Birds Eye Case
Why did they develop as a vertically integrated producer? They had to build it all up from scratch because there was no one else. They wanted to be able to guarantee high quality by quality control and this was easier to attain by themselves. They got the raw food from farmers. They supplied the farmers with the right materials. Contract costs.
They are the first firm – so they had to. Competitive advantage. 2) Why did they adopt different arrangements for peas, fish, and meat?They started by having contracts. It was a new technology so there were no farmers who could supply them with all the products. Peas needed to be processes within 90 min. of picking.
Fish was partly imported from Scandinavia and frozen and distributed. Chicken came from a chicken farm that they owned and then had to sell later on. So they had to get the products from different suppliers. They made the contractors dependent of them as they supplied them with freezers. Unilever was a holding company investing in Birds Eye.
) Why did specialized intermediaries (mellemled) emerge? New technologies – retailers. Possibilities of big storage. Cheaper. Because of economies of scale they emerged intermediaries. Distributors – warehouse – supermarkets.
They had the freezer capacity. Emergence of supermarket chains. They sold other products that could go with their products. ‘Christian Salvesen’ distributor. They could outsource the marketing. They were in charge of storage as well they could store it at the point of sale.
It was a small part of the population who had a freezer at home. 4) Did a vertically integrated producer have a competitive advantage over more vertically specialized suppliers of frozen foods during the early 1980s? (It is better to have a supplier or not? ) It is better to be Birds Eye or Christian Salvesen? No. But it depends on the circumstances. It is easier to have a supplier. The new technology was bad for them. 5) What should they have done in 1979? They get a new chairmanship in 1979.
A new strategy was reappraised. Recommendations: They should restructure, reposition themselves. They should focus on core competences: Freezing foods, good quality foods, being vertically integrated, competitive advantages. They are vertically integrated – is it bad or good? They could imitate or differentiate from other firms. Be better than them. Better branding.
Market dominance. Cut costs by starting to use specialized suppliers. Selling assets. Using economies of scale. Fixed costs. They should focus on innovation.