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Corporate Strategy: Birds Eye Trade

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Questions:

1. Why did Birds Eye develop as a vertically integrated producer?

2. In sourcing raw materials, why did Birds Eye adopt different arrangements for peas, fish, and meat?

3. Why did the frozen food industry de-integrate?

4. What was Birds Eye’s problem in the late 1970s?

5. What should Birds Eye do?

 

Answers:

1. In early 19th century, soon after Birds Eye trade was commenced, there were certain complexities in the trade of frozen food. So, in order to keep the superiority of the food to be highly kept in mind, it has to be iced up rapidly. Even if the eatables were cold right away then also it has to be kept ice-covered until it gets to the clients.

Due to the requirement for high quality of the goods that were being frozen, emerging to be as a vertically-integrated producer permitted it to be the most controlled one. From the time when the operating cost was high in the market of frozen food, it was only worth freezing the best food to keep up the high quality and hence be able to charge a premium cost for the same (Kliein et al., 2008).

But the major reasons for developing Bird Eye as a vertically integrated producer was:

Lack of a Well-Developed Infrastructure: Irregularity of machines and shortage of skilled labor were the main issues in production. Public cold storages had a limited capacity. The state of retail distribution was also not good. For this reason, Birds Eye was obligated to make its own system (Collis, 1994).

Perseverance of Quality: The food must be timely processed and frozen otherwise its quality was cooperated. Therefore, the system must be extremely proficient.

Regular Supply of High Quality Raw Material: Birds Eye creates capacity in poultry and attained a majority stake in a fishing corporation. For vegetables, they worked directly with farmers who supply seeds and provide them with farming expertise.

2. For Fish and poultry Birds Eye did a backward integration by inculcating a capability and obtaining a controlling wager in the suppliers.

But for peas Birds Eye has worked directly in relation with the people by giving them with both assets and proficiency with the development of high superiority manufacture. There were certain reasons also for the different arrangements like:

In the market place Birds Eye was able to be safeguarded for the grant of raw material with longer term agreements with the people of the farm.

But with the trawl suppliers, the procedure was harder when the proceeds bought from dock side sales were introduce from Scandinavia.

This procedure did not let Birds Eye to have an adequate amount to be in charge of so they fixed the procedure by vertical integration.

 

3. The De-Integration of Frozen Food Industry was done as a result of a number of factors like:

  • The industry got matured and reduced its capital cost as a result of which there were low entry barriers;
  • New technologies were adopted off the shelf there were an availability of the blast freezers. And integration of freezing lowered the advantages of large scale production;
  • Developments in Retailing for providing counter service and self service which increased marketing opportunities.
  • It also led to new entrants with specialization in particular segments;
  • New firms emerged which provided storage, freezing, transportation services;
  • Development of Supermarkets and large supermarkets chains were done;
  • Developments of Catering Segments were made;
  • Lack of Brand Consciousness,
  • Emergence of Home Freezer Centers, etc (Grant, 2013).

When Birds Eye came into the business, as it founded the industry of food which was refrigerated, it utilized vertical incorporation advance. It had lot of income and aggressive benefit over its participants. It had high productivity and market share in comparison to its participants. But later in late 19th century there was add to in opposition, which lead in reduction in market share and productivity of the Birds Eye.

4. Although all the vertically integrated producers were seen to be enjoying certain competitive advantages which were connected to the dedicated dealers, but over time their formation led to certain difficulties in other areas, which canceled their benefits. On the whole the difficulties were seen to be such that they presided over the advantages (Grant, 2016).

The advantages comprises of:

Having power over the supply chain: A perpendicularly incorporated manufacturer enjoyed the power over the whole supply chain which was most important to more rapid response in order to increase the demand of the same.

Quality of goods: Since a perpendicularly incorporated producer has much better power over the excellence at a number of points which were there in the supply chain, they could make sure that a better quality finished product was granted (Grant, 2016).

Incarcerating the profit crosswise to the value chain: Vertically integrated manufacturers were able to take into custody both the up and down proceeds. 

Similarly, the Disadvantages which prevail in such situation were:

Augmented overhead prices: The dedicated dealer’s takes pleasure in lower transparency prices as they were dedicated in only one good, which did not include any exchange prices. On the other side perpendicularly incorporated manufacturers had numerous goods lines, which led to inadequacies.

Exit Restrictions: The considerable transportation capital investments by perpendicularly incorporated manufacturers when the market was not mature prohibited them from outlawing less gainful trades (Tadelis, 2009). 

5. In order to stay and survive in this competitive world the Birds eye should:

Strip/turn off dealer and allocation trades: They should keep into consideration advertising or revolving off its procurement and allocation trades, therefore reduce expenses and attain equivalence in price arrangement with the other rivalry. The smaller mass would also add to making it lither and act in response rapidly to transformations in its trade (Collis, 2017).

Influence Brand: They could utilize the brand acknowledgment to enlarge into other goods or certify their brand name for other goods to produce certain proceeds.

Advertising to private labels: They should also believe selling to private labels as their share in the market has been growing at a fast speed. From 6% in 1970 to 21% in 1978. Although the margin would be lower in this trade it would assist in recapturing market share (Grant, 2010).

Diminish product lines: Over a period of time good production took place at organization in order to struggle in some diverse market areas. This led to issues with marketing as endorsing such widely diverse goods was establishing to be complicated. They should keep in mind and think on the most gainful product lines, utilize its brand image as power and endorse advanced margin goods while doing away with the unbeneficial good lines.

 

References 

Collis, D. (2017) Birds Eye and the UK Frozen Food Industry, Harvard Business School, 5, 795.

Collis, D.J.(1994) Birds Eye and the U.K. Frozen Food Industry (A),  Harvard Business School Case 792-074.

Grant, R.M. (2010) Contemporary Strategy Analysis and Cases: Text and Cases, 7th ed.

Grant, R.M. (2013) Vertical Integration and The Scope of The Firm. [Online] Contemporary strategy analysis. Available from: https://www.contemporarystrategyanalysis.com [Accessed on 8/2/17]

Grant, R.M. (2016) Contemporary Strategic management. 6th ed.

Grant, R.M.(2016) Contemporary Strategy Analysis. 9th ed.

Kliein, B., Crawford, R.G., and Alchian, A.A. (2008) Vertical Integration, Appropriable Rents, and the Competitive Contracting Process. Journal of Law and Economics, 21(2), 297-326.

Tadelis, S. (2009) The Innovation Organization: Creating Value through Outsourcing. [Online] Berkeley Haas. Available from: https://faculty.haas.berkeley.edu/stadelis/Tadelis_CMR.pdf [Accessed on 8/2/17]

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