Tyson Foods and its Importance to International Business - Term Paper Example

 AN OVERVIEW OF TYSON FOODS Table of Contents Contents Page No Introduction: Importance of Tyson Foods in World’s Business 04 Vision Statement 04 Core Values 04 Historical Background 05 Company Profile 06 Major Products and Services 07 (a) Food (i) Chicken (ii) Pork (iii) Beef (iv) Prepared Food (b) Tyson Renewable Energy 08 (c) Tyson’s Human Welfare Activities 09 (d) Environmental Sustainability 09 (i) Environmental Management System (EMS (ii) Efforts to Reduce Greenhouse Gas Emission. (iii) Water Quality Competitive Marketing Strategy 10 05 Year Financial Summary 10 SWOT Analysis of Tyson Foods 12 Strengths 12 Weaknesses 13 Opportunities 13 Threats 14 Major Competitors 15 Strengths 16 Common Weaknesses 16 Common Opportunities 16 Common Threats 17 Conclusion 17 Works Cited 18 Introduction: Importance of Tyson Foods in World’s Business Tyson Foods, founded in 1935 in Springdale, is one of the leading food processing and producing companies of the world. Its 75 years of history shows the dedicated struggle of its executives and employees to gain the today’s symbol of honor. Tyson’s services cannot be overlooked from the international business perspective. More than 90 countries are getting services from this company. The world over connected supply chain of the company enables its products to be taken to the farthest distances both in United States and across the border. Each year Tyson supplies around 25 billion pounds of beef, chicken, pork and prepared food to Wal-Mart, McDonald's, KFC and main supermarket and restaurant chains in the United States and all over the world. Vision Statement Our vision is to be the world's first choice for protein while maximizing shareholder value. We are dedicated to producing and marketing trusted quality food products that fit today's changing lifestyles and to attracting, rewarding and retaining the best people in the food industry (Tyson Corporate Fact Book, 2002). Core Values Tyson Foods is a food producing company working inside the United States and across the border with truth and integrity and dedicated to create value for its clients, shareholders and working staff (www.tyson.com). Historical Background During the global recession era of 1931, John Tyson moved to Springdale, Arkansas with his family consisting of his wife and a son of one year old. In 1935, for the first time John Tyson brought 50 chickens to Chicago from Springdale to sale them on profit. In 1937, he named his business as Tyson Feed and Hatchery. The business slowly and steadily progressed and in 1947, the company was incorporated. The company got a valuable boost as the Tyson’s son Don Tyson joined the company as head of operations in 1952. In 1957, the company entered into a more competitive bracket when it opened a processing plant in Springdale and introduced its first ice-pack processing line. In 1963, the company was publicized and became renowned as Tyson’s Food, Incorporated. Three years, later Don Tyson became the president of the company as John Tyson and his wife died in a road accident. During the 60’s, new technological developments and the increase of broiler production by 13%, gave a new edge to the poultry industry. In 1960s, the broiler production became one of the industrialized industries of the United States. In 1969, Tyson Foods acquired Prospect Farms, Inc., which later on became its precooked chicken division. During that year, the company’s strength reached 3000 and infrastructure contained 05 chicken processing plants and 04 protein-processing plants in Arkansas and Missouri. The company continued to progress in 70’s as it acquired Ocoma Foods, Krispy Kitchens, Inc and the poultry division of Wilson Foods during 1972. During the same year, the company name was changed from Tyson’s Foods to Tyson Foods. Cassady Broiler Company and Vantress Pedigree, Inc were acquired in 1973 and 1974 respectively. Rest of Wilson Foods Corporation was acquired in 1978. During this decade, Tyson introduced several unique foods as by the end of 1979, it had 24 exclusive products (Schwartz, 1991). In 1980, Tyson introduced its famous Chick 'n Quick line of products which had number of chicken portions and had easy steps to make. In 1983, the company acquired Mexican Original Products, Inc. By the end of 1984, Tyson had spread its operations up to 06 states i.e. Georgia, North Carolina, Missouri, Tennessee, Louisiana, and Arkansas and numbers of its products were