Smithfield Foods
Essay Preview: Smithfield Foods
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Abstract
Smithfield Foods is the world’s largest pork processor and hog producer, with revenues approaching $12 billion in fiscal year 2007. In the United States, Smithfield is also the leader in turkey processing, cattle feeding, and several packaged meats categories as well as the fifth-largest beef processor. From national brands and regional powerhouses in the U.S. to some of the best-known European brands, Smithfield Foods packages meats that are purchased by retail, foodservice, and deli customers (2008).
Headquartered in Smithfield, Virginia, longtime Chairman and CEO, Joseph W. Luter III, vision was to drive down cost and push up sales. Luter introduced a vertical integration strategy to control all aspects of a product’s development, manufacturing, and distribution in 1981 and to date; the company has completed 30 acquisitions. In the meat industry, vertical integration refers specifically to maintain control over both livestock production and meat processing which allows for greater product consistency and traceability (Thompson, 2006, p. C-172).
Over the last decade, Smithfield Foods had met with mounting opposition to expansion of its business, particularly in hog farming. The main opposition is Smithfield Foods’ neighboring residents to its 8,000 plus North Carolina hog farms, who claim, hog farming has been imposed on them and that the adverse impact in low wages, environmental damages, maltreatment of the hogs, and overall water safety is not worth the profits (Thompson, 2006, p. C-172).
In 2006, Smithfield Foods made Fortune magazine’s annual list of America’s Most Admired Companies, ranking third among all U.S. food production companies. Fortune describes its annual list of America’s Most Admired Companies as a “definitive report card” on corporate reputations (2006).
This case study will answer the seven questions listed below:
What are the key elements of Outback Steakhouses strategy in 2005? Is the strategy working?
What role do you see that Outbacks Principles and Beliefs have played in the companys success? What relevance do these Principles and Beliefs have to Outbacks strategy? How does the STARS program support Outbacks Principles and Beliefs?
What do you see as the key policies and operating practices that Outback is using to execute its strategy?
What do you think of Outbacks emphasis on “taking care of Outbackers first”? What evidence indicates that this is a successful policy or not?
How would you characterize Outbacks culture—strong, weak, healthy, unhealthy, high performance, adaptive? What are the chief components of the culture? Is the culture well-matched to the strategy? Why or why not?
What grade would you give Outback management for the manner in which it is trying to execute its strategy? What support can you give for assigning this grade? How close is this company to achieving operating excellence? Is this a good example of best practice and continuous improvement?
What recommendations would you make to Bill Allen, CEO of Outback, regarding Outbacks strategy and its approaches to strategy execution?
LO6.1, 6.2, 6.3, 6.4, 6.5, 6.6
Business ethics concerns the application of general ethical principles and standards to the actions and decisions of companies and the conduct of company personnel (Thompson, 2006, p. C-317). Chairman and CEO, Joseph W. Luter III, vision to drive down cost and push up sales is an admirable vision and a solid theory in our capitalist economy and I do not see a moral issue with his original vertical integration strategy. However, the results of his strategy and the now known effects of the strategy do impose moral and ethical issues ranging from the environment to poor working conditions and public safety (2008).
In my opinion, I think Smithfield Foods did pass the moral scrutiny test in 1981 when they truly began their vertical integration strategy. To date, some of their actions are questionable and in my research, I did not find any shady or unconscionable facts, but there are several facts about their practices that are injurious to others and unnecessarily harmful to the environment. The question for me is “who is responsible?” Smithfield’s owns the hogs, the independent farmer owns the land, and agreed to raise the hogs, so is the farmer responsible for the environmental issues and safety concerns of the public or is Smithfield? I do think executives with strong ethical convictions are more proactive in linking strategic action and finding ways to meet everyone’s needs while retaining the profitability of the company and Smithfield Foods is lacking in its convictions at the executive level to bring about the change.
In my research, I found too many conflicting stories and articles about Smithfield Foods to decide if Smithfield is a socially responsible company and if they should continue to pursue a rapid growth strategy even when that strategy could pose environmental problems and adversely affect the living conditions in the communities where it operates. For example, in 2006, Smithfield Foods made Fortune magazine’s annual list of America’s Most Admired Companies, ranking third among all U.S. food production companies. Fortune describes its annual list of America’s Most Admired Companies as a “definitive report card” on corporate reputations and leadership using innovation, people management, financial soundness, quality of management, use of assets, social responsibility, long-term investment, and overall quality as the basis for its rankings (2006). On the other side, Rolling Stone magazine and Justice Smithfield branded Smithfield Foods as one of America’s worst exploiters of the poor and the nation’s top environmental polluter (2006).
I believe Smithfield Foods should be proud of its business model and strategy because they stuck to the plan and they became the industry leader, which is what all companies are striving to do. However, should Smithfield be proud of the effects of their business model and strategy is debatable. We are capitalist society and in the business world, it is all about the bottom-line and you cannot be mad at Smithfield for achieving the goal. However, without pressure from outside organizations, they probably would not use company resources to find innovative ways