Hudson, Michael A.

Rekeweg, Matthew A.

English

Research Papers in Economics

Strategic Alliances in the Livestock Sector:
Industry Perspectives and Opinions
by
MatthewA. Rekeweg
ResearchAssistant
Departmentof A~icultural Economics
Cornell University
Ithaca, NY
MichaelA. Hudson
AssociateProfessor
Departmentof AgriculturalEconomics
Cornell University
Ithaca, NY*
Background
The dynamic nature of the food and agri-
businesssector is creating new managementchal-
lenges for firms at all levels of the production-
marketing continuum. New coordination strate-
gies are emerging as firms seek to establishsus-
tainablecompetitiveadvantages. Onesuchadvan-
tage is to provide a variation of the increasingly
diverse set of product attributes demanded by
consumers. Becausesomeofthese attributesmay
have to be “grown” into the product at the pro-
ductionstageor incorporatedinproductioninputs,
coordination of activities across stages of the
production-marketingcontinuumbecomes neces-
sary.
One strategy for coordinatingthese activi-
ties involvesbuilding partnerships between fmns
which facilitate the sharing of information.
Recent advances in information technology,
among other things, allow such “strategic alli-
ances” to be madeto coordinate efforts alongthe
production-marketing continuum. Firms employ-
ing this strategy achieve vertical coordination
withoutthe burdens of ownership inherent in full
vertical integration.
Ourcurrentresearchsolicitsthe opinionsof
industry experts regarding the emerging role of
strategic alliances within the livestock and meat
sector. Survey results will be used to assess the
curred perspectivesof industryleadersabouthow
informationtechnologymaybe usedto coordinate
activities in alliances, why alliances might be
formed, and who will initiatethem.
Initialresultsbasedon a surveyoflivestock
industry and agribusiness academicians suggest
that experts expect strategic alliances to increase
in numbers over the next ten years. Table 1
summarizesthese initialresultsaboutexpectations
regarding strategic alliances. Tables 2a and 2b
highlightexperts’opinionsaboutpotentialreasons
*Not to be quoted without authom’ permission. Commeats and suggestions welcome.
Journal of Food Distribution Research February 93/page 187for developing a strategic alliance in the livestock
industry. Finally, Tables 3a and 3b summarize
the responses regarding who will initiate strategic
alliances.
Next Steps
Our continued research will focus on the
beef and pork subsectors with further surveys of
industry participants and experts. The survey
results will be analyzed to assess the current per-
spectives of industry leaders with regard to how
information technology is being used to coordinate
activity along the production-marketing con-
tinuum. Special attention will be paid to alliances
which have evolved, are evolving, or are expected
to evolve. Case studies will be developed to
examine the motivations driving industry partici-
pants toward strategic alliances.
Implications
The opinions of industry experts and partic-
ipants regarding the potential for using informa-
tion technology-based alliances to achieve vertical
coordination will provide insight into the current
and future potential of strategic alliances within
the food and agribusiness sector. The nature of
the livestock and meat industry and the historical
role of vertical integration will make the result
particularly illuminating--the examples identified
within the livestock and meat sector are likely to
be important forerumers of activity in other sub-
sectors of the agribusinesss ystem.
February 931page 188 Journal of Food Distribution ResearchTable 1. OpinionsRegarding Expectationsof Strategic Allianceain the Livestock Sector, Survey of
Academiciansand Experta, November, 1992.
IN IN MORE
NOW FIVE TEN NEVER
YEARS YEARS TEN
STATEMENT YEARS
1. Over 75% of producer-packer tranaac- 2% 30% 28% 30% 9%
tiona are the result of strategic alliances
2. Strategic alliances are the non-price 22% 24% 29% 24% o%
coordinating mechanism for over 50% of
the production-marketing chain.
3. Fornud, contractual arrangement will 40% 24% 7% o% 29%
make up leas than 30% of producer-
packer linkages
4. Over 75% of livestock will be sold to 2% 32% 49% 17% o%
packers on a carcass-merit basis un&r
which producers are paid on the basis of
some desirable attribute of the animal
(such as percent of lean, freedom from
antibiotics, etc.).
5. Data on individual cwwaaes will be 2% 28% 43% 19% 6%
supplied to 80% of producers by pack-
ers.
6. More than 60% of retail fresh meat sales o% 19% 38% 30% 13%
will be made up of branded products.