also being distributed globally. In 1988, Tyson Foods made a successful bid to takeover the Holly Farms Corporation. During mid of 1989, HFC merged into Tyson Foods for $1.29 billion. This purchase made the company an undisputed king of food industry in the United States. With the addition of this HFC, the company earned a significant turnover in the beef and pork divisions during next few years so that by the end of 1995, this division had an 11% share of the total annual income of the company. In 1991, Don appointed Leland E. Tollett, his college classmate, as the president and chief executive of the company and himself remained as chairman. The next year, Tyson explored the seafood by acquiring Alaska Fisheries Corporation and Louis Kemp Seafood Company. At that time, Tyson Foods had a major contribution in the Clinton’s presidential election (Heath, 1995). By 1994, the Tyson foods were shipping in 54 countries (Manning, 1994). A great era of Tyson ended when Don Tyson retired as chairman, however, remained involved with company as senior chairman. From 1995 to 1997, Tyson further progressed and acquired some more corporations. Tyson acquired Cargill’s U.S., McCarty Farms, Inc. and Culinary Foods of Chicago in 1995 and Mallard's Food Products of Modesto in 1997. This made the company as world’s largest poultry company by 1998 while by the acquisition of IBP, Inc. in 2001, Tyson Foods became the world’s largest marketer of chicken and red meat. Company Profile Tyson Foods, founded in 1935, is the world’s largest marketing company of processing chicken, beef and pork, and the 2nd largest as food producing. The company has a great appreciation for its wide variety of protein based and prepared food products and this recognized as the leading company of its field. Tyson offers its services and products at more than 400 places of 32 states inside the United States and more than 90 countries of the world including major countries Canada, Central America, China, the European Union, Japan, Mexico, the Middle East, Russia, South Korea, Taiwan, Vietnam, Dominican Republic, Hong Kong, India, Ireland, United Arab Emirates, Venezuela, Netherlands, Philippines and Peru. The company’s headquarters is located at Springdale, Arkansas and is considered as one of the 100 largest companies of United States (forbes) with approximately 117,000 Team Members within and outside the United States. Approximately 100,000 workers are employed in Unites States and remaining 17,000 are in foreign countries. The company’s annual revenue reached about $26,862 millions at the end of financial year September 2008, an increase of 4.4% of the previous year. The company deals a wide variety of brand name and processed animal based food products at its 123 food processing plants. Its major food products are fresh meats, processed and pre-cooked meats, refrigerated and frozen prepared foods etc and thus it is recognized as the market leader in almost each and every foodservice distributor and full service restaurant chain. The company deals with 6729 chicken growers. Major Products and Services (a) Food As stated above, Tyson Foods is the largest food processing company in USA that supplies its four different brands of beef, chicken, pork and prepared food to highest number of retail grocery stores, food distributors, restaurants, hotels, fast food points, and non-commercial foodservice establishments such as educational institutes, healthcare facilities, military as well as to the international markets. It supplies fresh chicken, fresh beef, fresh pork, frozen and fully cooked chicken, beef and pork, pre-cooked prepared food, meat toppings for pizza brand etc. Tyson has introduced several unique products e.g. Buffalo wings, boneless Buffalo wings, and chicken nuggets and Tenders as well. All the major Yum Brand chains are its recipients like, McDonald’s, KFC, Wal-Mart, Burger King, Costco and Taco Bell etc. (i) Chicken. Chicken operations consist of breeding and raising chickens. It also involves processing of live chickens into fresh and frozen chicken products. (ii) Pork. Pork operations include processing live market hogs and fabricating pork carcasses into primal and sub-primal cuts and case-ready products. (iii) Beef. Beef operations contain the steps like processing live fed cattle and producing dressed beef carcasses into primal and sub-primal meat cuts and case-ready products. (iv) Prepared Food. Prepared Foods operations include producing and marketing of frozen and refrigerated food