1. Why did Birds Eye develop as a vertically integrated producer?
When Birds Eye started a business, during the early 50’s, the frozen food industry was a completely new market, where still was needed to develop some major issues. During this period the industry was growing really fast, around a 40% per annum. In order to maintain and sustain its growth, Birds Eye needed a very efficient and reliable supply chain. The strategy of vertically integration allowed the company to secure their high demand of raw material supplies, distribution of their products and maximizing production capacity.
Another point for integrating vertically is the increasing barriers for new entrants in the industry. Since resources are developed internally, if a new firm wants to enter the market, they would need a high amount of capital in order to have access to the raw materials or distribution channels. Finally, Birds Eye differentiates itself as a high-quality product. In this sense, if they have full control of all the supply chain process they can control and maintain quality in all the process.
2. In sourcing raw materials, explain why Bird?s Eye adopted different arrangements for peas, fish and meat?
Lets study each arrangement individually and then explain the differences between the strategies adopted by Bird’s Eye Food Ltd. In the case of peas (vegetables), they company closed annual contracts with farmers in order to secure a minimum amount of supply and at a fixed quality and price. They had a close control over all the process, from providing the seeds and harvesting equipment to controlling the planting times and approving the fertilizer and insecticide used.
In the case of the fish industry, companies have to buy the fish from dockside auctions or imported it from Scandinavia in frozen blocks or fillets.
Another way to secure supply was reaching guaranteed contacts to buy a proportion of the catch. In addition, Bird’s Eye acquired a majority stake in a fishing company to secure a regular supply of fish. In the case of meat, Bird’s eye sought direct ownership of its sources of raw material. During the 60’s they owned more than 20 farms with a production capacity of 6. 5 million birds a year. The different strategies adopted by Bird’s Eye Food Ltd. can be explained by the way they buy the raw materials. In all the cases they need to secure high quality and long-term supply arrangements in order to meet their demand.
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