In this order of ideas, based on the legislative opportunity to offer farming contracts, the manufacturer offered deals to family farms that would raise the hogs. This basically meant that the capital invested would belong to the farmer, and therefore the company was subjected to few risks. “Why invest your own capital when you can get a farmer to take the risk? Why own the farm when you can own the farmer?” (Hosmer, 2004)
However this particular strategic approach was rather useful for the corporations, the industry was facing a quite serious problem. As such, industry analysts were concerned with the huge freedom and capabilities of the large companies. To better explain, since they took no risks, but only purchased the hogs from the farmers, organizations had the possibility to change the contractual terms and impose drastic conditions upon the farmers. They could easily request lower prices, and the farmers would have to grant them, as they could not do anything else with the hogs but sell them. “Industry observers […] worried about the practice of saddling hundreds of small farmers with thousands of dollars of debt. […] the problem foreseen […] was the possibility that a company could cancel its contract with only 30 days notice, leaving the farmer with the debt and no income to repay it, or it could threaten to cancel and then renew the contract only with a sharply lower price per animal” (Hosmer, 2004). Smithfield approach to the matter resulted in a more equitable sharing of the incurred risks, meaning basically that the corporation owning the hogs would risk more than the farmer growing them.
Another key issue in the industry is given by the difficult tasks the employees in factory farms have to deal with. Not only are these tasks sometimes difficult to complete, they are also unpleasant, to say the least. The basic example is given by the staff members who have to kill the hogs or disembowel them. In replying to this particular challenge, Smithfield ensures that the killing of the hogs is painless and that the disembowelling is automatically performed by machineries.
Ultimately, the success registered by the Smithfield Foods company represents their outstanding capabilities to best work with the given resource constraints and also to most efficiently analyze the outside environment and seize the given opportunities. But just like with most organizations, suggestions for improvement could be made. In this order of ideas, the rapid expansion of Smithfields could affect their long-term stability. To avoid this from occurring, the corporate officials should focus on developing and strengthening their businesses in the areas where they are already present, instead of expanding to other regions. In this order of ideas, they should conduct market research to identify customers needs and wants and should develop new ways to satisfy these needs. The strategy would lead to a better consolidated market position, increased market share materialized in a superior competitive position and larger revenues. The overall corporate performance would as such increase significantly.
The second most important recommendation has a more environmental nature and regards the waste eliminated from the Smithfield farms. They generally pose threats for the individuals health and the issue must be resolved. The search for a viable solution has been tedious, but the company should request the services of specialized environment organizations and work together to resolve the matter. Through this, they would gain the approval of the community, which would perceive Smithfield as a fighter for individual and environmental health, and through this perception, the market share, the competitive position and the corporate performances could once again increase.
Hosmer, L.T., Smithfield Foods Vertical Integration Strategy
Business Intelligence: Smithfield Foods Competitive Analysis, Hoovers, 2008, http://www.hoovers.com/smithfield-foods/–ID__14734,target__business_intelligence — /free-co-samples-index.xhtmllast accessed on July 14, 2008
Vertical Integration, Quick MBA, 1999-2007, http://www.quickmba.com/strategy/vertical-integration/last accessed on.