products and their supply to the target markets. These products include beef, pepperoni, bacon, and pork pizza toppings, pizza crusts, flour and corn tortilla products, appetizers, prepared meals, soups, sauces, meat dishes and side dishes. (b) Tyson Renewable Energy After the processing of chicken, beef and pork, the food processing plants left with a huge amount of animal wastages and fats. Tyson Foods took a revolutionary step in 2006 when it successfully started its Tyson Renewable Energy business unit (Bio-diesel Magazine, 2007). The purpose of this unit is to transform the leftover animal material into bio-fuels. In 2007, Tyson and ConocoPhilips signed on agreement to produce approximately 175 million gallons of bio-diesel per year. It was estimated that this amount would be sufficient to run all the trucks of the company for about 3.5 years (Souza, 2007). (c) Tyson’s Human Welfare Activities The main field of Tyson’ corporate citizenship is the support of hungry people and to provide relief to needy people in natural disasters. In its publication of December 2007, Forbes Magazine declared the Tyson Foods as the second most generous company of United States that donated 1.6% of its annual operating revenue to deprived people during 2007. In order to raise the awareness of hunger, Tyson Foods launched numerous seminars with national organizations. Moreover, 08 individuals are awarded by Tyson Hunger All-Star Award each year which perform significant role in hunger relief missions. Tyson’s role has been remarkable in disaster relief operations as well. It provided 3.2 million meals to the people of Midwest and Gulf Coast affected by hurricanes of 2008. (d) Environmental Sustainability “Environmental stewardship is a core value of Tyson Foods’ business philosophy because we believe protecting natural resources is essential to achieving clean air, water, and land for our world” (Tyson Foods Environmental Policy). Tyson Foods always strives to bring the latest technology to facilitate its operations with respect to new environmental progress. Environmental management system, reduction of greenhouse gas emissions, natural farming and water quality reveal the Tyson’s environmental stewardship. (i) Environmental Management System (EMS). All the local food processing plants are working with respect to ISO-14001 under EMS program. This EMS contains latest environmental practices. (ii) Efforts to Reduce Greenhouse Gas Emission. Tyson Foods signed on an official agreement on October 2004 to become a member of SmartWay with Environmental Protection Agency (EPA), a national voluntary environmental and energy program. Tyson aimed to reduce fuel emission through its transportation fleet till 2007. During the same year Tyson also joined Climate Resolve program developed by Business Round Table (BRT). Later in 2004 Tyson, launched its separate environmental protection program called Climate Leader. The main objective of the program is to reduce the greenhouse gas emission within in next 05 to 10 years on the part of Tyson Foods. (iii) Water Quality. Tyson Foods uses 38 full treatment plants and 32 partial treatment plants inside the United States where approximately 75 million gallons of wastewater are treated each day. The company spends more than $100 dollars per day on this sensitive issue. Competitive Marketing Strategy Tyson food produces the exclusive food products which do competition with the other national and international food processor and producers companies. Tyson Foods has the vision to maintain its leading market position through its competitive marketing strategy which includes: High quality products through target markets Focusing on food production, its sales and marketing to enhance the demand from such target markets Operating customer support services and national distribution systems 05 Year Financial Summary In the next page, 05 year financial summary of Tyson Foods is presented showing how the company is earning its share from the market globally. Operations/Years 2009 2008 2007 2006 2005 Sales $26,704 $26,862 $25,729 $24,589 $24,801 Goodwill impairment 560 - - - - Operating income (loss) (215) 331 613 (50) 655 Net interest expense 293 206 224 238 227 Income (loss) from continuing operations (536) 86 268 (174) 314 Income (loss) from discontinued operation (1) - - (17) 58 Net income (loss) (537) 86 268 (196) 372 Diluted earnings (loss) per share: Income (loss) from continuing operations (1.44) 0.24 0.75 (0.51) Income (loss) from discontinued