Develop a Competitive Profile Matrix for your CLC groups selected company. Complete the following steps. Company (Chick-Fil-A) Step 1: Refer to Chapter 3 of Strategic Management:

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Proposed Strategic Plan Capstone Strategic Management Course

At Francis Marion University Fall 2020 Semester

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Table of Contents Introduction ………………………………………………………………………………………………………………………………………….. 3

Current Vision Statement ………………………………………………………………………………………………………………………… 3

Proposed Vision Statement ……………………………………………………………………………………………………………………… 3

Current Mission Statement ……………………………………………………………………………………………………………………… 3

Proposed Mission Statement …………………………………………………………………………………………………………………… 3

Competitive Profile Matrix (CPM) …………………………………………………………………………………………………………….. 4

Financial Statements ………………………………………………………………………………………………………………………………. 4

Ratio Analysis ………………………………………………………………………………………………………………………………………… 6

Internal Factor Evaluation (IFE) Matrix ……………………………………………………………………………………………………… 7

External Factor Evaluation (EFE) Matrix …………………………………………………………………………………………………….. 8

Proposed Strategies Developed from SWOT Matrix ……………………………………………………………………………………. 9

Strategic Position and Action Evaluation (SPACE) Matrix …………………………………………………………………………… 10

Boston Consulting Group (BCG) Matrix ……………………………………………………………………………………………………. 12

Internal-External (IE) Matrix …………………………………………………………………………………………………………………… 13

Quantitative Strategic Planning Matrix (QSPM) ………………………………………………………………………………………… 14

Recommendations ……………………………………………………………………………………………………………………………….. 18

Explanations for Recommendations: ………………………………………………………………………………………………………. 18

Organizational Chart …………………………………………………………………………………………………………………………….. 20

Perceptual Map ……………………………………………………………………………………………………………………………………. 21

Firm Valuation ……………………………………………………………………………………………………………………………………… 22

EPS-EBIT Analysis …………………………………………………………………………………………………………………………………. 22

Projected Financial Statements ……………………………………………………………………………………………………………… 24

Projected Financial Ratios ……………………………………………………………………………………………………………………… 26

Retained Earnings Table ………………………………………………………………………………………………………………………… 26

Executive Summary ………………………………………………………………………………………………………………………………. 27

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Introduction Sanderson Farms, Inc. was founded in 1947, and is a fully, vertically-integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken. Headquartered in Laurel, Mississippi, Sanderson Farms is a Fortune 1000 company. Employing more than 15,000 employees in operations spanning five states and 17 different cities, Sanderson Farms is the third largest poultry producer in the United States. Incorporated in 1955 with the initial public offering presented in 1987, common shares of Sanderson Farms, Inc. are traded on the NASDAQ stock exchange under the symbol SAFM. Sanderson Farms, Inc. maximizes stockholder value by being a successful producer and marketer of high quality food products and providing superior service to the food industry.

Current Vision Statement “It is not our intent to simply be larger. Our vision is to be special, successful, and at the very top of our industry.” ~Joe Frank Sanderson, Jr. Source: https://sandersonfarms.com/our-story/#6th; 08/19/2020, 8:32 pm

Proposed Vision Statement We strive to produce the highest quality, conveniently packaged chicken products that our customers can gladly serve to their friends and family, today and tomorrow.

