Integrative Case 12.0: Perdue Farms

MGMT 466.1, Dr. Blumberg

December 3, 2014

Jasoda Acharya, Jocelyn Arce-Flores, Elif Celik, Iolani Davis, Andrea Hosage

Contents

Chapter One...................................................................................................................................................3

Part One: Introduction of Team Members.................................................................................................3

Part Two: Poultry Product Manufacturing Industry History and Analysis...............................................3

Figure 1: Source-National Chicken Council..........................................................................................6

Chapter Two...................................................................................................................................................8

Part One: Company Overview...................................................................................................................8

Section A: Company History.................................................................................................................8

Section B: Who They Are Now.............................................................................................................9

Part Two: Introduction to Key Company People.......................................................................................9

Chapter Three...............................................................................................................................................10

Overview of Theoretical Framework Used in Analyzing Company.......................................................11

Management and Organizational Leadership......................................................................................11

Marketing and Domestic Retail...........................................................................................................12

Operations............................................................................................................................................13

Figure 2: Source-Organizational Theory and Design text, Daft..........................................................15

Research & Development....................................................................................................................15

Environment.........................................................................................................................................16

Logistics and Information Systems......................................................................................................18

Industry Trends....................................................................................................................................19

Figure 3: Source- Author Generated....................................................................................................20

Figure 4: Source-Author Generated.....................................................................................................21

Figure 5: Source-Author Generated.....................................................................................................21

Figure 6:Source-Author Generated......................................................................................................22

Plans for the Future..............................................................................................................................23

Chapter Four................................................................................................................................................23

Part One: Organizational Analysis using Theoretical Model and Identification of Problems................23

Chapter Five.................................................................................................................................................24

Part One: Recommendations for Solving Identified Problems................................................................24

Part Two: Recommendations for New Organizational Structure and Processes, with diagrams............27

Figure 7:Source-Organizational Theory and Design text, Daft...........................................................30

Chapter Six...................................................................................................................................................30

Summary of Findings and Conclusion.....................................................................................................30

References....................................................................................................................................................32

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Chapter One

Part One: Introduction of Team Members

Jasoda Acharya--Chapter 5, Part 2: Recommendations for Business Structure, Chapter 6

Jocelyn Arce-Flores--Chapter 2, Part 1, Section: Who We Are Now & Chapter 3, Section:

Logistics and Information Technology, Chapter 6

Elif Celik—Chapter 6

Iolani Davis--Chapter 2, (Part 1 sec B: Who they are now) Part 2: Key People & Chapter 4 &

Chapter 5, Part 1: Recommendations for Solving Problems

Andrea Hosage--Chapter 1, Parts 1 & 2, Chapter 2, Part 1: Company History, Chapter 3,

Sections: Management and Organization Leadership, Marketing and Domestic Retail,

Operational Efficiency and TQM, Research and Development, The Environment, Industry

Trends, and Future Plans.

Part Two: Poultry Product Manufacturing Industry History and Analysis

The poultry product manufacturing industry, or broiler chicken industry as it was called

until the 1990s, is one of the most highly regulated industries, governed by the United States

Department of Agriculture (USDA) regulations, as well as, by the US Poultry and Egg

Association, and the National Chicken Council. The industry began in the late 1800s and early

1900s, as family farms began to raise dual-purpose chickens on their property. Initially, these

chickens supplied eggs and were used for the occasional holiday meal. Early poultry

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entrepreneurs began selling chickens for meat as a supplementary form of income for their farm.

By the 1920s-1930s, farmers began developing and breeding “broiler chickens,” which was a

type of chicken raised specifically for its meat. At this time, most broiler chicken production was

limited to the Delmarva Peninsula, Georgia, Arkansas, and New England. It was Wilmer Steele

of Sussex County, Delaware who is credited with pioneering the broiler chicken industry, when,

in 1923, she raised a flock of 500 chicks intended to be raised and sold for meat. By 1926, Mrs.

Steele was able to construct a broiler house to hold 10,000 chickens (US Poultry & National

Chicken Council).

During the 1940s-1960s, the broiler chicken industry experienced much growth, business

process integration, and the development of early USDA regulations. Early broiler chickens were

sold as “New York dressed,” which meant that only blood and feathers were removed from the

meat. In 1942, Illinois became the first state to gain governmental approval for “on-line

evisceration,” which is the removal of the internal organs; packing and processing ready-to-cook

carcasses would soon become the norm in the industry. Seven years later, in 1949, the USDA

instituted a voluntary meat grading program, which informed consumers of the quality of the

chicken meat they were purchasing. By the 1950s, the broiler industry was experiencing a huge

economic boom, where specially bred broiler chickens became more widely purchased than farm

chickens (US Poultry).

