Silver Fern Farms Limited: A Strategic Analysis

The Business Model of Silver Fern Farms Limited

Silver Fern Farms Limited is a multinational meat company based in New Zealand, Australia. The company is a result of an equal partnership between Shanghai Mailing Aquarius Ltd. and Silver Fern Farms Co-Op Ltd., which is a conglomeration of more than 16000 cattle, deer and sheep farmers in New Zealand. The company was founded in the year 1948 on 30^th September and currently has its headquarters in Dunedin, New Zealand (Silver Fern Farms 2018). The company currently has as its chairman, Rob Hewett and Guoxiang Wang is its current co chairman. At present, Silver Fern Farms is the largest processor and manufacture of meat products in New Zealand. It dabbles in manufacturing, transportation of live stock, meat processing, meat marketing, export logistics and so on. The company which was initially known as PPCS Limited, is also responsible for the export of all meat, beef, venison and lamb related products to different parts of Australia and other countries as well. The business model of the company can be roughly divided into two aspects – food and associated products. The food segment of the company involves the production and processing of lamb, beef, mutton and also venison. These are exported to the overseas and domestic markets. The associate segment is mainly composed of the processing and manufacture of by products.

Porter’s Five Forces and competitive analysis 

The company falls under the strategic groups of agribusiness, manufacture, production and processing of livestock and all kinds of meat products. Although the company has complete dominance over the New Zealand red meat market, it has competitors like Teys Australia, which are equally portent, when it comes to the meat industry. The Porter’s Five Forces Framework has been used in the following section to carry out a competitive analysis of the industry in which Silver Fern Farms operates. 

Threat of new entrants

The red meat industry in New Zealand is a highly profitable one, which generates huge revenues each year. As a result, the market is extremely attractive for new entrants. Unless the existing companies take requisite measures to block these new market players, the threat owing to new entrants is going to increase in the next few years. However, there are quite a few factors which could potentially stand as obstacles for new entrants. These include high exit investments, brand equity, patents, rights and so on. Plus, the initial investments involved in setting up a company in this industry are extremely high, which can be challenging for new companies (Dobbs 2014, p. 33). As far as Silver Fern Farms is concerned, this helps in ensuring that they are able to maintain their competitive positioning in the market.

Competitive Analysis of Silver Fern Farms Limited

Threat of substitutes

Substitutes refer to the product boundaries of the concerned industry and the other products outside the boundaries, which may prove to be better alternatives. The threat faced by substitutes for Silver Fern Farms is relatively low. This is because people who prefer red meat like beef or mutton would not change their preferences. However, poultry is becoming increasingly popular in New Zealand at present. As a matter of fact, there are some people who even consider poultry to be comparatively healthier and a much cheaper investment as compared to red meat.

Customers’ bargaining power

The bargaining power refers to the power that the buyer has with respect to the price over the company. In the case of the meat industry in New Zealand, there are a few factors which must be taken into consideration – namely buyer volume, dependency levels, channels of distribution and the availability of information. With respect to Silver Fern Farms, the buyers are of two types, consumers and individual firms (Morales et al. 2013, p. 239). The bargaining power of customers in this case is quite high, since they have a large number of options to choose from.

Suppliers’ bargaining power

The chief suppliers for a meat production company like Silver Fern Farms would include the sheep, lamb and cattle farmers who are responsible for producing the raw materials necessary for processing and manufacture of red meat (Morris 2013, p. 80). As such, the threat of supplier power in this company is relatively low, because the suppliers are internally integrated. 

Threat of rivals

It must be asserted that Silver Fern Farms is indeed one of the most popular and trusted brands in the red meat industry in New Zealand. However, there are other brands like Teys Australia, who are competing within the same industry. As such, there are also a number of local and regional manufacturers of red meat which serve the local audiences of Australia.

Competitive analysis of the company

A competitive strategic management policy is followed by the company. Such a strategy is all encompassing and would be taking into consideration the internal environment of the company, along with the integrated apprehensions of the external environment. The competitive environment in the red meat industry is relatively high in New Zealand and the strategy of the company is aimed at positioning it favorably within the industry (Lees 2015). There are several local companies in New Zealand, which have however failed to attain the heights that Silver Fern Farms has been able to. For example, the ANZCO Foods company is another multinational company which provides lamb and beef products to residents of New Zealand and Australia. This company is one of the competitors of Silver Fern Farms. The company maintains its competitive positioning through a number of strategies like corporate social responsibility and sustainability. These policies are directed at the target audience and would lure in potential customers and even retain existing ones.

Global Impact of Silver Fern Farms Limited

The critical success factors in the red meat industry would revolve around the quality of produce or manufactured goods. This is largely because the success of such a company would be intricately linked to the quality of products manufactured or processed. The factors are herd management, farmer training, diseases control and strategic management. Disease control and herd management are closely linked, with the former being a part of the latter. The farmers would have to gain a deeper understanding of the various stages of herd management and herd growth and ensure that they do not lose their precious livestock to diseases. Herd mortality rates should be regulated and kept low (Juan Ding et al. 2014, p. 87).

Globalization may be defined as the process of increasing interdependency amongst the various countries across the globe and their people. A wholly integrated system of product and service delivery, with resources available across countries and a conglomeration of international markets, is characteristic of globalization. Globalization in Australia has technological, cultural, political and economic dimensions. For a company like Silver Fern Farms, at least 85 per cent of the revenue is obtained from international trade (Martin et al. 2013). The reductions of barriers in trade, foreign direct investments and other export channels have made it possible for the company to penetrate international markets with ease. While assessing the impact of globalization on the country operations, there are a few aspects to be considered. For instance, since 1975, the rate of export of all kinds of agricultural goods (which includes beef) has only increased by 3.5 %. The current population in Australia has grown to approximately 20.4 million from 20 million in 2004 (Thompson & Martin 2014). Over these years, the lifestyles of Australians, the dietary habits, purchasing patterns and consumerist attitudes have changed drastically. While increase in globalization has led to an increase in consumerist attitude, it has also led to an increasing awareness about the harmful effects of excessive consumption of products like beef and alcohol. The rate of beef and venison consumption fell from a average 70 kg per person to a miserable 35 kg per person in the twenty first century. Globalization has also led to an increase in the popularity of poultry farming in Australia, with poultry farmers exporting their products to different parts of the world.

Globalization has also compelled the company to take into account the following factors:

• The need for mitigating environmental impacts by reducing release of harmful pollutants into the atmosphere. There is also a growing concern regarding the biodiversity and stability of the pastoral ecosystems.
• The general public have are becoming aware of the processes involved in management, slaughter and transport of livestock, which has taken a toll on the international and domestic markets of the company (Levine 2013, p. 210).
• Another factor that has adversely affected the international market of Silver Fern Farms is the growing concern regarding the spread exotic diseases.

Strategic Management at Silver Fern Farms Limited

Overview of the organization operations 

In order to understand the operational aspects of the company, one must study their business model. The business model of the company is customer oriented, where the unique needs and demands of the customer are first identified and then implemented as part of its strategic operations. The company works in close association with its farmers to produce meat products that are of exceptional quality and specifically caters to the needs of the customers (Greiner 2016, p. 3). The company’s unique selling proposition would be the fact that it is 100 % New Zealand (Silver Fern Farms 2018). The company has been responsible for production of top quality, grass fed red meat to the whole of New Zealand and Australia. The following report carries out a strategic analysis of Silver Fern Farms. In a diverse company like Silver Fern Farms, it is important to have a corporate strategy that takes into account its goals and objectives. The business strategy of the company is also inclusive in nature and incorporates all the minute activities and tactics that the company would execute. Strategic management at Silver Fern Farms is focused on making optimum use of available resources. The strategic management of the company, which contributes to its success, would involve the use of innovative techniques, diversification, market development, integration and product development. 

The vision of the company is “Inspirational Food created by Passionate People”. The company is led by a mission which dictates that the company’s activities and operations are representative of what they stand for. Food has remained and continues to be the heart of the company’s mission and vision. The company also strives to do right by their stakeholders and shareholders, by taking into account their individual interests. The mission and vision of the company have remained the same since their founding – to give the people of New Zealand and the rest of the world a taste of world class red meat (Silver Fern Farms 2018). The long term business objectives would be to establish themselves as a frontrunner in the meat manufacture business in Australia and in international markets (Silver Fern Farms 2018). The short term goals of the organization are

• To improve the herd management process at the farms
• To equip farmers with land toolkits and provide training for them.