Current Mission Statement As a company, Sanderson Farms is committed to adopting a fresh approach in everything that we do. Not only where products are concerned, but companywide as well. Though the company has grown in size, it still adheres to the same hometown values of honesty, integrity and innovation that were established when the Sanderson family founded the company back in 1947. Source: https://sandersonfarms.com/press-releases/sanderson-farms-cultivates-culture-community- charity-chicken/; 08/20/2020, 2:15 pm

Proposed Mission Statement Sanderson Farms’ mission is to provide a variety of high-quality, affordable (7) chicken products (2) to our customers in North America and around the world (3). We believe customer satisfaction, both in households and in the food industry (1), is paramount to our continued success. Our singularity of focus on poultry allows us to be industry leaders through perfecting the production of chicken, from birth to death (5). Our utilization of state-of-the-art animal husbandry and production technology (4) is critical to achieving our goal of operational efficiency. Our philosophy of social and environmental responsibility (8) guides our operations, by prioritizing caring for our employees (9), our animals, and the environment (6). (102 words)

(1) Customers (6) Philosophy (2) Products or services (7) Distinctive competence (3) Markets (8) Public Image (4) Technology (9) Employees

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(5) Survival, growth and profitability

Competitive Profile Matrix (CPM) Below is a matrix detailing information about the Competitive Profile Matrix. This compares Sanderson Farms with two major competitors—Tyson and Pilgrim’s Pride.

There are a few items to note from the CPM above. Sanderson Farms’ weighted score on the different metrics is 2.91. This means that Sanderson Farms is a stronger competitor in the market than Pilgrim’s Pride, with a score of 2.31. Tyson, however, is doing better competitively with an overall score of 3.14.

Financial Statements Below are the income statement and balance sheet for Sanderson Farms for fiscal years 2018 and 2019.

Critical Success Factors Weight Rating Score Rating Score Rating Score International Market Penetration 0.14 2 0.28 4 0.56 1 0.14

Domestic Market Penetration 0.12 2 0.24 4 0.48 3 0.36 Market Share 0.10 2 0.20 4 0.40 3 0.30 Product Quality 0.10 4 0.40 2 0.20 3 0.30 Price Competitiveness 0.10 4 0.40 2 0.20 3 0.30 Customer Loyalty 0.09 2 0.18 4 0.36 3 0.27 Financial Profit 0.08 3 0.24 2 0.16 1 0.08 Advertising 0.07 3 0.21 4 0.28 2 0.14 Customer Service 0.06 4 0.24 3 0.18 2 0.12 Employee Dedication 0.06 4 0.24 1 0.06 2 0.12 Top Management 0.06 4 0.24 3 0.18 2 0.12 Product Variety 0.02 2 0.04 4 0.08 3 0.06 Totals 1.00 2.91 3.14 2.31

Tyson Pilgrim's PrideSanderson Farms

10/31/2018 10/31/2019 Percent Change $3,236,004,000 $3,440,258,000 6% 2,974,739,000 3,158,323,000 6% 261,265,000 281,935,000 8% 231,565,000 213,941,000 -8% 29,700,000 67,994,000 129% (857,000) 4,147,000 -584%

30,557,000 63,847,000 109% (30,874,000) 10,553,000 -134%

0 0 NA NA 61,431,000 53,294,000 -13%

EBIT

Income Statement

Interest Expense EBT Tax

Revenues Cost of Goods Sold Gross Profit Operating Expenses

Non-Recurring Events Net Income

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10/31/2018 10/31/2019 Percent Change

$121,193,000 $95,417,000 -21% 121,932,000 131,778,000 8% 240,056,000 289,928,000 21% 83,308,000 63,988,000 -23% 566,489,000 581,111,000 3%

1,087,588,000 1,185,860,000 9% 0 0 NA NA 0 0 NA NA

5,363,000 7,163,000 34% 1,659,440,000 1,774,134,000 7%

128,936,000 132,741,000 3% 69,953,000 82,940,000 19% 198,889,000 215,681,000 8%

0 55,000,000 NA NA 72,658,000 85,778,000 18% 271,547,000 356,459,000 31%

22,100,000 22,204,000 0% 1,284,524,000 1,309,461,000 2%

0 0 NA NA 81,269,000 86,010,000 6%

1,387,893,000 1,417,675,000 2%

1,659,440,000 1,774,134,000 7%Total Liabilities and Equity

Long-Term Debt Other Long-Term Liabilities Total Liabilities

Equity Common Stock Retained Earnings Treasury Stock Paid in Capital & Other Total Equity

Accounts Receivable

Total Current Liabilities

Other Current Assets Total Current Assets Property Plant & Equipment Goodwill Intangibles Other Long-Term Assets Total Assets

Liabilities Accounts Payable Other Current Liabilities

Inventory

Balance Sheet Assets Cash and Short Term Investments

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Ratio Analysis Below are the financial ratios for Sanderson Farms for 2019 and 2018.