In order to streamline production and decrease costs and risk, farmers began vertically

integrating the business processes associated with raising and producing broiler chickens.

Previously, the feed mills, hatcheries, farms, and processors were all separate entities, each

relying on the success of the other for their own business. When vertical integration took hold, it

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meant that a single company was involved in all stages of production, processing, and marketing.

By the mid-1960s, approximately 90% of all broiler chickens sold came from vertically

integrated farms. Vertical integration allowed the broiler industry to take advantage of new

pharmaceutical, biological and production technologies to become more efficient, responsive,

and profitable (National Chicken Council).

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In addition, vertical integration caused a reduction in the man hours needed for

production, because flocks were larger and technology evolved. Not only did technology

decrease man hours, but also the overall growing time for a broiler chicken decreased, which

meant less time, space, resources, and less impact on the environment. Advances in genetics and

nutritional technology reduced the amount of feed need per bird, and better processes for

managing the health and welfare of the chickens were initiated. For the consumer, vertical

integration technologies meant the ability to purchase a tastier, meatier broiler chicken, at any

time of the year, at a budget-friendly price. The following operations chart shows the typical

flow of operations in a vertically integrated poultry farm (National Chicken Council).

Figure 1 : Source-National Chicken Council

By 1954, the National Broiler Council (later known as the National Chicken Council)

was started as a way to stimulate demand for broiler chicken meat. In 1959, USDA grading and

inspection for wholesomeness became mandatory. Television and print media advertising for

broiler chickens also became more widely used in the 1960s and 1970s. Today, more than 90%

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of the chicken sold in retail grocery stores has a brand name; either a processor’s brand or a

“private label,” which is a store brand produced by major processors for that store (National

Chicken Council).

After the 1970s, the industry evolved into its current state, with advancements in

nutritional discoveries, disease eradication programs, genetic improvements through traditional

breeding, and mechanization and automation technologies. By the 1980s, consumers began to

prefer cut-up chicken parts, as opposed to whole chickens, and this opened up opportunities for

the major poultry producers. By 1985, chicken had surpassed pork consumption in the US and it

surpassed beef consumption by 1992. In 1991, the government authorized the first shipments of

frozen chicken leg quarters to the Soviet Union, known as “Bush Legs” by Russian consumers,

in honor of the first President Bush. When the Soviet Union began to disintegrate, Russia opened

the door for international commerce and poultry exports expanded exponentially. By 2001, only

10 years later, foreign exports of poultry accounted for 20% of total production and about $2

billion in revenues (US Poultry).

In 1998, the USDA initiated its Hazard Analysis and Critical Control Points (HAACCP)

process control system program in all large poultry slaughter establishments. This program is a

modern approach to quality control that seeks to identify and control the points in processing at

which chemical, physical and microbiological hazards can be controlled, reduced, or eliminated.

Pathogen reduction is a key component of USDA’s initiatives. All of the advancements in the

industry have made today’s broiler chickens meatier, tastier, more affordable, and more

wholesome than the broilers of fifty years ago and even of those of just fifteen years ago. The

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poultry industry uses highly advanced scientific methods and practices to produce the highest

quality chicken for the consumer (US Poultry).

Today there are at least 40 major US companies involved in the production of poultry

products, and about 29,500 family farmers have production contracts with these companies.

Roughly 95% of broiler chickens are produced on the family-owned farms, with the remaining

5% raised on company-owned farms. In 2011, roughly 9 billion broiler chickens, weighing 50

billion pounds total, live weight, were produced. Almost 37 billion pounds of chicken product

was marketed, measured on a ready-to-cook basis. The US has the largest broiler chicken

industry in the world, and over 17% of production was exported to other countries in 2011.

Americans consume more chicken than anyone else in the world – 83.6 pounds per capita, and

chicken is still the number one protein consumed in the US (National Chicken Council).

Chapter Two

Part One: Company Overview

Section A: Company History

Perdue Farms was founded in 1920, by Arthur W. Perdue (Perdeaux), a Railway Express

agent, who left his job to start a small egg business at his small family farm near the town of

Salisbury, Maryland. By 1925, he changed from selling table eggs to selling baby chicks to other

farmers. He quickly gained a reputation for producing the best quality chicks by investing in the

best available breeding stock. In 1930, Mr. Arthur, as he was called, opened a second farm to

accommodate his rapidly expanding business. His only son, Franklin Parsons Perdue, who was

born in 1920, left college in 1939 to join his father’s business. By 1940, Mr. Arthur noticed that

