Smithfield Foods

Introduction

Smithfield Foods is well known for the production of pork and it’s the largest producer of pork in the world. It’s located in Smithfield, Virginia. Joseph W. Luter together with his son started Smithfield packing company in 1936. It later grew of a big company after engaging itself in the industrialization of production of pig. The company has a lot of pigs about 15 million every year, 27 million are processed leading to production of pounds of pork of about 6 billion. The annual revenue of Smithfield is 12 billion. In 2007 it was the highest in operation of slaughtering pigs. Smithfield foods have many products in different varieties such as smoked hams, fresh pork fresh ground pork, bacon, marinated pork etc.

Financial project mostly assists in forecasting the company’s operation in terms of financial and economic results. Financial projection assist the owner of the company to forecast revenue to be generated every month of the year based on predicting the production costs expenses and the amount of sale. Financial projection strategies are designed to improve profitability in the sense that when a firm forecasts its expenses and financial position, it helps them to plan on how to use its resources available so as to generate profits, (Felberbaum, 2010).

 

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In the case of Smithfield foods to improve their profitability in producing pork and processing ham it engaged in vertical integration strategy which reduces uncertainty provides consistent products of high quality. This is maintained by coperating all the processes from the farm to other subsidiaries of Smithfield food. This may in turn ensure there will be high sales since the product produced are of high quality. Corporate strength ensures profitability in Smithfield foods Inc. By improving on their technology in processing pork ensures future operation as it is the biggest pork processor in the world thus increasing production of pork.

Financial projection of Smithfield foods from 2012-2014

A financial projection determines the future of an organization in terms of the revenue, the financial position and expenses. In 2012 it was a profitable year for Smithfield Foods for the second time. The net income for fiscal 2012 was reported to be 361.3 million US dollars. Sales went up compared to 2011 by 7 % recorded at 13.1 billion US dollars. By restructuring their pork segment it allowed them to concentrate on the meat part of the company which would lead an increase in their earnings.

By fiscal 2012 Smithfield foods packaged meat resulted to high profits of more than 50 million US dollars despite the high cost of raw materials. Smithfield has finished the constructing in Smithfield, Virginia of a 5 million facility for research and development so as facilitate improving their product thus meet different needs of the consumers. Production of hog and pork grew through export despite the cost of raising hogs being high. Smithfield partnered with Richard Petty Motorsports NASCAR team so to increase sales by use of their core brands so as to promote the company’s future growth and increase the market share.

In early 2012 Smithfield estimated expenses of interest and annual finance to be 100 million and reduced debt by 1 billion. By fiscal 2012 there was a reduction in interest by almost 70 million. Smithfield foods were able to payback their investors through the generation of their cash flows by repurchasing their shares. Smithfield managed to repurchase 9.2 million for 189 million. In packaging meat Smithfield increased the range of their operating profits per pound from 12 to 17 compared to the previous 10-15 expecting by fiscal 2013 the growth in volume to go up by 2% to 3%. In fiscal 2013 Smithfield is expecting the demand of pork in the US to go up due to the rise of pork prices and low cost of production.

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From the table above we have established a product positioning map, which shows how the company makes profits in terms of the number of the number of goods sold in the market. Product positioning map enables the Smithfield food company to understand which product makes huge profit and which company is not earning the company enough profit. This is a strategy the company use to evaluate which product they are supposed to increase marketing promotion so that they can be at the same level of other products.

Analyzing product position map

The table above show shows four main product of Smithfield Foods Company, that is Ham, Hot Dogs, BBQ and Bacon. These are some of the company best sold product in the market. Although all products earn Smithfield food good revenue, some product with small sale volume makes huge product to the company. For example BBQ product has high profit with low volume of sales.  When we compare with Hot Dogs products with also earn the company high profits, needs high volume of sales in the market to be at the same level with BBQ. Other product such as Ham and Bacon has unique features in terms of market competition. When we analyze the above table, we discover that Ham makes huge profit with less volume of product sold unlike with Bacon which after huge volume of its product sold in the market, the company still makes small profits.

Explanation in Terms of EFE Matrix

This is the management evaluation tool used by much business institution to internalize all external factors that affect the business in terms of realization of its profits. These factors may include all political factors that directly or indirectly affect the company, social factors, government or legal conditions affecting the company and economic factors. Smithfield Food Company uses EFE matrix to examine external factors that make the company either to phosphor in the market or failure. The company lists all external factors that affect the company performance, weight each factors and then establish a list of main factors that affect the company. For example Smithfield Food Company is affected by many external factors such government controlling the production process of its goods and legal procedure to be followed in terms of marketing a given product. Other factors such as political influence, may affect the performance of Smithfield in a manner that may reduce its profit earning. This mean some people may be elected to hold office within the company with poor qualification, hence affecting the performance of the company in terms of providing quality services to the entire company. Lastly economic factors may affect how the company earns its revenue. This is because when the country is faced with high inflation or high costs of raw material, it will undermine the performance of the company, (Deptolla, 2011).

Explanation in Terms of IFE Matrix

This is the company management strategy tool used to discover all the internal strength or weakness the company has in terms of delivering its services effectively. Smithfield Company has established an internal audit which helps in identifying all internal factors that affect the company in terms of high profit realization. During doing an internal audit, the assigned tem should weight all internal factors either from 0.1 to 1 in terms of importance. This means that factor which is 1.0 has more importance in terms of profit realization. Affect identifying all the factors the organization that evaluating each factor so that to come up with good strategy to improve the factor if it was weak on keep it up wards if it was strong. For this matrix to be very effective, one should come up with a table where they will number all internal factors in terms of importance in evaluate how to tackle each factor? Some of internal factors include employ wrangles, poor organization management, and low profits among others.

Explanation in Terms of CPM Matrix

This is a management tool used by many companies when comparing the performance of their company with other companies or industry in terms profit, market share or product advertisement. This management tool also include both IFE matrix and EFE matrix to analyze how both factors affect one company in relation to other companies in the industry. The company use this matrix to evaluate which factors makes the company successful hence its rated highly and those factors that are rated lowly meaning the company must come up with policies that will ensure the company succeed in terms of its business operation. When we evaluate Smithfield Food Company, the company is doing well in terms of advertising its products but it has failed in terms of improving the quality of its products as per the requirement of its customers, (Rollin, 1995).

In conclusion, Smithfield Company is the world number one it terms of food production. The company is doing very well in the world market although facing stiff competition from other companies. The company has employed numerous strategy which will ensure that it keep updated as the technology changes. The company has employed numerous management strategy tools such as IFE, EFE and CPM, TO ensure that it competes with other companies effectively in the market.