There are a few important things to note. The poultry industry, like other agricultural industries, is fundamentally characterized by earnings volatility stemming from its dependence on weather, fluctuating commodity prices, and other uncontrollable factors. It does, however, enjoy fairly consistent demand and the chicken industry has been growing steadily since the 1980s (see EFE matrix). Sanderson Farms’ relatively high inventory turnover rate speaks to the nature of their industry and the perishability of its products.

10/31/2018 10/31/2019 Current Ratio 2.85 2.69 Quick Ratio 1.64 1.35 Total Debt-to-Total-Assets Ratio 0.16 0.20 Total Debt-to-Equity Ratio 0.20 0.25 Times-Interest-Earned Ratio -35 16 Inventory Turnover 12.39 10.89 Fixed Assets Turnover 2.98 2.90 Total Assets Turnover 1.95 1.94 Accounts Receivable Turnover 26.53941541 26 Average Collection Period 13.75 13.98 Gross Profit Margin % 8% 8% Operating Profit Margin % 1% 2% ROA % 4% 3% ROE % 4% 4%

Historical Ratios

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Internal Factor Evaluation (IFE) Matrix Below is a matrix detailing the Internal Factor Evaluation Matrix (IFE Matrix). This lists Sanderson Farms’ greatest strengths and weaknesses as a company.

Strengths Weight Rating Weighted Score 1 Sanderson Farms pounds poultry sold increased by nearly 3% from

2018 to 2019. 0.08 4 0.32

2 Sanderson Farms had international export gains of $112 million from 2018 to 2019. 0.07 3 0.21

3 New, state-of-the-art processing plant in Tyler, TX brought 100% online by second quarter of 2020. 0.06 4 0.24

4 Pounds poultry processed increased by 405 million pounds in 2019 from previous year. 0.05 3 0.15

5 Sanderson Farms discontinued antibiotic use in its poultry in 2018 in response to consumer demand for antibiotic-free meats. 0.04 1 0.04

6 In 2019, reduced OSHA injury rates by 10% from previous year. 0.03 3 0.09 7 Third-party animal welfare audit score at 99% in 2019. 0.03 3 0.09 8 Average contract farmer retained for greater than 20 years,

compared to Tyson Foods at 15 years. 0.03 3 0.09

9 Sanderson Farms named one of America's Best Employers by Forbes magazine in 2019. 0.01 4 0.04

10 88% of 2019 new hires were minorities and women. Sanderson Farms has 32% greater diversity of employees and board members in relation to Tyson Foods.

0.01 3 0.03

Weaknesses Weight Rating Weighted Score 1 Sanderson Farms' earnings fell 38.6% from 2019 to 2020. 0.10 2 0.20 2 Sanderson Farms' EPS down $.93 in 2020 from previous year. 0.08 2 0.16 3 Sanderson Farms share prices down 34% from 2019 to 2020. 0.08 2 0.16 4 Entirely dependent on demand for a single protein source, chicken. 0.07 1 0.07

5 Total liabilities increased from $271,547,000 to $356,459,000 from 2018 to 2019. 0.05 2 0.10

6 Sanderson Farms produced 4.7% fewer pounds of packaged poultry in the first half of 2020 as a result of weak demand from restaurants and the food service industry due to the COVID-19 pandemic. 0.05 3 0.15

7 Tyson Foods organic chicken division sales up 7% from 2019 to 2020. Sanderson Farms has no organic offerings. 0.05 1 0.05

8 Perdue Farms achieved its goal to provide outdoor access in 25% of its chicken houses by January 2020. Sanderson Farms' chickens have no outdoor access.