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the future of the industry lay in selling chickens, not chicks or eggs. By 1944, Mr. Arthur had

made Frank a full partner in A.W. Perdue & Son, Inc. By 1950, Frank was given leadership of

the company, and by 1952, the company had begun vertical integration of its own business

processes, as well as, contracting with other farmers to grow chickens for them. By the 1960s,

Perdue Farms had continued its vertical integration process by purchasing a poultry processing

plant. In 1991, Frank became chairman of the Executive committee and Jim, Frank’s son, had

become chairman of the board and assumed leadership of the company. Jim focused on quality

control and strategic planning and by the 1990s Perdue Farms saw economic growth and market

expansion into the south and Midwest. By 1992, Perdue had an international division and within

6 years international sales were $180 million annually. Sales to commercial food service

industries grew, as did marketing and advertising, with the introduction of the “Fit & Easy,”

nutrition campaign. The 1990s also saw an increase in technology for scheduling deliveries and

coordinating with drivers (Daft, 2013, pp 625-627).

Section B: Who They Are Now

In 2010, Perdue Farms celebrated its 90th anniversary. They refreshed their vision,

values, reason for being, and aspiration statements in order to build on the foundation of trust

woven into the company’s fabric of existence. This refreshment included an update of the “base

brand,” which is fresh, young, ready-to-cook chicken with the Perdue brand. The “new” Perdue

chicken is the first poultry product manufacturer to give consumers the added assurance of

USDA process verified programs for “raised cage-free,” “humanely raised,” and “all-veggie fed”

poultry labeling. Perdue has also introduced a line of “better-for-you products”, which includes

whole grain breading and reformulated products low on sodium. This new movement has an

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obvious appeal to the health conscious consumer or anyone taking steps to eat and live healthier.

It is also up to par with some other companies, like KFC for example, who began making efforts

to offer chicken that is healthier for consumers. In order to continually foster trust between

consumer and producer, Jim Perdue has assumed the role of spokesperson and appears in most

all television advertisements. Currently, Perdue Farms employs nearly 20,000 associates and has

revenues over $2.5 billion (Our Company).

Part Two: Introduction to Key Company People

There are several key people in the Perdue Company who hold high level executive positions

however; we have chosen to introduce the following four influential executives. Unfortunately,

there was no information on Mr. Clint Rivers available for us to share.

1. Dr. James A. Perdue, grandson of founder Arthur, is currently the Chairman and Chief

Executive Officer of Perdue Farms. He holds a Master’s of Business Administration

and PhD in Fisheries from University of Washington. Prior to that, he earned his

Bachelor’s Degree from Wake Forest University. Dr. Perdue has been the CEO since

1991 after joining the company as an entry-level management trainee, and held various

positions in nearly every area of operations throughout the company (Company

Overview, Business week)

2. Mr. Clint Rivers is the Senior Vice President of Operations & Supply Chain

Management.

3. Mr. Mark Garth, Chief Financial Officer, Senior Vice President, and Treasurer. He

holds an MBA from Drake University and a BA in Accounting from Central College.

Mr. Garth joined Perdue Farms in 2011 as SVP of Finance and Accounting. That

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position expanded 7 months later to include Treasurer duties and he was promoted in

January 2013 to CFO to manage all financial and information technology operations

(LinkedIn Profile).

4. Roger C. Merrill, MD is the Chief Medical Officer of Perdue Farms Inc. He obtained

his Medical Degree from Virginia Commonwealth University, School of Medicine

(WorldCongress.com).

Chapter Three

Overview of Theoretical Framework Used in Analyzing Company

We will analyze Perdue Farms based on several aspects of its business. We are going to

examine Perdue Farm’s: a) Management and Organizational Leadership, b) Marketing and

Domestic Retail Operations, c) Operational Efficiency and Total Quality Management, d)

Research and Development, e) The Environment, f) Logistics (supply-chain) and Information

Systems, g) Industry Trends, and h) Plans for the Future. Our analysis will include the current

state of each category, as well as, where the company should be based on the best business

practices we have learned in our studies thus far. In the next chapter, we will discuss the findings

of our analysis and the problems we have identified within Perdue’s current operational outlook.

Management and Organizational Leadership

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Jim Perdue has a people-first management style and his company’s goals focus on the

three P’s, people, products, and profitability. His personal philosophy is that customer needs

should be satisfied with quality products, and putting his associates first is the best way to put his

philosophy into practice. He believes that if his associates are satisfied, then they will strive to

produce a superior product and thereby satisfy customers. Jim Perdue goes to great lengths to

ensure his associate’s satisfaction by providing English-language classes to non-English-

speaking associates and assisting them in earning a certificate equivalent to a high school

diploma. Perdue also has an ergonomics committee that redesigns jobs that can cause the most

physical stress or harm to the body. The company also has several Perdue-operated medical

clinics that are staffed by doctors employed by Perdue Farms and are accessible to any Perdue

Farms associate. As a result of the programs that Perdue has implemented for the associates’

benefit, the company enjoys a reduction in loss of time for medical visits, lower turnover rates,

and a happier, healthier, more productive and stable workforce (Daft, 2013, pp 627-628).

