Archer Daniels Midland
Company Profile
Archer Daniels Midland (ADM) is an American based food
production, agricultural, and transportation conglomerate
founded in 1923. ADM is a global organization with more
than 265 processing plants on six continents, operates in
over 75 countries, and employs more than 30,000 people.
Company Profile (Cont.)
Much of ADM’s success is due to its extensive vertically
integrated supply chain. The company’s operations are classified
into three business segments: Agricultural services, Oilseeds
processing, and Corn processing. Through their supply chain
links, ADM is able to take their source commodities - corn,
oilseeds, wheat, cocoa, palm and sugar - and immediately
transform, transport, distribute, market and sell their products.
ADM’s customers are principally other manufacturers and
processors and their products are distributed mainly in bulk from
processing plants or storage facilities directly to customers‘
facilities. Some of the end products used by businesses and
consumers include bio-diesel, oil-seed mill, Vitamin-E, wheat flour,
ethanol, cocoa powder, and renewable plastics.
Company Profile (Cont.)
Globally, Agricultural services accounts for 47.01% of net
sales, while Oilseeds processing makes up 33.04%, Corn
processing comprises 12.28%, and “Other” (includes
processing and financial activities) makes up the remaining
7.65%.
The agricultural commodities market is growing both
domestically and internationally. The United States
currently accounts for 52.5% of net sales and other operating
income. Europe is responsible for 18.1% and “other foreign
countries” make up the remaining 29.3%.
Company Profile (Cont.)
Currently, the United States is ADM’s largest single country
producer of corn, soy, wheat, and oil-seed crushing refineries.
However, ADM has made significant investments in Brazil for
oil-seed and sugar processing and procurement plants.
Recently, ADM made a significant investment of $100 million in
the Agriculture Bank of China and acquired a 16% stake in
Wilmar International Ltd. to advance its strategic growth plans
there (Asia).
ADM’s 2010 annual report indicates that their business could be
affected by many governmental policies (taxes, subsidies, price
controls), extreme fluctuations of exchange rates, terroristic
events, changes in global demand due to population growth,
and extreme weather events (flooding, drought, etc.).
Competitive Advantage
ADM’s competitive position is in its vertically integrated global supply chain. This image
depicts two things: First, ADM’s global network of sourcing facilities, processing facilities,
and sourcing and processing distribution channels. Second, ADM’s advantage of having a
global presence that exceeds their competitors.
Business Model
ADM has a balanced vertically integrated business model that allows them to
take their source commodities and send them through each link in the supply
chain. ADM then sells to other manufacturers, processors, and (less often)
consumers.
Core Competencies
ADM’s core competencies revolve around the company’s position in the
agriculture industry: ADM has obtained economies of scale through its
efficient vast global network of crop origination, commodity
transportation, investor services (ADMIS), and government contracts.
ADM has the unique ability to meet a substantial portion of the world’s
growing fuel and food needs.
Target Market
ADM sells its products (mainly) to other manufacturers and processors.
ADM’s target market consists of many different organizations across multiple
industries.
ADM’s Target Market:
•Federal and Local Governments
•Food and Beverage companies
•Plastic Manufacturers
•Farmers and Animal Feed organizations - feed for livestock
•Raw materials for independent organizations (wheat, oats, corn, oilseeds,
etc.)
ADM is a Winner
•ADM was named the world's most admired food production
company by Fortune magazine for 3 consecutive years; 2009, 2010, 2011
•ADM is the uniquely positioned: The company has significant market share in
developed nations, while making substantial investments in emerging
markets
•ADM has the rare ability to help supply food and fuel to the growing world
population
ADM PEST Analysis
PEST Analysis
• Agricultural Services
• Oilseeds Processing
• Corn Processing
– Food
– Fuel
Pest Analysis - Agricultural Services
Factor
Political
Economic
Social
Technological
Trend
Evaluation
Impact (1=High,
5=Low)
-US is subsidizing grain elevators
-US, Germany, Brazil, Japan, India,
China and more have contracts with
ADM
-China is making substantial
investments in Ag. Services
-Opportunity
-Opportunity
-Opportunity
1
-Increase in cost of fuel
-Droughts have reduced no. of
livestock, reducing amount of feed
needed to transport
-Increase in cost of commodities
-Need for agricultural logistics
increasing
-Emerging markets increase demand
for Ag. Services
-Weak US dollar allows transportation
equipment to be exported w/favorable
costs
-Currency Exchange - lots of fluctuation
-Threat
-Threat
1
2
-Threat
-Opportunity
3
3
-Opportunity
1
-Opportunity
2
-Opp./Threat
2
-Farmers against corporate grain
elevator acquisitions
-Social movement by farmers to use
locally owned processing units
-Threat
4
-Threat
3
-Increased efficiency/ability in
transportation equip. (GPS) allows for
increase in logistical efficiency
-Opportunity
5
Rank in terms of
Importance
2
1
2
1
4
3
Pest Analysis - Oilseeds Processing
Factor
Political
Economic
Social
Technological
Trend
Evaluation
Impact (1=High,
5=Low)
-Brazil subsidizing biofuels
production
-Brazilian govt. has inexpensive
land
-European and US govts.
