KEPAK STRATEGY - Literature review Example

                   Introduction Kepak was founded in the mid-1960s by Noel Keating as a retail butcher’s business supplying wholesale beef to the food service sector and into other markets. Kepak had a turnover of Є750 million in 2010 and had 1700 employees. The company processes 300 000 cattle and 1.5 million lambs each year. It operates through nine manufacturing facilities in Ireland and UK. The company’s principal activity is animal slaughter and the sale of meat in cut and processed formats through Kepak Meat Division.

The firm has substantial business interests in convenience foods operated through Kepak Convenience Foods and an agricultural commodities trading business, Agra Trading. This paper explores Kepak’s business strategy in response to industry challenges and opportunities (Bell, Mcloughlin and Shelman, 2011, P.3). Examination of Kepak’s business environment The most popular tool in strategic management for analysing the business environment of a company is PESTEL. In the case of Kepak, the economic environment was affecting business negatively as the industry lacked predictability in financial performance.

This according to the company CEO from 2010, John Horgan, made it difficult for Irish beef processors to plan for growth. In addition, Kepak was not a listed company thus limiting its access to capital to borrowing or trading profits in a very capital intensive business (Bell, Mcloughlin and Shelman, 2011, P.3). Supply chain consists of producers who sell cattle to processors who market the product internationally. Most of the cattle are grass fed and takes up to 30 months to mature compared to cereal fed beef which can finish in 12-15 months.

The presence of agents hampers innovation in the supply chain as their role is historical and; therefore, they added little value (Bell, Mcloughlin and Shelman, 2011, P.3). Political and legislative factors are seen to influence the firms business where the EU-wide introduction of decoupled Single Payment Schemes moved subsidy payments from actual production of commodities to other objectives contributing to a reduction in beef production. These factors negatively affected the firms business as there was an increase in live beef exports after 2008 as it was more profitable to export live-calf than to mature, slaughter and process them in Ireland.

Change in the economic environment caused an increase investment by farmers in dairy products leading to a reduction in beef production as well as a concern among processors that this would lower the quality of beef products (Bell, Mcloughlin and Shelman, 2011, P.3). With respect to porter five forces, there were three major players in the beef processing industry and who accounted for 60-65% of the capacity and output. The perception was that these competitors would rather suffer lower margins than take compromises and retailers used this weakness to play processors against each other.

Therefore, there was a negative effect of competitor rivalry in the beef business and, which affected the firm’s bottom line. According to literature by Porter, rivalry limits profitability in an industry as it transfers profitability directly to customers through price cuts and in this case customers try to achieve the same by playing firms against each other. Britain is Ireland’s major market for beef exports and shares similarities in both markets in beef tastes, systems of