As we have learned in our Human Resource courses, employees who are satisfied tend to

perform better at work. We have studied, in Dr. Gibney’s MGMT 321 course, Maslow at great

length, and Maslow developed a hierarchy of needs that is used to help explain employee

motivation as it relates to job satisfaction and performance. Maslow’s central theory is that a

person cannot advance to the next level until the lower order needs have been met. Lower order

needs are biological and physiological needs such as preservation of life needs (food, clothing,

shelter), and then safety and security needs (job security, financial security, health security) (Dr.

Gibney, 2014). The programs that Perdue has in place for its associate’s help in meeting these

basic needs allowing the associates to progress into belongingness (friends, family), esteem

(recognition, high achievement), and self-actualization (self-fulfillment, reach potential). The

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increased productivity, lower turnover, and commitment to quality are evidence that Jim

Perdue’s people-first management style are working very well for Perdue Farms.

We have also learned that the most sustainable form of motivation comes from positive,

intrinsic motivation which comes from within the individual. When there is a good person-

environment-occupation fit, the individual is more satisfied with their job and more motivated to

perform better. The individual works harder because they want to, because they like their job, the

company’s values align with their own, and they are happy at work (Dr. Gibney, 2014).

Marketing and Domestic Retail

The current challenge facing Perdue Farms is how to market a wide variety of products

under a unified theme to a wide variety of customers. Originally, Perdue chicken was marketed

as “fresh, never frozen” chicken, but with the increase in international, foodservice, and retail

consumers who prefer value-added and frozen products, Perdue had to find a new way to market

their product. In addition, with the new health-focused consumer, there has been an increase in

the amount of “cage-free” and “organic” chicken that is needed to fill orders (Daft, 2013, pp 628-

629).

Today’s grocery consumer is interested in ease and speed of preparation in products they

purchase, which is where the value-added products target demographic has come from. These are

the soccer Moms who do not have hours to prepare dinner for their family, or working

households who get home late and need to get dinner on the table quick. This demographic has

changed the meat department in the grocery store, and has caused conflict with Perdue’s central

“fresh young chicken” marketing theme (Daft, 2013, pp 628-629).

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Operations

Perdue’s guiding philosophies for operations are quality and efficiency. Quality is

emphasized over efficiency, especially through Perdue’s strict adherence to Total Quality

Management principles and slogan, “Quality, a journey without end.” Ever since 1924, Perdue

has been continually working on improving its processes to lead to higher quality poultry. One of

the biggest innovations that led to an improvement in quality was the vertical integration of

Perdue’s broiler chicken company. This allows Perdue to control every aspect of its poultry

manufacturing. It breeds and hatches its own chicks, selects its own contracted growers, builds

Perdue-engineered chicken houses, formulates and produces its own specialty feed, oversees care

and feeding of the chicks, operates its own processing plants, distributes and markets its chicken

through its own network of distribution channels (Daft, 2013, pp 629-630).

Vertical integration and total process control formed the basis for Perdue’s claim that its

poultry is higher quality than the competition. Total process control also makes it possible for

Perdue Farms to control its waste and monitor every product, every step of the way. Perdue also

buys and analyzes competitor’s products regularly and poultry inspectors grade these products

and report to top management. Perdue also displays their quality policies in each plant and

teaches them to all new associates during training (Daft, 2013, pp 629-630). The following chart

shows the integrated operations at Perdue Farms and how vertical integration works for them.

This chart makes it easy to understand the entire concept of vertical integration and why it is so

important to Perdue Farms and their ability to control every step of the process.

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Figure 2 : Source-Organizational Theory and Design text, Daft

Research & Development

Perdue has long been recognized as an industry leader in research and the use of

technology to provide the highest quality products to its customers. As compared to the three top

competitors, Perdue spends more money as a percentage of total revenue on research and

development. This is a core competency of Perdue’s that has its roots in Frank Perdue’s efforts to

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continually differentiate his products based on value and quality. The company employs

microbiologists, avian scientists, nutritionists, geneticists, and veterinary scientists who utilize

their knowledge and expertise to give Perdue a competitive advantage. Perdue has the most

extensive vaccination program in the industry and often partners with the United States Food and

Drug Administration (USFDA) for field tests with pharmaceutical companies. Perdue has used

technology to increase productivity as well. In 1950 it took about 14 weeks to grow a 3 pound

bird and today it takes only 7 weeks to grow a 5 pound bird (Daft, 2013, p 630).