subsidizing biofuels and oilseeds
by-products
-US exports of oilseed products
are subject to substantial tariffs
-Opportunity
1
-Opportunity
1
-Opportunity
1
-Threat
2
-Global increase in demand of
oilseeds and oilseed by-products
-Growing of oilseed crops is land
and capital-intensive
-GM oilseeds allow for increase in
profit margin
-Labor costs in Brazil are cheap
-Opportunity
1
-Threat
2
-Opportunity
2
-Opportunity
1
-Social disapproval of trans fats
-Increased use of canola/viewed
as healthy alternative to veg. oil
-Many countries, individuals are
against GM oilseeds
-European nations taxing
unhealthy food products
-Threat
-Opportunity
2
5
-Threat
3
-Threat
3
-Increase in technology has
created new (feasible) uses for
oilseed by-products (fuels, feed)
-GM oilseeds allow for increase in
profit margin
-Opportunity
3
-Opportunity
2
Rank in terms of
Importance
1
2
3
4
Pest Analysis - Corn Processing for Food
Factor
Political
Economic
Social
Technological
Trend
Evaluation
Impact (1=High,
5=Low)
-Sugar Import Quotas encourage
use of HFCS
-BRIC and ASEAN countries need
bigger quantities of human and
animal feed as living quality
increases
-US provides subsidies for corn largest corn producer in the
world
-Opportunity
3
-Opportunity
1
-Opportunity
1
-BRIC and ASEAN nations have
increasing living standards increase in eating red meat
-Price of corn is increasing
-Global demand for corn will
increase 55% by 2030
-Yield affected dramatically by
global weather conditions
-Opportunity
1
-Opp./Threat
-Opportunity
1
1
-Threat
2
-Consumers and businesses are
refusing to buy products made
with HFCS
-Consumers and businesses
concerned with corn feed in
animals, switching to no-grain or
all-natural formulas
-Threat
2
-Threat
5
-GM Corn is allowing for increase
in yields in dryer climates
-Opportunity
3
Rank in terms of
Importance
2
1
3
4
Pest Analysis - Corn Processing for Fuel
Factor
Political
Economic
Social
Technological
Trend
Evaluation
Impact (1=High,
5=Low)
-The use of ethanol reduces
dependence on foreign oil
(Europe, US in particular
-US may remove $.45 tariff on
imported ethanol
-Trade deficit from imported oil is
political priority
-Europe, Brazil, US are subsidizing
other renewable resources
-Opportunity
2
-Threat
1
-Opportunity
1
-Threat
3
-Substantial subsidy for ethanol
producers in US
-Price of corn is increasing
-Global population will increase
by 2 Billion by 2030 - increasing
demand for fuel
-Opportunity
1
-Opp./Threat
-Opportunity
1
1
-Taxpayers are upset with orgs.
that have large subsidies
-Ethanol is a controversial fuel
across the ideological spectrum
-Threat
2
-Threat
4
-Electric/Hybrid car purchases are
increasing
-Lithium Ion car batteries are
becoming more advanced,
widespread
-Threat
4
-Threat
5
Rank in terms of
Importance
1
2
3
4
PEST Analysis Conclusion
Political/Economic
• Political
– National and State Government’s policies (tariffs, tax credits, and
subsidies) are important factors for ADM; have a substantial impact
on bottom line
– BRIC and ASEAN nations will have a large increase in demand for
ADM’s products and services in the future
• Economic
– Increase in commodity prices can become problematic for ADM
– Growth in emerging markets will help increase economies of scale
– Being a global organization, fluctuation in exchange rates could be
both problematic and/or beneficial
PEST Analysis Conclusion
Social/Technological
• Social
– Controversial products like High Fructose Corn Syrup create a bad
image, (potential) loss of B2B sales
– Too many acquisitions of locally owned operators can cause social
backlash among farmers
• Technological
– Increase in technology assists in more efficient logistics
– GM crops can perform better under adverse conditions
– Alternative energy (lith. Ion, hybrid) vehicles can hurt
ethanol sales
Industrial, Competitive, and Market Analysis
Industrial Analysis
Porter’s Five Forces
Industrial Analysis - Porter’s Five Forces
Industry Defined
•Organizations that process source commodities and are able to transform,
transport, and distribute their products
•Companies in this industry derive vast majority of revenue from B2B business
activities
•The largest (and most successful) players in this industry have vertically integrated
supply chains
•The most prominent organizations engage in risk management strategies to hedge
against price fluctuations, production risks (yields and outputs) and legal risks
(business agreements and environmental issues).
