Case Scenario 1: International Cow Packers

question 124

Essay

Case Scenario 1: International Cow Packers.
International Cow Packers (ICP)is a $12 billion meat processor (slaughter, processing, and packing). Founded in v1943, ICP has grown to become the largest beef and pork processor in the United States (revenues come 90 percent from beef and 10 percent from pork)and also has a growing export market to Japan. The company follows a focused cost leadership strategy, delivering USDA-graded meats primarily to the institutional (schools, prisons, hospitals)and supermarket channels. ICP's entire value chain is organized to deliver volume product at the industry's lowest per-unit cost. Its supplier industries, primarily cattle and swine feedlots, have relatively little power since prices for these raw materials are determined in the commodity markets. While entry barriers to the industry are high due to high minimum start­up costs, industry rivalry is extremely intense-primarily due to the fact that three large companies (including ICP)control 80 percent of the market for processed meats. The threat of substitutes is high with an increasing trend for consumers to favor poultry and other non-beef proteins. Buyers are also powerful since supermarkets are relatively concentrated at a regional level and end consumers have ample choices.
-(Refer to Case Scenario 1). Is ICP's focused low-cost strategy appropriate for its industry? Why?

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