Internal analysis of organization 

Core competencies

• The company is supported by a strong work force. The internal stakeholders of the organization, including the governance and the farmers, are all dedicated towards the growth of the company.
• The company also has a high profitability rate. The company holds a significant share of the meat industry in Australia and overseas, resulting in consistently high revenue outcomes.  
• The company is entirely focused on customer service. Every activity of the company from procurement of raw materials to distribution revolves around customer service.
• Specialized attention is provided to the quality of goods manufactured. The company claims to be 100 % Australian, with emphasis on utilization of state of the art technology and production of top quality products.
• Corporate social responsibility is a unique core competency which gives the company competitive advantage. For instance, the company provides its farmers with land toolkits, which would help the farmers understand the impact of their activities on the environment and also manage these results (Wiedman et al. 2015, p. 69).

Opportunities and threats 

The global animal protein industry is only in the exponential phases as of 2018, with the demand for quality beef, lamb and mutton products increasing in Australia and across the globe (Morris 2013, p. 80). In Asia and Latin America, there is a growing demand for beef products, which provides immense opportunities for beef exporters like Silver Fern Farms. Similarly, the increasing availability of fresh water and other required resources can help double the level of production of animal protein and associated products (Umar et al. 2014, p. 12). However, the company faces severe challenges from other competitors who are taking advantage of the situation and attempting to penetrate the market. Also, the company is extremely dependent on its raw material suppliers, which provides them with more power than necessary. Flawed practices in herd management could affect the profitability of the company.

Mission, Vision, and Objectives of Silver Fern Farms Limited

External analysis 

• Political factors– There are quite a few political factors that Silver Fern Farms will have to consider. These include – political stability in the home country and the host country, globalization impacts, trade relations with other countries and export and import regulations. Australia is a relatively politically stable country, which promotes the manufacturing process of beef in New Zealand.
• Economic factors– The level of beef production in New Zealand has decreased by almost 10 % since the 1990s, owing to changing patterns in land use and global economic crises. More than 1 million tones of lamb, beef and mutton products are exported to more than one hundred and twenty countries each year (Ferguson et al. 2014, p. 480).
• Social factors– As mentioned earlier, a large percentage of the population in Australia is becoming increasingly conscious about the health impacts of excess beef consumption, with more and more people turning to poultry. This has affected the profitability of the company (Morales et al. 2013, p. 250).
• Technological factors– There have been several improvements in technology pertaining to land use, cattle farming, herd management, diseases control, cattle genetics et cetera, which can pave the way for sustainable red meat manufacture (Lankester 2013, p. 190).

The internal and external analysis of Silver Fern Farms reveals that the strategic management of the company follows a robust policy through empowerment of cattle farmers, who are the chief assets of the company. The unique factor about the company’s operations is the fact that the company is 100 % Australian. The company also makes judicious use of its available resources in order to produce the best possible product for the customers, who are the sole focus of their strategies. However, the company faces threats in the form of severe competition from rivaling companies. It would thus need to improve its advertising and promotional strategies as well its international market strategies so as to improve overall profitability.

The resource based view theory suggests that it is the available resources of a company which determine its success and failure. The two main resources have been analyzed:

• Cattle and livestock– The company pays special attention to the quality of livestock, so as to improve the quality of product manufactured. The company uses gene mapping, to ensure that only top quality cattle are used (Zhang et al. 2014, p. 20). Similarly, superior disease control methods are used to reduce mortality rates of cattle (Silver Fern Farms 2018).
• Human resources– The main human resources in the company are its cattle farmers and herd manager. They are also the chief suppliers of raw materials. The company follows a strict policy of safety regulations so as to reduce mishaps in the processing factories. Also, the farmers are trained to abide by environmental standards so as to make the business sustainable in the long run (Mansi et al. 2013, p. 185).

• Cost leadership– The company certainly dominates the market in terms of finances and profitability. In New Zealand, the company is the largest exporter of meat products and generates approximately 6.7 billion dollars in revenue each year. In the past few years, at least 85 % of this revenue has been due to export. The company has increased its market share by charging affordable prices and at the same time making reasonable profits consistently (Silver Fern Farms 2018).
• Differentiation– The company follows a differentiation strategy. Each step within the manufacture and processing operations with the company is accompanied by solid scientific research, development and innovative ideas. This enables the company to deliver high quality products (Sun, Hyland & Bosch 2014, p. 650).
• Focus– The niche market that Silver Fern Farms caters to is the domestic market in Australia. It does so by marketing its products as 100 % Australian which add to its appeal and lure in customers from all over Australia. This also builds brand loyalty (Silver Fern Farms 2018).

