Smithfield Food’s Vertical Integration Strategy
Smithfield food’s vertical integration strategy
1. What are the most important elements of Smithfield Food’s strategy?
1. They chose the food industry – in particular the red meat sector.
2. Their core business focus was on mainly pork, and beef to a lesser extent.
3. The company opted for an aggressive growth strategy which is primarily based on amongst others a geographic expansion: o They carried out 32 acquisitions since 1981. o They expanded into foreign markets – Smithfield made acquisitions in Canada, France, Romania and Poland. Acquired meat processors in Poland and Romania; including a hog farming operation in the latter country.
4. They followed a product diversification strategy, in order to grow:
5. This resulted in diversification into new product segments – they marketed chops, roasts, lions, ground pork, bacon, hams, sausages, sliced deli meats
6. Most importantly, they followed a vertical integration strategy into the pork business: o This entailed a full or partial integration (depending on location), with operations ranging from operations in hog farming, feed mill, meat packing plants and distribution.
7. They also carried out joint ventures
8. Established joint ventures in Spain, Mexico, and China
9. In addition to that they sought to become a low cost provider:
10. They employed the newest technology available, their plants were efficient, their wages were low and operating costs were relatively low. The pricing was as such very competitive. “Every effort was made to reduce costs” There was a concerted effort to lower costs and push up sales.
Not withstanding the company’s financial performance, this strategy has facilitated the rapid adoption of new technology, improved quality control, assured markets for the hogs and provided a steady flow of hogs for processing. This essentially created economies of scale and lowered production costs. The customers benefited as the company was able to respond to their changing preferences for quality
1. What are the most important elements of Smithfield Food’s strategy?
1. They chose the food industry – in particular the red meat sector.
2. Their core business focus was on mainly pork, and beef to a lesser extent.
3. The company opted for an aggressive growth strategy which is primarily based on amongst others a geographic expansion: o They carried out 32 acquisitions since 1981. o They expanded into foreign markets – Smithfield made acquisitions in Canada, France, Romania and Poland. Acquired meat processors in Poland and Romania; including a hog farming operation in the latter country.
4. They followed a product diversification strategy, in order to grow:
5. This resulted in diversification into new product segments – they marketed chops, roasts, lions, ground pork, bacon, hams, sausages, sliced deli meats
6. Most importantly, they followed a vertical integration strategy into the pork business: o This entailed a full or partial integration (depending on location), with operations ranging from operations in hog farming, feed mill, meat packing plants and distribution.
7. They also carried out joint ventures
8. Established joint ventures in Spain, Mexico, and China
9. In addition to that they sought to become a low cost provider:
10. They employed the newest technology available, their plants were efficient, their wages were low and operating costs were relatively low. The pricing was as such very competitive. “Every effort was made to reduce costs” There was a concerted effort to lower costs and push up sales.
Not withstanding the company’s financial performance, this strategy has facilitated the rapid adoption of new technology, improved quality control, assured markets for the hogs and provided a steady flow of hogs for processing. This essentially created economies of scale and lowered production costs. The customers benefited as the company was able to respond to their changing preferences for quality