Environment

The natural environment and acts of nature present constant challenges for any poultry

processor, and Perdue is no different. Vertical integration of poultry processors means that the

company needs to operate with the utmost efficiency in order to keep costs at a manageable

level. There are always activist groups who think the process is dangerous to workers, inhumane

to the birds, and a strain on the environment, which leads to unsafe foods (Daft, 2013, pp 630-

632).

Perdue Farms tries very hard to stay ahead of environmental issues so that they can

manage them when they occur. In 1993, Perdue implemented an Environmental Steering

Committee, whose purpose is to oversee how the company is managing environmental issues

such as carcass disposal, hazardous waste removal, storm water, waste water, recycling, bio-

waste, solid waste, and health and human safety. The committee ensures that Perdue Farms is

being a good corporate citizen (Daft, 2013, pp 630-632).

Corporate Social Responsibility (CSR) is something that Perdue Farms takes very

seriously. Consider this quote from Jim Perdue, CEO of Perdue Farms,

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Perdue was built upon a foundation of quality. Arthur Perdue, Frank Perdue’s

father, founded our company by selling table eggs to select customers who

demanded high quality. That tradition continued as our company expanded; Arthur

later gained a reputation for providing area farmers with the highest quality chicks

and feed. When Frank Perdue launched the PERDUE® brand in 1968, he not only

put his family name on the package, he also insisted that his chickens be

measurably superior to the competition. (Corporate Responsibility)

In 2011, Perdue established what became their company’s CSR platform. It contains six

statements that make up Perdue’s pledge for CSR initiatives. The statements are:

1) We believe in responsibly producing safe, high-quality, affordable food for customers

and consumers worldwide.

2) We believe in responsibly helping customers prosper with flexible, forward-thinking

solutions for agriculturally-based products, from a uniquely trusted name.

3) We believe in being responsible stewards of the natural resources we utilize to produce

and market our products and services.

4) We believe in being a responsible employer, investing in our associate’s growth, health,

and well-being.

5) We believe in being responsible members of the communities where we do business.

6) We believe in responsibly contributing to the economic stability of our company and our

business partners, (Corporate Responsibility).

In addition to this CSR statement and initiatives that support the statement, Perdue Farms also

has a foundation, called the Arthur W. Perdue Foundation that donates money to any number of

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charitable and non-profit organizations annually. There is a place on the Perdue website where

organizations can go to apply to receive funding and donations from Perdue Farms (Corporate

Responsibility).

There have been improvements made in the disposal of dead carcasses and hatchery

waste, which are two of the most historically difficult wastes to manage. Perdue spent $4.2

million dollars to upgrade an existing treatment center to dispose of hatchery waste. Over 10

years ago, North Carolina’s Occupational Health and Safety Administration issued Perdue a

citation for too many repetitive stress injuries at its processing plants. This caused Perdue to

launch an investigation and research ergonomics and have seen tremendous results; worker’s

compensation claims came down by 44%, an 80% decrease in repetitive stress injuries, and a

reduction in time lost for surgeries of 50% (Daft, 2013, pp 630-632).

Even with all these advancements, there are still other issues that arise in the poultry

processing industry. These issues are: 1) How to maintain the trust of the poultry consumer? 2)

How to ensure that the poultry remains healthy? 3) How to protect the safety of the employees

and the process? 4) How to satisfy legislators who need to show their constituents that they are

taking firm action when environmental problems occur? 5) How to keep costs at an acceptable

level?

Logistics and Information Systems

Information technology has helped by shortening the distance between the customer and

Perdue Farms. In the 1980s, personal computers were placed directly on each customer service

associate’s desks, allowing the associate to enter customer orders directly. Then, a system was

developed to put dispatchers in direct contact with every truck in the system so they can have

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accurate information about product inventory and truck locations at all time. Recently, IT has

helped to improve the distance between the customer and the Perdue Farms service

representative by putting a PC on the customer’s desk. In the end, all of this has led to improved

communication and shortened times from order to delivery (Daft, 2013, pp 632-634).

Perdue Farms decided to purchase a multi-million dollar information technology system

to control the entire supply chain management process. It represents the biggest non-tangible

asset expense in the company’s history. The major goals of the system are to make it easier and

more desirable for the customer to do business with Perdue Farms. It also makes it easier for

Perdue Farms associates to get the job done and take as much cost out of the process as possible

(Daft, 2013, pp 632-634).