7. Packers and processors will use retail- 28% 48% 17% 7% o%
level scanner data to monitor cmwumer
demand.
8. Genetic seedatock suppliers will use 6% 28% 36% 17% 13%
retail-level scanner data to monitor con-
sumer demand.
9. ‘Producers will use retail-level scanner 7% 11% 24% 33% 26%
data to monitor wxtaumer demand.
10. More than half of aedatock auppliem 4% 21% 45% 26% 4%
will use &ta on their livestock from
identity-preserved slaughtering practices
to adjust their breeding programs to mEK4
consumer demands.
11. More than half of producer-packer link- 16% 35% 44% 5% 0%
ages will be information-baaed.
12. Packers will provide information to o% 30% 45% 21% 4%
facilitate over 50% of producers selection
of breeding stock from genetic aeedstock
suppliers.
Sourcti Survey and calculation.
Journal of Food Distribution Resemvh Febnaary93/page 189Table 1., Continued
IN IN MORE
NOW FIVE TEN THAN NEVER
YEARS YEARS TEN
STATEMENT YEARS
13. Databases containing livestock performance 13% 28% 30% 23% 6%
information listed by producer will be used
by packers to customize slaughter selections.
14. Commercial livestock producers will have 7% 37% 37% 13% 7%
access to databasea of general carcass data
maintained by packers.
15. Individual producers will obtain records of 11% 39% 39% 9% 2%
their own livestock carcass results through
computer linkages with packers.
16. Packer/processors will use computer data- 9% 39% 41% 11% o%
bases containing the results of periodic live
animal performance evaluations to make pre-
slaughter recommendations to commercial
producers regarding production practices.
17. Computer databases containing t@s results 6% 11% 36% 38% 9%
on seedatock animals will be used by 75% of
producers to select breeding stock replace-
ments.
18, Electronic links behveen more than 50 % of 4% 11% 33% 46% 7%
producers will be used to match existing
livestock supplies to packer demands for
particular animal attributea.
19. Packers will purchase livestock for at least 9% 28% 46% 17% o%
50% of their slaughter needs using on-line
electronic data transfer to transmit order
forms, invoices, and payments.
20. Electronic exchange of information on inven- 2% 15% 39% 35% 9%
tories and shipping schedules between pro-
ducers and input suppliers will be used for
more than two-thirds of transactions.
21. More than tsvo-thirds of retailers and packerl 4% 26% 46% 17% 7%
processors will exchange electronic informa-
tion on sales, inventories, orders, and ship-
ping schedules.
Soume: Survey and calculations
FebNsry 93/page 190 Journal of Food Distribution ReseamhTable 2a. Opinions Regarding Importance of Potential Reasons for Developing Strategic Alliances in the
Livestock Sector, Survey of Academicians and Experts, November 1992.
I Potential Reason Very Important Not Important
1. Responding to distinct consumerdemanded product char-
acteristics
2. Reducing costs for the partners involved in the alliance
I
3. I Increasimz the market share of meat moducts
15
17
4
4. Assuring definite product outlets for the seller 2
5. Fulfilling the buyer’s need to assure definite product quality 18
6. Effectively using available technology 4
I
7. Establishing relationships with genetics and input suppliers to
assure final product quality
8
I
8. Reducing the antagonism that currently characterizes inter-
actions between packers and processors
2
19 9 3 1 0
13 11 4 2 0
16 14 9 4 0
19 19 5 1 1
21 7 0 1 0
9 15 12 6 1
10 16 10 3 0
7 13 17 7 1
Source: Suwey and calculations
Table 2b. Selectionof Most Likely Reasons for Developing Strategic Alliances in the Livestock Sector,
Survey of Academicians and Experts, November, 1992.
Potential Reason Numtxx of Reqxmses
1. Responding to distinct consumerdemanded product characteristics 23
2. Reducing costs for the partners involved in the alliance 2s
3. Increasing the market share of meat products 7
4. Assuring definite product outlets for the seller 9
5. Fulfilling the buyer’s need to assure definite product quality 30
6.
.
7.
—
8.
Effectively using available technology I 5
I
Establishing relationships with genetics and input suppliers to assure final 10
product quality
#
Reducing the antagonism that currently characterizes interactions between I
8
packers and processors I
Source: Survey and calculations
Note: Survey respondents each listed three moat likely reeaons for developing l strategic alliance, maulting in 117 responaea.
Journal of Food Distribution Research February 93/page 191

STRATEGIC ALLIANCES IN THE LIVESTOCK SECTOR: INDUSTRY PERSPECTIVES AND OPINIONS

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics