Smithfield

Smithfield

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Strategy


     Smithfield Foods is the largest hog producer and pork processor in the world. They produce 5.1 billion pounds of meats yearly. Smithfield products are sold in North America and 25 worldwide markets. These international acquisitions gave the company a strong hold on the market, upgraded manufacturing facilities, and the opportunity for growth. Smithfield began its’ expansion into foreign markets in 1998 when they made their way into Canada, France, Poland, and later on into Mexico.
     Smithfield Foods headquarters are located in Smithfield, Virginia. However, most of the company’s operations are found in North Carolina. Their southern location enables them to give lower wages in order to have more competitive prices. The CEO, Joseph W. Luter III goal was to keep driving costs down in order to increase the sales. They want to continue this trend into the future in order to increase profits.

Performance

In 2002, Smithfield’s sales were 6.6 times where they were in 1993. In addition to this, net income was up 50 times the amount of 1993. The company quickly expanded, and in 2001 they raised 12 million hogs. That was 3.5 times the amount of their closest competitor. Expanding the business abroad was essential in the company’s growth. In 1995 net income was 27. 8 million. In 1999 net income was 94.8 million. That increase was the direct effect of international expansion. After the expansion abroad, Smithfield also expanded domestically which sent sales rocketing. By 2002 the company owned or leased facilities in North Carolina, South Carolina, Virginia, Utah, Colorado, Texas, Oklahoma, South Dakota, Missouri, Illinois, Mexico, Brazil, Poland, and Canada. In 2002 the net income was 197 million and the company secured its place as the top in the industry.

External Audit

There were many external factors that affected the company’s performance and were something that needed to be dealt with. Most importantly was the issue of waste in the environment due to the hog farming. The residents of eastern North Carolina were unhappy with the situation taking place. The smell of the city was beginning to become unbearable and it was affecting the lives of many people. The problem did not affect sales and income however it had become an issue of morality. Another external factor that needed to be dealt with was the availability of land to dispose of the manure. According to the reading, the hogs in eastern North Carolina generate 9 million tons of manure each year.

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This began to have an effect on the people in the neighboring communities. Water quality, air quality, and the quality of life were all diminishing because of the means of disposal. Once again these problems had no effect on income, however the company was facing ethical issues.


Internal Audit


     There were not as many problems internally within Smithfield as there was externally. However one of the problems that they faced as a company was the fact that they were withholding information about the lagoons. The lagoons are where they disposed the manure. The information that they were withholding was that on occasion the lagoons leak and the water becomes contaminated. Residents were not urged to buy bottled water because they were not informed of the spills. Another internal problem was the fact that this company did not want to deal with the unpleasant odor that their wastelands were emitting. According to company officials there is no possible solution to the problem of the extremely horrific odors. Smithfield were abiding by the laws for waste disposal of manure, therefore they felt no urge to change their methods. Financially, the company was doing excellent. They were increasing sales and profits significantly and were showing no signs of slowing up. As with the external problems, the internal problems were more environmental than financial.

Critical Issues


1)     Deal with the problem of leakage in the lagoon systems
2)     Find an effective way to minimize the odor that is affecting eastern North Carolina
3)     The employees’ wages are very low and the work conditions are extremely strenuous and unpleasant.
4)     The people within the organization need to stop withholding information from the public.



Alternatives

     
Smithfield Foods could address their critical issues in various ways. To deal with the leakage more lagoons could be created. This would prevent overflowing and therefore solve the problem of contamination. Perhaps they could ship manure to other facilities in need of fertilizer. To alleviate the odor Smithfield could use better ventilation systems in their barns. Additionally, spreading out the location of the lagoons would reduce the odor to the community. By not concentrating the lagoons in one area the smell would not be as potent.


Recommendations


     In my opinion Smithfield should try to minimize the odor, which is the core complaint of the communities of eastern North Carolina. In doing so the company would prevent possible public relations problems. However, since they are at a good financial standing and North Carolina is one small part of their vast market the rest of their organization should not be affected in the effort to appease the community. On the other hand, the leakage and possible contamination need to be dealt with by a combination of spreading out the location of lagoons and reducing the amount of manure that goes into each. To deal with the employee issues, Smithfield should give better benefits to those who have been with company for an extended period of time and perhaps shorten the work shifts.
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