Analysis of company history development & growth

Arthur W. Perdue†s quest for excellence in the poultry business began in 1917. Perdue started his company as a table-egg poultry farm. He slowly expanded his egg market by adding a new chicken coop every year. Arthur†s son Frank joined the family business in 1939 after leaving school at the end of his the second year. In 1950 Frank took over leadership of Perdue Farms, which had over 40 employees at the time. During the 1970†³s Perdue entered into new markets in Boston and Philadelphia and also opened a new processing plant in North Carolina. Shortly after this, in 1977 Arthur Perdue died, leaving behind a business who†s annual growth rate was 17 percent compared to the industry average of 1 percent. Arthur†s son Frank was left behind to take over the business. Frank Perdue without a hint of self-deprecation stated that â€Å"I am a B-minus student. I know how smart I am. I know a B-minus is not as good as an A-said of his father simply†, â€Å"I learned everything from him† (Hill & Jones, 208). During the 1980†³s and 1990†³s Perdue Farms diversified and expanded its market further down to other eastern coast states and southern states. By 1994, revenues were around 1.5 Billion a year. To add to this number Perdue purchased the twelfth largest poultry producer in the United States with about 8,000 employees and revenues of approximately $550,000 a year. Internal analysis of strengths and weaknesses – Maintain an environmentally friendly workplace – Represent the total quality management slogan – Largest poultry producer in the northeast – Second largest producer in the United States – Involved in every aspect of the business External analysis of opportunities and threats – Produce roasted Chicken and Chicken parts Risk of entry by potential competitors The risk of entry from potential competitors is low, due to the barriers of entry. The barriers of entry are high, traceable to the cost of starting the business and what it costs to remain successful. Perdue also has a cost advantage over potential new entrants that is credited to superior production operations. Perdue has control of their inputs required for production, such as labor, materials, equipment, or management skills. Between the existing companies rivalry is strong. There is no significant price competition because of the over capacity in the broiler industry. Buyers (consumers) have a great deal of bargaining power because the buyer has a variety of brands to choose from and a lot of options to choose from such as precook, fresh, roasted and boneless. Perdue Farms supplies all of its own inputs, and they have established relationships with the distribution retailers. The substitute products for the broiler industry are pork, beef, and seafood. These items hold a real threat to the broiler industry. Perdue is in a very good competitive position. It has gained recognition for becoming one of the top broiler companies in the nation. One strength of Pedrue it that they own their own trucking fleet which they can distribute their own product. A main strength of Perdue Farms is that they refuse to let their product be shipped frozen. Perdue says that if the poultry is shipped frozen, it will loose flavor and moistness when cooked. This strength can result into brand loyalty, because when customers see the name Perdue, they know that the product is fresh not frozen. Another strength is that Perdue leads the industry in quality. To ensure that Perdue continues to lead the industry in quality, it buys about 2,000 pounds of competitors† products a week. Inspection associates grade these products and the information is shared with the highest levels of management (Hill & Jones, 1998). Perdue†s company policy is taught to all associates in quality training. Perdue has one weakness at this time. Perdue has rode down the experience curve and changed all of its other weaknesses into positives. For example, In the 1980†³s Perdue decentralized and formed separate business divisions. Soon after this was done, chicken sales leveled off. At on point the firm was losing as much as $1 million a week and, in 1988, Perdue Farms experienced its first year in the red (Hill & Jones, 1998). Perdue learned from this and quickly changed back to centralized. Currently, Perdue has the opportunity to produce other kinds of meat such as beef or pork. This opportunity could soften the financial impact if the threat of overcapacity continue to haunt the broiler industry. Perdue Farms Mission –†Create a quality product, be aware of your customers, deal fairly with people, and work hard, work hard, work hard† (Hill & Jones, 1998). Perdue is a vertically integrated agribusiness (www.perdue.com). Perdue practices forward integration by moving downstream to distribution. Perdue owns it own trucking fleet by which they distributes it to the end users. Perdue also practices backward integration by formulating and manufacturing its own feed. By vertically integrating backward to gain control over the source of critical inputs or vertically integrating forward to gain control over distribution channels, a company can build barriers to new entry into its industry (Hill & Jones, 1998). The business level strategy of a company encompasses the overall competitive theme that a company chooses to stress. Perdue Farms business level strategy is considered to be differentiated. In the early 1980†³s Perdue diversified and broadened its market. Perdue did this by raising turkeys and production other meat products. Perdue distinctive competency is in premium quality products. Frank Perdue was convinced that higher profits could be made if Perdue†s products were premium quality so they could be sold at a premium price (Hill & Jones, 1998). This distinctive competency resulted in 1994 revenues around about 1.5 billion and net profits at $50 million. The philosophy at Perdue is quality and efficiency with emphasis on the first over the latter. To ensure that Perdue continues to lead the industry in quality, it buys about 2,000 pounds of competitors† products a week. Inspection associates grade these products and the information is shared with the highest levels of management (Hill & Jones, 1998). The structure and control at the function level is improved with efficiency. Efficiency is improved through management of details. At Perdue nothing goes to waste. To make sure this is true Perdue is involved in every aspect of the chicken business, from breading and hatching its own eggs to processing chicken feet and selling then to Asia as a barroom delicacy. These efforts were implemented through team management with a focused message coming from senior management.