Industry Trends

Perdue Farms is the fourth largest ready-to-cook chicken manufacturers, with an 8%

market share, behind Tyson Foods, Pilgrim’s Pride, and Sanderson Farms, respectively. It is the

oldest poultry product manufacturers in the industry. The following graph shows the annual sales

comparison between Perdue Farms and each of its competitors (Hoover’s Company Profiles).

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Sanderson

FarmsPerdue Farms Pilgrim's

Pride Tyson Foods

$0

$5,000,000,000

$10,000,000,000

$15,000,000,000

$20,000,000,000

$25,000,000,000

$30,000,000,000

$35,000,000,000

$2.68B $3.17B$8.41B

$34.37B

2013 Annual Sales

Annual Sales (in Billions)

Figure 3 : Source- Author Generated

As shown in the graph, Tyson Foods leads the industry with annual sales of over $34 billion

dollars annually, but as shown in the next graph, Tyson Foods’ net profit margin is very small in

comparison to Pilgrim’s Pride and Sanderson Farms. Perdue has annual sales of just over $3

billion, and their net profit margin data was unavailable.

Perdue is also the only privately-held, owned, and operated poultry product manufacturer in

the industry, resisting the urge to be publicly traded on stock exchanges such as NYSE and

NASDAQ. The following graph shows the net profit margin comparisons of the other top

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competitors in the industry (Hoover’s Company Profiles).

Tyson FoodsSanderson

Farms Pilgrim's Pride Perdue

Farms

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

2.72%

7.27% 8.07%

0.00%

2013 Net Profit Margins

2013 Net Profit Margin

Figure 4 : Source-Author Generated

Another notable figure is the number of pounds of ready-to-cook chicken produced by

each of the top four firms in the industry. The following graph shows this figure in millions of

pounds produced for each firm (US Poultry).

Tyso

n Foods

Pilgrim

's Prid

e

Sanderso

n Farm

s

Perdue Fa

rms

040,000,00080,000,000

120,000,000160,000,000

168M138.33M

58.47M

56.2M

Ready-to-Cook Production

Ready-to-Cook Production (in Millions of Pounds)

Figure 5 : Source-Author Generated

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Tyson Foods also leads this category with over 168 million pounds of ready-to-cook

chicken produced annually, whereas Perdue Farms produces about one-third as much with 56.2

million pounds annually (US Poultry).

The poultry product manufacturing industry is a relatively stable industry, with the main

industry risks stemming from environmental and regulatory sources. Opportunities to expand

into the industry are not easily found, and there is a barrier to entry for new competitors due to

the market shares of the top four companies comprising 61% of the total poultry product

industry. The following pie chart shows the individual percentages for the top four companies, as

well as, the remaining percentage for the 36 other poultry product manufacturers (Meat, Industry).

25%

23%8%5%

39%

Market Share of US Poultry Industry

Pilgrim's PrideTyson FoodsPerdue FarmsSanderson FarmsOther Producers

Figure 6 :Source-Author Generated

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Plans for the Future

Perdue’s plans for the future include continual improvement of its operational processes

and improving the quality of its chicken. In the new, twenty-first century market, high quality is

the name of the game, and Perdue plans on using exceptional customer service to differentiate

itself further from its competition. There will be a greater focus on taking cost out of the product,

while still being able to provide exactly what the consumer wants. Jim Perdue has been quoted in

saying, “Perdue Farms wants to become so easy to do business with that the customer will have

no reason to do business with anyone else.” (Daft, 2013, p 63)

Chapter Four

Part One: Organizational Analysis using Theoretical Model and Identification of Problems

1. When analyzing their supply chain management and logistics we found that they were

having difficulty in forecasting supply and timing their deliveries. Processors need to

know 18 months in advance how many broilers are needed in order to size hatchery

supply flocks and contract with growers to provide live broilers. Fresh poultry has limited

shelf life (measured by days). Therefore, forecasts must be extremely accurate and

delivery must be on time.

2. Analysis of their current market strategy: Their current marketing strategy is basically to

advertise to the masses about their extensive line of chicken products. Their extended line

of chicken caters more to either the new health-focused consumer (“cage-free” and

“organic” chicken) and also the ever growing on-the-go population seeking quick and

easy value-added products more conducive with their lifestyle; (previously prepared,

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breaded and or frozen chicken). Seeing as how Perdue chicken was initially marketed as

“fresh, never frozen” and “fresh young chicken” one can see how the change was in

direct conflict.

3. Unfortunately their future plans did not highlight or even mention the diversification of

their employees, particularly executive positions that should include more women, to be

specific.