0.05 1 0.05

9 Sales to Sanderson Farms' top ten customers represented approximately 54% of their net sales during fiscal year 2019. 0.04 2 0.08

10 Sanderson Farms faces multiple pending lawsuits in 2020, from price fixing charges to environmental protection violations. 0.02 3 0.06

Total IFE Score 1.00 2.38

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External Factor Evaluation (EFE) Matrix Below is the EFE Matrix for Sanderson Farms and the poultry industry. Listed first are the key opportunities followed by the major threats.

Opportunities Weight Rating Weighted Score 1 Over the next five years, poultry consumption is expected rise an

annualized 0.1% to 109.4 pounds per person in the US. 0.10 4 0.4

2 The price of poultry meat in the United States is expected to increase at an annualized rate of 0.8% over the next five years. 0.08 4 0.32

3 Broiler meat exports increased 4.2 % in first half of 2020, with shipments to China offsetting weaknesses in other major markets. 0.04 3 0.12

4 Profit margins in the poultry industry have remained steady over the past 5 years, increasing by .4% in 2020 from 2019. 0.04 2 0.08

5 Poultry industry has reduced amount of grain necessary to produce a salable pound of poultry by 50% in the United States in the last 40 years.

0.04 2 0.08

6 Longer term 15 year contracts with farmers have improved farmer retention by 24% from 2000 to 2020. 0.03 4 0.12

7 Automation in slaughterhouses have reduced OSHA violations by 86% from 1973 to 2020. 0.02 1 0.02

8 In the US, poultry production has been getting steadily more mechanized for decades—going from 3,000 chickens processed per hour in 1970 to 8,000 in 1980 and 15,000 today.

0.02 1 0.02

9 Feed grain prices decreased by 2.7% from 2019 to 2020. 0.02 3 0.06 10 Diesel fuel prices have dropped by $.62/gallon from 2019 to 2020 as a result of lower liquid fuel demand following the coronavirus pandemic.0.01 2 0.02

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Proposed Strategies Developed from SWOT Matrix Below are strategies developed that Sanderson Farms could pursue to stay competitive and grow the company. Strength-Opportunity (SO) Strategies

Weakness-Opportunity (WO) Strategies

Threats Weight Rating Weighted Score 1 From March to August 2020, at least 40,517 meatpacking workers

have tested positive for COVID-19, and at least 189 have died of COVID-19.

0.12 1 0.12

2 The North American Meat Institute estimates that most plants are at 70% production because of COVID-19 shutdowns and COVID related employee absences.

0.10 1 0.10

3 The Meat, Beef & Poultry Processing industry is expected to see a 43% decline in demand in 2020 from 2019 levels due to the mass closure of food service establishments.

0.09 3 0.27

4 As many as 85% of independent restaurants may permanently close because of the pandemic by the end of 2020. 0.09 3 0.27

5 Real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020. 0.06 3 0.18

6 The net increase of immigrants in the American population dropped by more than 70% from 2018. Immigrants account for the majority of meatpacking employees.

0.06 4 0.24

7 19% increase in demand for free-range or organic poultry expected over next five years. Sanderson Farms does not offer free range or organic poultry.

0.03 1 0.03

8 11.9% of U.S. households currently purchase plant-based meat, up from 10.5% a year ago. 0.03 1 0.03

9 Low revenue growth in the industry predicted at 0.3% from 2020 to 2025. 0.01 3 0.03

10 The chicken companies, including Pilgrim's, Claxton, Tyson Foods, Sanderson Farms and Perdue Farms Inc., have all been indicted on price-fixing charges in 2020.

