1. Executive Summary
Worcester beef company has grown from a small retail meat store bought by Edward Grant and Manuel Searles in 1943 to a conglomerate of companies including cold storage company, real estate holding, stocks and a truck leasing company. It also owns partnership shares in several other businesses. Though the net earnings of the meat business is low due to high operating cost, the company has expanded and diversified by investing retained earnings that have accumulated over time. Now, Edward Grant is dead and the aging Manuel Searles has to take strategic decisions to transform the company and hand it over to the next generation. The following is the author’s business case analysis of Worcester Beef.
2. Market Analysis
2.1.Market Size and Segmentation of the Meat and Poultry Industry in the USA
In the USA, the total production of meat and poultry was about 92.1 billion pounds in 2010, which is an increase of 1.2 billion pounds from 2009, AMI, 2011. The meat and poultry industry is the largest segment of U.S. agriculture, employing 526,290 workers directly in the packing and processing, with salaries in the total sum of US$19 billion. The industry including suppliers, distributors, retailers and ancillary industries have 6.2 million employees, with wages totaling US$200 billion. In recent years consolidations have been going on in the industry, changing the business landscape and triggering fears of price control, Barkema, Drabenstatt, Notvack, 2001.
2.2 SWOT Analysis
Strengths
The strengths of Worcester Beef are rooted in the determination of the management to make the business a success coupled with creative marketing incentives. The creation of two divisions, namely wholesale and retail allowed each of the partners to concentrate on sector of the business, optimize business processes and generate tangible revenue. The partners built functional distribution channels that gave the company competitive edge and made the company popular distributor of high selling products including Hilshire Smoked Sausages and Butter-Ball Turkeys in the region. While the meatpacking-wholesale division generated the major revenue, the retail division contributed constant income to the business.
Weaknesses
The company is trapped in financial problems depicted in short and long term debt, and overvalued fixed assets. It is deprived of borrowing power and lacks liquidity. An unexpected business slow-down could result in the company not being to pay its debt. There are unresolved family issues that could impact negatively on the business in general. The company also has to deal with a transition period of new management generation that may not have the determination and business acumen of Edward Grant and Manuel Searles.
Opportunities
The consumer in the USA and developed countries are getting more health -onscious and demand beef and related products devoid of bio-chemical and pharmaceutical contaminations. The growing business sector offer opportunities for entrepreneurial minds. The economic situation in many countries including the developing countries is getting better and the socio-cultural changes are taking place. This changes offer opportunities for Worcestr to expand beyond the borders of USA and form partnerships to sell its products. Modern business sector such as e-commerce also offer opportunities that Worcester Beef Company can look into.
Threats
There are large suppliers and distributors in the industry that practically dominate the market and dictate prices. Smaller companies like Worcester have to compete with competitive prices, broader range of products in demand and on time delivery to attract large buyers. This incurs high costs and low margins. A large company seeking to gain more market share could put pressure on Worcester Beef Company to it.
2.3 Five Forces Analysis of the Competitive Environment
Entry Barrier and Threat of Substitutes
The competitive environment raises the level of entry barrier of the meat industry. The large companies in the supply and distribution sectors have very control of the regional market and are expanding internally by forming partners. Consumers are generally loyal to the brands they are used to and accept. The newcomer needs huge capital to invest in making its brand known and accepted. There are also government laws and regulations that the companies have to abide with. There is also the health issue. Supplying or distributing meat products that cause disease may result in devastating legal costs for the company involved. There are different types of meat but there are no threats of substitute for meat, For vegetarians, alternatives such as soya products are available.
Bargaining Power of Suppliers
Large suppliers and distributors have bargaining power as opposed to smaller firms. They have well-structured distribution channels that meet the demands of large buyers including restaurants, hotels and supermarkets. Due to their large scale of business, they have the advantages of economies of scale, which allow them to influence product prices.
Bargaining Power of Buyers
Large buyers also have bargaining power in relation to small suppliers and distributors. They have the power to bargain for supply contract agreements, product prices and delivery conditions. Small suppliers and distributors have to raise or modify their service standards to meet the requirements of large buyer if requested by the buyer.
Competitive Rivalry
The profit margin in the meat industry is generally low especially for small company like Worcester Meet Company. The competition for market share is very intense and small firms have to be very creative to keep afloat financially. Large firms generate most revenue through very high volumes of business transactions that smaller firms can not cope with financially
3. Analysis of Strategy
Worcester Beef Company survived the Second World War and the after effect of the recession period due to the relentless efforts of the Edward Grant and Manuel Searles. The company was able to grow through the sales and marketing strategy as well as the stringent financial management of the partners. The regional and global restructuring that is going on in the meat industry demands new business strategy. The corporate culture of the firm, including allowing family members to learn by doing is an accepted initiative. However the management must recruit competent professionals to transform the company. Worcestr Beef Company is not in the position to achieve cost leadership in an industry sector where much larger companies more or less dominate the market. The larger companies use their bargaining power and high volume capacity to maintain cost leadership. The company has been able to differentiate itself through successful product development and effective distribution channels that has gained popularity in the region. Focus on customer-centric strategy should remain a priority.
4. Conclusion
The financial situation of Wocester is a major concern that must be resolved by the management. A possible strategic move could be the formation of alliance with compactable small firms to consolidate operating processes and costs, thereby improving financial status. The management should review the current values of the company’s assets and take decisions on which assets it could sell profitably to improve its cash flow. With its popular brand image, Worcester Beef Company could find niche market and offer peripheral services. In partnership an investor or several investors, the company could expand within the USA and with time find international partners. The product development capability and customer-centric strategy practiced by Edward Grant should be revived and refined to meet the new challenges.
5. References
American Meat Institute. (2011). The United States Meat Industry At a GlanceBarkema.A., Drabenstatt.M, Novack.N. (2001). The New U.S. Meat industry
Afritopic 2017
You must be logged in to post a comment.
