The Agricultural Processing Industry
Essay Preview: The Agricultural Processing Industry
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CASE STUDY
March 10, 2013
INDUSTRY ANALYSIS
The agricultural processing industry has served as a link between farmers and consumers since the 1800s. This industry is all based on the existence and reliability of farmers crops. Without the farmers production of crops not only would the agricultural processing industry be hurting or out of existence, but is the key to the overall economy. Because, the agricultural processing industry is responsible for making food ingredients, animal feed ingredients, fuels, alternatives to industrial chemicals. With the worlds population growing, the demand for this industry rises even more to provide for the demand of all the quality products that the agricultural processing industry provides. So, the outlook for this industry is very good because without these processing plants many products would not be available and could cause a less-functional economy.
Five Forces Model of Competition
ARCHER DANIELS MIDLAND BROAD DIFFERENTIATION STRATEGY
Archer Daniels Midland (ADM) connects the harvested crops to homes across the world they create a unique bond throughout 75 countries which is the broadest in there industry. Archer Daniels Midland also created “The ADM Way” which describes who they are, what they do, what they can do in the future and what they can do to achieve that goal. They are here to Serve Vital Needs through food and energy. They vision to be the most admired global agribusiness, creating value, growing responsibly, and serve the worlds vital needs. A majority of their strategies are expanding in all aspects broadening their horizons to new countries, and expanding the crops they work with. They also have stated values which include Integrity, respect, excellence, resourcefulness, teamwork, and responsibility. Recently, ADM has created an ADM cares campaign that is a corporate social investment program that consists of strong roots, strong bonds, and strong communities. This ADM care program also, includes a Donate-A-Acre program that asks a farmer to donate an acre of crop to help feed the needy families in their area. They also hope to keep achieving being the most admired food production company by Fortune magazine which they have done for the last 3 consecutive years.
ADM employs 30,000 plus, has annual revenue of around $81 billion and operates in 6 of the 7 continents. This growth has come from their great business model that connects the world markets to agricultural crops. Its efficient and reliable, pays attention to the needs of our customers, product innovations, and having a lot of emphasis on their product quality and safety. ADM provides our customers with some of the corn, wheat, cocoa, and oilseeds into products for food, animal feed, also chemical and energy uses. The customers include many of the worlds largest food and energy companies. ADMs strategies and differentiation has successfully exploited their business model and revenues. ADM had been around for over a century and still looks to grow even larger to become the largest in its industry and with them having revenue of around $81 billion a year with that increasing over the this past year to $89.03 billion in (FY 2012) and a net income of $1.23 billion in (FY2012). For a measure of their success it shows in there revenue that ADM is still growing and only getting larger. With ADM expanding into almost every continent and in over 75 countries ADM looks to become the largest agricultural food processing company in the world and be the one on top in their industry.
SWOT ANALYSIS
Strengths
♦ Increasing demand for sweetener and related products provide strong growth potential for ADM corn processing division.
♦Sweetener and related products have 43.9% income for division. This product rose 12.0% to 2.1 billion in the last year.
♦ ADM has strong logistics operations. With 2,000 barges, 20,000 railcars, and 1,500 tractor-trailers, which enter 500 pasture storage elevators. They also have over 100 ships that operate on 6 continents.
♦The company leases their transportation facility which also earns revenue.
♦ADM also owns 4.0% of all rail cars which gives them a substantial plus.
Weaknesses
♦ Processing Plants depend greatly on many energy sources like coal, electricity, and natural gas, while their transportation facilities are dependent on fuel and diesel products. Price fluctuations can affect production costs and profits.
♦ADM is behind other companies in their industry in their research & development, with increase in bioenergy and biodegradable plastics which could be a setback to the company.
♦Rising studies through other companies in the industry puts them behind in this field.
Opportunities
♦ Increase in demand for bio energy products, like ethanol and biodiesel.