0.01 1 0.01

Total EFE Score 1.00 2.52

1 2 3 4

SO Strategies Use production gains to increase exports to China by 25% in one year. [S2,S3,S4,O3,O8] Develop 4 new ads to increase customer awareness of "no antibiotics" policy [S5,S7,O1] Increase exports to Mexico by 50% over next 3 years [S3,S4,O3] Offer $500 sign on bonus to new domestic employee recruits [S9,S10,S6,O7]

1 2 3 4

Create pamphlet for distribution to shareholders about firm's resilience through COVID crisis[W1,W2,O4] Hire new director of marketing with focus to increase Sanderson Farms brand awareness [W4,O1,O2] Shift 5% fresh pack production to frozen pack [W6,O3]

Diversify customer base by seeking 40% more new contracts with school districts [W9,O1,O2] WO Strategies

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Strength-Threat (ST) Strategies

Weakness-Threat (WT) Strategies

Strategic Position and Action Evaluation (SPACE) Matrix Below is a Strategic Position and Action Evaluation Matrix (SPACE Matrix) for Sanderson Farms and its two closest competitors, Tyson and Pilgrim’s Pride.

1 2 3 4

ST Strategies Shift 50% production for food service customers to export markets. [S2,S3,S4,T3,T4] Transition one-third of contract farmers to free range production model over next 3 years.[S8,T7] Develop all new packaging with animal welfare certification label for 2021 [S7,T7] Hold restaurant competition and offer free chicken for a year for the winner[S4,T3,T4]

1 2 3 4

Develop PR campaign in 2021 to improve image [W10,T10] Recruit 250 more farmer/producers already using free range production model [W8,T7]

WT Strategies Offer incentives for farmers to transition to 10% organic production [W7,T7] Acquire Beyond Meat, Inc. a plant-based meat substitute company [W4,T8]

Sanderson Farms

Tyson

Pilgrim's Pride

-7.0

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

-7.0 -5.0 -3.0 -1.0 1.0 3.0 5.0 7.0

FP

SP

CP IP

Defensive

Conservative Aggressive

Competitive

Sanderson Farms Tyson Pilgrim's Pride X Axis 0.4 2.0 1.0 Y Axis 0.4 -2.0 -3.0

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The SPACE matrix puts Sanderson Farms in the Aggressive quadrant. It has a stronger than industry average financial position (FP) due to a low debt to equity ratio, high current ratio, and high inventory turnover. The stability position (SP) is a reflection of extreme competitive pressure and high barriers to entry. The poultry industry requires a huge amount of up-front capital in an already well-established market. Like other food industries, it does benefit from a low price elasticity of demand, which improves its stability position. Sanderson Farms’ position on the horizontal axis is affected by the competitive position and industry position. Its industry position (IP) is lower than both Tyson and Pilgrim’s Pride, but Sanderson Farms is poised to take advantage of growth opportunities presented by further penetration of export markets (especially China and Mexico). The financial stability score of 1 is an indicator of the volatility and low profit margin nature of the poultry industry in general. However, it is even lower than its competitors because of Sanderson Farms’ reliance on a single protein source and its riskier vertically-integrated structure. The competitive position (CP) is worsened by low variety of products offered and low market share. In addition to Sanderson Farms falling within the aggressive quadrant, there are several factors which recommend a market development strategy. First, unsaturated markets exist in China and Mexico for poultry products. A decrease in domestic demand, due to the mass closure of food service establishments caused by COVID-19, means Sanderson Farms possesses the capacity to supply these markets. Further, the distribution channels to both countries are inexpensive and reliable. Lastly, poultry products are not subject to either Mexican or Chinese tariffs.

