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Case study, Scenario Extract of Tyson Foods, Inc.

Tyson Foods, Inc., produced, distributed, and marketed beef, chicken, and pork products, including prepared foods and related allied products. The company's products were marketed and sold to national and regional grocery chains, regional grocery wholesalers, meat distributors, clubs, and warehouse stores. Institutional customers included military commissaries, industrial food processing companies, and national and regional chain restaurants. Tyson also distributed via international export companies and domestic distributors. The company's major export markets included Canada, China, Japan, Mexico, Europe, Puerto Rico, Russia, and South Korea. Approximately 12% of Tysons total sales were to a single customer, Wal-Mart Stores, Inc. The IBP Acquisition In August 2001, Tyson acquired IBP, Inc., (renamed Tyson Fresh Meats [TFM]), a major supplier of processed, minimally processed, and prepared beef and pork products. The combined company comprised two primary marketing groups: a food service and international group and a fresh meats and retail group. Operations were conducted in five segments: beef, chicken, pork, prepared foods, and other. Tyson held about 27% of the U.S. beef market, 23% of the chicken market, and 19% of the pork market. Chicken accounted for 32% of fiscal 2004 revenues and 59% of profit; beef, 45% and 14%; prepared foods, 11% and 15%; pork, 12% and 9%; other sources of revenue were nominal. Prior to the acquisition, IBP had begun developing the first national retail brand of both case-ready red meat and quickfrozen steaks and pork chops under the Thomas E. Wilson brand. The IBP acquisition also allowed Tyson to extend its line of branded convenience foods to beef and pork via the Thomas E. Wilson brand of fully cooked family dinner meats. Found in the refrigerated meat case, these products could be prepared in as little as five minutes. Varieties under this brand included beef pot roast, seasoned pork roast, seasoned beef meatloaf, and seasoned beef sirloin roast. Although Tyson initially embraced the Thomas E. Wilson brand as a means of gaining market share in the fast-growing ready-to-eat segment, the company announced only a year later - to the surprise of industry analysts - that it would drop the Thomas E. Wilson name and replace it with Tyson as a first step in a branding strategy focused on creating a single national protein brand. Communication and promotional efforts across product lines were built around the Powered by Tyson strategy, a fully integrated marketing campaign designed to position the company as a premier provider of protein. Continued Restructuring In August 2002, Tyson announced that it would close its company-owned and leased hog farms and end contracts with 132 contract hog producers in Arkansas and eastern Oklahoma. The company noted that transportation costs were a big factor in the decision to exit the pork processing business: Competing companies had pork-processing operations closer to packing facilities and consequently could avoid higher transportation costs for both finished hogs and grain.

Tyson announced in mid-September 2002 that it had reached a definitive agreement to sell its Specialty Brand, Inc., subsidiary, a leading producer of frozen food products, including handheld Mexican appetizers and entrees, frozen filled pasta, and coated appetizers under the Jose Ole, Freds for Starters, Rotanelli, Marquez, Posada, Little Juan, and Butcher Boy brands. Industry analysts noted that Tyson had had a difficult year in 2004. It began the year with strong demand and higher prices as McDonalds, Wendys, Burger King, and other fast food restaurants rushed to promote white meat chicken and lower-fat beef items, in an attempt to take advantage of the growing popularity of the Atkins and South Beach diets. However, the huge demand drove prices to a point at which both customers and food retailers began to cut back purchases. Although there was usually a drop in demand for chicken and beef during the summer months (July 4 to midSeptember), Tysons drop in sales was greater than expected. Chicken exports were further hurt by an outbreak of avian flu early in the year, and the mad cow scare of late December 2004 continued to keep borders in Canada and Japan closed to U.S. beef exports.

Negative Publicity While the entire industry had suffered some bad publicity relating to the unsanitary conditions of plants, high illness and injury rates for poultry and meatpacking workers, and heavy-handed tactics with growers and other suppliers, Tyson had been the subject of more negative news stories that its competitors, including wage and hour suits filed by current and former employees; Environmental Protection Agency suits alleging violations of various environmental laws, including the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act; a suit alleging violation of securities laws with respect to the IBP merger; and various patent infringement actions. In addition, Tyson had been targeted for investigation of influence peddling and charged with conspiracy to smuggle illegal aliens to work at a handful of the companys poultry plants. Questions: 1. What was the rationale behind restructuring? 2. Did the organizational restructuring help the organization and how? 3. What would be your strategy to encounter the negative publicity? 4. What is your analysis of the product portfolio of Tysons product, is this a risky portfolio?

5. What would change strategically in Tyson to change the current situation.

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