Reference no: EM133349825

Case Study: International Cow Packers (ICP) is a $12 billion meat processor (slaughter, processing, and packing). Founded in 1943, ICP has grown to become the largest beef and lamb processor in the United States (revenues come 90% from beef and 10% from lamb) 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 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 start-up costs, industry rivalry is extremely intense - primarily due to the fact that three large companies (including ICP) control 80% 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.

1. Refer to Case Scenario is ICP's focused low-cost strategy appropriate for its industry? Why?

2. What risks is ICP accepting by adopting its focused low-cost strategy? 

3. What can ICP do to decouple itself from the ups and downs of the pure commodity markets? What specific actions might ICP undertake?