operation - - - (0.05) Cumulative effect of change in accounting principle - - - (0.02) Net income (loss) (1.44) 0.24 0.75 (0.58) Dividends per share Class A 0.160 0.160 0.160 0.160 Class B 0.144 0.144 0.144 0.144 Balance Sheet Data Total assets $10,595 $10,850 $10,227 $11,121 $10,504 Total debt 3,552 2,896 2,779 3,979 2,995 Shareholders' equity 4,352 5,014 4,731 4,440 4,671 Other Key Financial Measures Depreciation and amortization $496 $493 $514 $517 $501 Capital expenditures 368 425 285 531 571 Return on invested capital (2.7)% 4.3% 7.7% (0.6)% 8.6% Effective tax rate (2.7)% 44.6% 34.6% 35.0% 28.7% Total debt to capitalization 44.9% 36.6% 37.0% 47.3% 39.1% Book value per share $11.56 $13.28 $13.31 $12.51 $13.19 Closing stock price high 13.88 19.44 24.08 18.70 19.47 Closing stock price low 4.40 12.14 14.20 12.92 14.12 (Source: Tyson 05 Year Financial Summary, 2009 http://www.tyson.com) SWOT Analysis of Tyson Foods Strengths Global presence World’s largest processing and marketing company of chicken, beef and pork World’s 2nd largest food producing company Fresh and quality products Strong market position Strong and effective food supply chain Variety of food products incorporated with exclusive specialties Offers customers choice, competitive prices and exceptional customer service Acquisition of number of profitable companies From above listed strengths, it is evident that Tyson Foods has its main strength in its variety of products and services, large supply chain and competitive price strategy. The company produces and sells its diverse products through a huge infrastructure. More than 400 places are there in the United States where the Tyson products are sold. Within just one week, almost 42.5 million chickens are processed through 54 chicken plants, 347,891 pigs are processed through 06 pork plants and 170,938 cattle are processed through 13 beef plants. Other plants process hatcheries and tanneries (wikipedia.com). This huge infrastructure allows the Tyson Foods to contain a wide-ranging and diverse target market, reducing its business risk. Moreover, Tyson has competitive cost strategy which enables it to deal with both big and small business owners even across the world. The main marketing and promotional strategy is direct marketing with both new and already existing customers. Such strategies are considered low cost and therefore, very effective to Tyson Foods. Weaknesses Core product do not include vegetables, rice dishes and other dry food Products highly influenced by seasons especially with respect to foreign countries Depend on the on contract growers and supplier of live stock Price fluctuations in feed ingredients like feed grains, live cattle, live swine Depends on the energy and agricultural policies of US and foreign governments No large scale infrastructure in Australia From the above points, a very lax quality control is revealed that Tyson has slightly lapses on the part of its products to the foreign countries. This enhances the risk of foreign customer’s dissatisfaction with products. It also contains a higher risk for product recalls. Further Tyson needs to establish its full scale business structure in Australia and some other parts of the world to maintain its business growth strategy. Opportunities Online food reacquisition Joint projects with retailers Acquisitions Counter social changes with respect to general customer attitude, customs or trends Use of CRM to deal with targeted markets Financial markets (raise money through debt, etc) Setting of new formats e.g. celebrating special food festivals or food streets Increase online sales Global expansion up to emerging markets of China, India and Western Europe Product innovation Online order reacquisition can not only support the Tyson Foods to increase it revenue but also assist to reduce its transportation cost. New creative ideas are another room for the company to excel. Tyson has the opportunity to support the people, affected by War on Terrorism, in Afghanistan, Pakistan and Iraq. It will give a new horizon to the Tyson target marketing as well. Threats Outbreak of livestock diseases US customers slow down Impact of global recession on the customer’s purchasing strength Consolidation of customers Pressure groups concerning environment Increasing vegetarian life style Increasing labor costs Changes in consumer preference Competitive pressure from new entrants As a market leader, target of competition both locally and globally Adverse weather effect on the production of