4. When analyzing the environmental concerns, there were five questions that every poultry

processor needs to be concerned with. First, is how to maintain the trust of the poultry

customer? Second, is how to ensure that the poultry remains healthy? Third, is how to

protect the safety of the employees and the process? Fourth, is how to satisfy legislators

who need to show their constituents that they are taking firm action when environmental

problems occur? The fifth and final question is how to keep costs at an acceptable level.

Chapter Five

Part One: Recommendations for Solving Identified Problems

Supply-Chain and logistical concerns in this industry are of extreme importance to the

operation of a poultry processor. There are specific timing concerns, especially when dealing

with live birds or ready-to-cook carcasses. Forecasting demand in order to have an accurate

supply is not a precise science. One idea we came up with was for Perdue to have a more

automated system that tracks supply and demand metrics, and notifies management when supply

or demand fluctuate. For example, during the winter months and holiday times, whole, fresh

chickens might be in more demand than through the warmer chicken months when consumers

prefer to grill chicken parts. If the supply-chain system were able to accommodate these kind of

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fluctuations, Perdue may be better equipped to keep the right amount of flock birds to fill the

hatcheries, which in turn raises the right number of birds, and therefore demand is met, without

overages that may cause a loss.

It may be beneficial to reach out to consumers through a specific marketing campaign

that is differentiated from their current commercials (which are already informative and very

well done). This campaign would highlight the benefits of Perdue chicken in a simple and

detailed way for consumers to understand. It could also be partially consumer generated and

engaging with street talk and surveys to accurately see where the American people stand and

how they feel about the chicken they are consuming. Prizes and a free give away would make the

campaign more appealing and fun.

Due to the extensive line of products that have strayed from the original vision of Perdue

chicken never being frozen, we felt that a new tagline should complete every advertisement of

said forms of chicken with the following: “It may be frozen, but it’s STILL Perdue!” This

reinforces the high standards and unwavering quality of the chicken that consumers have become

comfortable with and appreciate. This may ease potential concerns of the masses such as retail

restaurants, institutions, international buyers, college students and on the go families. A

complementary method is to focus a targeted message that is concentrated on the health

conscious varying demographics. “Fit and easy” is the current slogan that can be found on the

healthier choices and leaner Perdue chicken products. In any and all campaigns the quality needs

to remain the unique selling proposition to consumers. This should include mentioning the four

principles that set Perdue apart from its competitiors: 1) The chickens are fed an all-vegetarian

diet including corn, soybeans and marigolds, 2) The diet has no animal byproducts or animal

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fats, 3) The chickens are always raised cage-free, and 4) The chickens are never injected with or

given steroids or growth hormones.

As Perdue moves forward into the future, one area that they could improve on is

intentionally seeking out more female professionals to fill top executive positions. In our

research we found that the top management of Perdue Farms is ripe with men, but there are no

women who hold executive positions. In order to give Perdue a more diverse organization and a

greater pool of innovation to draw from, they might consider recruiting women for top

management positions.

Finally, with respect to the environmental concerns that plague every poultry processor,

we found that one of the best defenses is a good offense. For most of the environmental issues

raised, Perdue is already handling most of them very well. One thing that Perdue has not done,

and it would help to keep consumers trust, keep costs low, and combat legislators, is to be

transparent. Perdue would benefit from being a more transparent company. Transparency is

basically issuing high-quality, easily understood, clear, and concise financial statements. This is

something that Perdue has not done, partially because they are still a privately-owned company

that is not traded on any of the big stock exchanges. Being a privately-owned corporation is a

double-edged sword for Perdue because on one side it allows them to control every part of their

business process and wholly fund their own endeavors. On the other side, their financial

statements are not released to the public, which is why we were unable to locate what Perdue’s

net profit margin is in relation to its competitors. We recommend that Perdue remain privately-

held but allow some of their financial information released to the public, so that the consumers

and legislators do not think that Perdue is hiding something.

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Part Two: Recommendations for New Organizational Structure and Processes, with

diagrams

According to the textbook Organization Theory and Design page 627, “The late 1980s a

period of considerable expansion and product diversification, a consulting firm recommended

that the company should form several strategic business units, responsible for their own

operations, which means the firm should decentralize. Unfortunately, the decentralization had

created duplication and enormous administrative cost”. Frank Perdue mostly used a centralized

management style that kept decision making authority in his hands or only few of the employees

he trusted.

Perdue has vertical structure, which means the company is dependent on Jim Perdue and

the few trusted top management leaders to make decisions. Implementing a horizontal structure

would make Perdue more effective. Moreover, when customer needs and demands change

rapidly, learning and innovation become critical to organizational success. We recommend that

Perdue implements a horizontal structure, rather than continue operating under its current

vertical structure.