• Market penetration– Since the company is largely based on international market penetration, it is focused on changing its incidental clients into regular ones and regular clients into heavy ones. This is done through customer relationship management practices.
• Market development– The market development policies of the company have been ineffective to some extent in the past few years. This is due to the increasing popularity of poultry and the threat of new entrants in the market (Hussain et al. 2013, p. 198).
• Product development and diversification– There is little product development and diversification on part of Silver Fern Farms. The company, since its founding, has marketed the same set of products and restricted itself to niche international markets.

The company’s operational strategies have more or less remained the same since its founding, except for a few changes. There have been some changes in corporate governance, so as to improve the quality of workforce in the organization. At present, the corporate governance of the company is driven by sustainability, succession planning, risk management, performance evaluation and so on. Corporate social responsibility is another change and improvement initiative implemented by the company, which takes into account the environmental impacts of the company operations. To avoid this, herd management policies, farmer training programs and environmental toolkits have been implemented. The improvement initiatives of Silver Fern Farms can be compared to that of its competitor, Teys Australia, which is largely focused on livestock quality (Teys Australia 2018). Teys has introduced a livestock assurance program which ensures food safety, biosecurity, traceability and animal welfare (Elser 2014, p. 32). As compared to Silver Fern Farms, Teys has successfully been able to implement customer relationship management policies which have improved its market presence globally. 

Summary of issues faced by Silver Fern Farms and factors that most affect company operations

• The environmental factors have posed a threat to the reputation of the company. There is a growing consciousness about the negative impacts of livestock farming amongst the general public, along with health impacts of beef consumption (Wiedman et al. 2015, p. 111).
• Herd management has proved to be problem for Silver Fern Farms in the past few years. Whereas its competitors are implementing wholesome programs to improve the quality of livestock, Silver Fern Farms has failed to live up to quality standards.
• It also faces severe competition from other rival countries within the same industry and the poultry market. Australians and international markets today prefer pork and poultry as compared to beef, which has severely affected the revenue outcome of the company (Bell et al. 2011, p. 10).
• The company would also need to improve its quality of workforce and human resource management so as to improve the supply chain in the organization.

Strategic options and recommendations 

• Farmer training programs– Since the company’s chief resources are the cattle farmers, they should implement robust farmer training programs. These would help the farmers stay abreast with the latest trends and developments in technology. They would be made aware of new practices in herd management, which they could implement. Silver Fern Farms should work in close association with the farmers and implements regular training programs to help them stay up to date. Moreover, adequate resources like toolkits and funding would also provided by the company to ensure that the condition of livestock in the farms is optimum. This would be implemented over a period of six months.
• Livestock assurance– The company should lay emphasis on the quality of livestock at the farms. Such a program would assure the customers of the quality of product they receive. The various aspects of the program (that would be implemented over a period of 3 months) would include welfare of the animals, genetics, disease control measures, herd growth tracking, resources to reduce mortality of livestock and so on. Such a program is expected to improve the quality of meat produced (Elser 2014, p. 32).
• Environmental impacts– The company should implement ongoing and long term programs to address the issues related to environmental impacts. For instance, it is important to take into account the impact that cattle farming has on land patterns. Environmental impact evaluation and consequent measures to reduce them should be implemented. This is expected to improve the overall reputation of the company, resulting in better customer relationships.

Justification for chosen option 

A strategic decision making methodology has been followed to arrive at the conclusion that the strategic option most suited for the company would be that of livestock improvement and assurance (Wilson 2014, p. 3). Since the company is mainly reliant on its cattle and livestock to meet the domestic and international quality standards, it would have to improve the herd management and livestock management procedures to ensure that the best quality red meat is delivered to the customers.

Conclusion

Expected outcome for the chosen option 

Livestock management would have two expected outcomes for the organization:

• One, it would improve the quality of product produced. The quality of livestock would be directly proportional to the quality of red meat produced. All over the world, there are stringent quality standards which the company must adhere to. This would ensure that the company attains a favorable marketing position in the domestic and international markets, with respect to its rivals.
• Two, the quality of raw materials would improve. Livestock management would increase biosecurity, promote the welfare of animals, reduce environmental impacts due to cattle feeding, reduce the chances of diseases, improve mortality and overall production (Elser 2014, p. 32). This would certainly improve the levels of customer satisfaction in both domestic and international markets. 

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