Internal Analysis: External Analysis: Financial Position (FP) Stability Position (SP)

5 -4 7 -2 1 -1 2 -7 6 -5

Financial Position (FP) Average 4.2 Stability Position (SP) Average -3.8

Internal Analysis: External Analysis: Competitive Position (CP) Industry Position (IP) Market Share -3 Growth Potential 4 Product Quality -1 Financial Stability 1 Customer Loyalty -3 Ease of Entry into Market 3 Variety of Products Offered -6 Resource Utilization 6 Control over Suppliers and Distributors -1 Profit Potential 2

Competitive Position (CP) Average -2.8 Industry Position (IP) Average 3.2

Current Ratio Debt to Equity Net Income Revenue Inventory Turnover

Rate of Inflation Technological Changes Price Elasticity of Demand Competitive Pressure Barriers to Entry into Market

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Boston Consulting Group (BCG) Matrix Below is a Boston Consulting Group (BCG) Matrix for Sanderson Farms’ operating segments by region. Revenues listed in the table are in millions.

Sanderson Farms’ regional segments, United States and Central Asia, lie mostly within the question mark quadrant, due to their relative market share position trailing far behind that of the industry leader, Tyson. Sanderson Farms’ sales into Mexico, however, are far and away the star among the divisions, where competitive pressures are less. Efforts to further market penetration into Mexico are a possible strategy indicated by its position. The position of Other Exports in the dog quadrant indicates that efforts in these markets may be better served by increasing exports to Central Asia and Mexico.

High 1.0

High 0.20

Low -0.20

Low 0.0

In du st ry S al es G ro w th R at e

Relative Market Share Position

Central Asia

Other Exports

United States

-0.35

-0.25

-0.15

-0.05

0.05

0.15

0.25

0.35

-0.200.000.200.400.600.801.001.20

Question MarksStars

Cash Cows Dogs

Your Firm's Division

Revenues

Top Firm in Industry Division

Revenues

Industry Sales

Growth Rate

Relative Market Share

Position

$3,161 $12,610 0.05 0.25 $157 $76 0.02 2.06 $44 $352 0.13 0.12 $78 $262 -0.02 0.30

Division

United States Mexico Central Asia Other Exports

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Internal-External (IE) Matrix

From the IE Matrix above, we see that Sanderson Farms’ strongest segments are fresh vacuum-sealed and fresh chill-packed chicken. They both have a strong internal and external positioning, as well as accounting for most of Sanderson Farms’ revenue. They are weakest in the other three products, fresh bulk-packed, minimally-prepared chicken, and frozen chicken. A major contributing factor to these lower revenues is that the customers for these products are institutions and the food service industry who demand a lower price.

Strong Weak 4.0 1.0

High 4.0

Low 1.0

THE IFE TOTAL WEIGHTED SCORES

TH E EF E W EI GH

TE D SC O RE

S

Sanderson Farms

Fresh vaccuum- sealed

Fresh chill- packed Fresh bulk-

packed

Minimally- prepared chicken

Frozen

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

0.501.001.502.002.503.003.504.004.50

Percent of Firm's Division

Revenues

Estimated IFE

Score

Estimated EFE

Score

$1,318 3.4 2.9 $1,132 3.0 2.7 $495 2.3 2.5 $213 2.0 1.8 $282 2.2 2.1

Minimally-prepared chicken Frozen

Division

Fresh vaccuum-sealed Fresh chill-packed Fresh bulk-packed

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Quantitative Strategic Planning Matrix (QSPM) There were several strategies from the SWOT analysis that could be pursued. The two that were determined to be the most attractive recommendations to pursue over the next three years are:

1. Use production gains to increase exports to China by 25% in one year. 2. Transition one-third of contract farmers to free range production model over next 3 years.

China is a market with a growing middle class that Sanderson Farms is just beginning to penetrate. There exists a lot of growth potential here coupled with steady demand that would help offset the recent loss of demand from the domestic food service industry. Sanderson Farms has had success in the past year increasing their revenue from international exports and with their new state-of-the-art processing facility in Tyler, TX should have no trouble meeting supply needs. Broadly speaking, consumers in the US are demanding more ethically and humanely produced meats.

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