feed ingredients like feed grains, live cattle etc Unstable political, economic and law and order situation in foreign particularly Asian countries Currency exchange rates with respect to US dollar particularly the Canadian dollar, the Chinese renminbi, the Mexican peso, the European euro, the British pound sterling, and the Brazilian real Increased fuel price could impact transportation costs & profitability Increased cost of petroleum-based products may impact cost of packaging Intricacy and costs related to a broad variety of complex domestic and international laws and treaties Natural calamities, fire, terrorism, extreme weather including droughts, floods, excessive cold or heat, hurricanes etc Tyson Foods involves food products which by nature have number of business threats. The higher risk is that even a single threat factor can washout the business marketing. Pressures from UNO and the environmental protection agencies are the foremost threat to Tyson Foods as well as to its competitors. Tyson itself has imposed several restrictions on itself by signing on number of treaties. Its Climate Resolve project is also under the observation of BRT. War on Terrorism in different parts of Asia is a major concern to its growth oriented strategy. Global warming is causing extreme weather events. Number of hurricanes has been increased during last 30 years. Ultimately the company may face extreme problem from the reduction of feed ingredients like feed grains, live cattle etc. Livestock disease and currently swine flu is a permanent source of concern. Major Competitors In the competitive world, every industry is facing challenges from its competitors. Same is the case of Tyson Foods in the food and poultry industry. Some of the leading competitors of Tyson foods are ContiGroup Companies, Inc., Farmland Industries, Inc., Cagle's, Inc., and Foster Poultry Farms which are discussed briefly. Some other major competitors include Gold Kist Inc., Cargill Inc., Perdue Farms Inc., Pilgrim's Pride Corporation, Sanderson Farms, Inc., and Hormel Foods Corporation. Strengths Company Strengths ContiGroup Companies, Inc. Global supplier of nutritional protein one of the world's largest cattle feeders 06th largest integrated poultry producer in the United States 2nd largest pork producer in United States largest poultry and animal feed producer in China strong economic and strategic position in market Farmland Industries, Inc. Largest agricultural cooperative in North America Strong strategic position Long standing reputation in industry Technical excellence Cagle's, Inc. 85 percent of the birds as value-added products Huge annual sale Innovative products Foster Poultry Farms Thoughtful risk-taking strategy Hands-on management and strict attention towards excellence Reputation for honesty and credibility High quality and leading producer of turkey along the West Coast Common Weaknesses Seasonal depending products Depend on number of supporting agencies Pollution and greenhouse gas emitters Common Opportunities Vast room for innovation Environmental sustainability Financial markets through debt etc Network expansion especially in Far East Asia and Western Europe Acquisitions Common Threats Debt or cash-flow problems Changing social and consumer trends Rapid technological developments Potential threats from new entrants Conclusion Tyson Foods is a world class company serving in food industry. The company has a great reputation and green image with respect to its product’s safety, purity and customer service. The company has a great 75 years history of its struggle to conquer the food industry at the international level. The key success factor of the company is the adherence of its operations with its vision and core values. Works Cited Bio-diesel Magazine (January, 2007). Tyson Foods forms Tyson Renewable Energy. http://www.biodieselmagazine.com/article.jsp?article_id=1360 Heath, Thomas, "A Booming Business Runs Afowl of Politics: Tyson Foods' Troubles Escalated Following Clinton's Election," Washington Post, July 23, 1995, p. H1. Manning, Earl, "Don Tyson: The Chicken King Spreads His Wings," Progressive Farmer, March 1994, pp. 24-25. Schwartz, Marvin, (1991). “Tyson: From Farm to Market, Fayetteville, Ark”: University of Arkansas Press, 158 p. Souza, Kim (April 16, 2007). Tyson Foods Turning Fat Into Fuel. The Morning News. http://www.nwaonline.net/articles/2007/04/16/business/041707apriltysonconoco. Tyson Corporate Fact Book, Springdale, Ark.: Tyson Foods, Inc., 2002, Read More