A horizontal structure will work more effectively for Perdue Farms, because according to

the text book page 124, “The most significant strength of horizontal structure is improved

coordination, which intensely increases the company’s flexibility and response to changes in

customer needs.” It also directs the attention of everyone in the company toward the production

and delivery of value to the customer. Each employee has a broader view of organizational goals

and promotes a focus on teamwork and collaboration. It also improves quality of life for

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employees by offering them the opportunity to share responsibility and to make decisions, and be

held accountable for outcomes.

A weakness of the horizontal structure, which is determining core processes, is difficult

and time consuming. It requires changes in culture, job design, management philosophy, and

information and reward systems. It also requires significant employee training so they are able to

work effectively in a horizontal environment and traditional managers may struggle with

relinquishing power and authority. A horizontal structure could also limit in-depth skill

development.

In the current context, Perdue can consider virtual networks and outsourcing as an

alternative source to enter into the global market, which will make the company more

productive, unique, and profitable, while learning how to operate in the international

marketplace. Some advantages are that virtual networks will enable Perdue to obtain aptitude and

resources worldwide, provide the company immediate scale and reach without a huge investment

in the company and equipment, enable Perdue to be highly flexible and responsive to changing

needs, and reduce the administrative overhead costs. Some disadvantages to virtual networks are

that managers do not have hands on control over many activities and employees. Also, virtual

networks require a great deal of time to manage the relationship and potential conflict with

contract partners and there is risk of company failure if a partner fails to deliver. Finally,

employee loyalty and corporate culture might be weak.

When Perdue was founded the organizational structure was more centralized, meaning

the decisions were made by Perdue’s owner and the few executive board members. The old

culture of Perdue was concerned with (taken from uwf.edu):

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· Top down management, Poor communication, Short term planning, Commitment to

Quality, Profitability focus, Limited associate training, Limited associate recognition, Short term

cost reduction, Annual goals as end target, and Satisfied customers.

And the new culture of Perdue is focused around:

· Team management, Focused message from senior management, Long range planning,

Expanded commitment to quality, Focus on people, product, and profitability, Recognition is a

way of life, Commitment to training, Long term productivity improvements, Continuous

improvement, and Delighted customers.

The basic idea is that the organization can glide smoothly between a highly formalized,

hierarchical structure that is effective during times of stability and a more flexible, loosely

structured one that is needed to respond well to unexpected and demanding environmental

conditions. According to textbook page 106, “managers need to recognize that the strongest

horizontal linkage mechanisms are more costly in terms of time and human resources but are

necessary when the organization needs high degree of horizontal coordination and knowledge

sharing are needed, building relational coordination into the culture of the company.”

However, if Perdue follows those guidelines then Perdue will improve and create more

valuable operational processes within the company. The following chart depicts an example of a

horizontal organizational structure, and how information flows across the organization, rather

than from the top-down.

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Figure 7 :Source-Organizational Theory and Design text, Daft

Chapter Six

Summary of Findings and Conclusion

Perdue began as and has remained a beacon for high quality and impeccable standards

when it comes to all of their chicken products. Although they remain private this allows them to

exercise control over the health and processing of their chickens. The implementation of our

recommendations will help to ensure the continued success of Perdue farms.

We have shown given the circumstances that Perdue has done remarkably well since its

inception in the 1920s. Although their percentage of the poultry processing industry market share

is relatively low compared to their competitors, you must keep in mind that they are still a

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privately owned company. We feel that in order for them to keep their product standards and

quality expectations high it may even be best for them to remain a private family owned

company without the pressures of conforming to the desires of stakeholders, who are most often

driven by money.

In addition, continuing to vertically integrate their operations and organization structure

will help them to maintain their competitive advantage. Perdue is unique from its competitors in

that it wholly owns all of its operations and has several contracts with private farms. Also,

Perdue has a separate business entity called Perdue AgriBusiness, which controls growing and

purchasing of grain, soybeans, and oil seed. This aspect of Perdue’s business has long been

recognized as a means of attaining superior quality products. This separate entity, along with the

wholly owned and vertically integrated operations is a recipe for poultry success (Our

Company).

In conclusion, we have found that by following the established values, solid mission, and

strong vision of the founder, Mr. Arthur, Perdue Farms will continue to be one of the world’s top

poultry product manufacturers. Perdue has solid leadership and Jim Perdue’s management

philosophy is one that inspires his employees to love what they do, where they do it, and who

they do it for and thus consistently rise to any challenge put before them. We highlighted some

issues with logistics, marketing, environmental concerns, and plans for the future that Perdue

might address to further ensure its future success. Perdue has a superior CSR platform and that is

an issue that Perdue takes very seriously. If Perdue Farms continues on the path it is on, it will

surely be successful far into the future.

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