Perdue Farms Swot Analysis
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Perdue Farms Inc.
I) Introduction
Founded by Arthur W. Perdue in 1920, Perdue Farms, Inc. has always focused on quality. To improve the quality of his stock, Arthur Perdue bought leghorn breeding stock from Texas and mixed his own chicken feed. By 1940, Arthur Perdue realized that higher profits would come from selling the chickens, not the eggs. In 1950, Arthur Perdues son, Frank, took over leadership of the company and led the company into vertical integration. Perdue Farms controlled its own hatchery, feed formulations, and feed mill. Vertical integration continued and in 1968, Perdue Farms bought its first processing plant. The most important change occurred
in the 1970s when Perdue successfully branded its chicken and distinguished it from the competition.
To increase quality, Perdue Farms used selective breeding and refused to ship its products frozen. Franks drive for quality became known inside and outside the industry, and in 1981 he was inducted into the Babson College Academy of Distinguished Entrepreneurs. In the 1980s, Perdue Farms began to buy out other producers and included turkey and fully cooked chicken products into its product mix. International business began in 1992, and has grown to be five percent of Perdue Farms revenues. Perdue Farms implemented a state-of-the-art information system in the 1990s and began building distribution centers. In this analysis of Perdue Farms, I will first discuss Perdue Farms internal strengths and weaknesses. Second, I will discuss the industry. Third, I will analyze the external threats and opportunities facing the company. Lastly, I will provide recommendations for Perdue Farms to continue its success far into the twenty-first century.
II) Internal Analysis
A) Strengths
Perdue Farms took marketing to the next level. Branding a commodity was unheard of before Perdue Farms accomplished this task. By branding its products, Perdue Farms was able to charge a premium price for its established quality.
The process of selective breeding is another strength. This process developed chickens with more breast meat than the average chicken. This created value for the customers since a pound of meat had more meat and less bone.
Quality has been the number one focus of Perdue Farms since its creation, and the best way to control quality is to control the whole process. Perdue Farms has done an excellent job of vertical integration. The company has control from the hatchery to the feed to the processing and distribution of its products.
Research and development is another way Perdue Farms stays one step in front of its competitors. Perdue Farms conducts more research than all of its competitors combined. Some of these elements include inspecting competitors chickens on fifty-two quality factors every week, developing commercially viable litter pellets for poultry, and improving on-time deliveries by twenty percent.
Another strength of Perdue Farms is its ability to adapt to customer trends. Americans have steered away from fresh whole chickens and prefer ready to eat meals. Perdue has met these demands with its skinless, boneless chicken and pre-cooked products.
B) Weaknesses
Management organization has room for improvement. Perdue Farms used a centralized management style that was extremely successful throughout the years. In the 1980s, Frank Perdue was advised to decentralize and form separate strategic business units. However, shortly after the move to decentralize, the chicken market stopped growing and actually declined, creating the companys first unprofitable year.
The food-service sector has grown rapidly and Perdue Farms has not adapted to this change. Only twenty percent of the companys revenues come from this category. High-class restaurants look for quality products, not just the cheapest deal, and a focus in this direction would increase revenues significantly.
International distribution is also weak. Most delivery trucks in China are not refrigerated. This limits the distance the product can be transported since the product begins to thaw. Also, one shipload on its way to Russia vanished and was later found to be impounded using forged documents. Control is this area needs improvement.
The location of Perdue Farms processing plants could have been chosen better. Most of the industry is located in the Northeast, creating pollution concerns with the high levels of nitrogen and phosphorus in the chicken manure. In addition, labor costs, regulations, and resource costs are more favorable in other parts of the country.
III) External Analysis
A) Opportunities
Turkey and chicken are leaner meats and are popular in current diets trends. Turkey products in particular are becoming increasingly popular as a substitute for beef. Ground turkey, turkey bacon, and turkey sausages are some of the latest, healthier substitutes and have high potential for increased profits.
Rivalry is tough in this mature industry and consolidation is becoming popular since the smaller companies can not keep up with strict regulations and the large capital investments