Industrial Analysis -Porter’s Five Forces
Bargaining Power of Suppliers/Buyers
Factor
Bargaining Power - Suppliers
Bargaining Power - Buyers
Evaluation
Weak
•Farmers rely on relatively few large corporations to purchase their
sources commodities; without them they could not remain
profitable
•Suppliers do not threaten to advance forward in the supply chain
within the industry
Medium
•Buyers have the options to purchase and transform source
commodities for themselves (ex. is sweeteners), but that does
require significant investment and risk
•Buyers have a plethora of choices to choose from for
transportation domestically; less choices for international
transportation (aircraft, ocean-going vessels)
•Governments are often buyers and/or alter the price for buyers
due to regulations (subsidies, tariffs, etc.)
Industrial Analysis - Porter’s Five Forces
Threat of Substitutes/Intensity of Rivalry/Threat of New Entrants
Factor
Threat of Substitutes
Intensity of Rivalry
Threat of New Entrants
Evaluation
Strong
•Orgs. in the industry work with the same source commodities (corn, wheat,
oilseeds, etc.) often producing the same end-products (food oils, animal
feed, human food)
•Cost of buyers switching to substitute products is low
Strong
•Orgs. are expanding into emerging markets significantly
•Acquisitions of agricultural organizations in emerging markets has seen a
substantial increase in the last five years
•Orgs. are consistently involved with negotiating new and existing
government contracts
•Strategic objectives of industry players are largely aligned increasing rivalry
Weak
•The industry is dominated by relatively few large organizations that wield
considerable purchasing power, transformation, and transportation
capabilities
•Major players have significant advantages of economies of scale
•New entrants would have significant challenges in accessing the necessary
distribution channels
Industrial Analysis - Porter’s Five Forces
Conclusion
•
•
Industry is attractive due to growing global food and fuel demand; profitable
Analysis of Porter’s Five Forces reveals significant disparities in remote
environment
– Intensity of Rivalry and Threat of Substitutes are High
– Threat of New Entrants and Bargaining Power of Suppliers are Weak
– Bargaining Power of Buyers are Medium
•
Industry lacks differentiation in source products - commodities
•
Value is added through vertically integrated supply chain; processing,
transformation, and transportation of crops/products is necessary to add some
differentiation (substantially increases profitability)
•
Governments play an substantial role in industry: contracts, regulation of crops,
subsidies, etc.
Competitor Analysis
ADM’s Main Competitors:
Bunge Limited (BG)
Corn Products International Inc. (CPO)
Cargill Inc. (Privately Held)
CHS Inc. (CHSCP)
(Louis Dreyfus Commodities was omitted due to lack of available information)
Competitor Analysis
Competitor
(to ADM)
Cargill Inc.
(Major)
Bunge Ltd.
(Major)
CHS Inc.
(Minor)
Corn Prod. Int.
(Minor)
$80.6 bn
(FY 2011)
$119.5 bn
(FY 2011)
$45.707 bn
(FY 2010)
$25.267 bn
(FY 2010)
$4.367 bn
(FY 2010)
Net Income
$2.03 bn
$4.24 bn*
(includes
discontinued
operations)
$2.388 bn
$535.39 mil
$176 mil
No. of Emp.
30,000
138,000
32,000
8,300
10,000
Global
Presence
Over 75
Countries
63 Countries
40 Countries
In at least 12
Countries
25 Countries
Revenues
ADM
Competitor Analysis
Strategic Business Units
Competitor
(to ADM)
Cargill Inc.
(Major)
Bunge Ltd.
(Major)
CHS Inc.
(Minor)
Corn Prod. Int.
(Minor)
SBUs
•Agricultural
Services
•Oilseeds
Processing
•Corn Processing
•Other
•Agriculture
•Food/Ingredient
applications
•Origination &
Processing
•RM & Financial
•Industrial
•Agribusiness
•Sugar & Bioenergy
•Food & Ingredients
•Fertilizer
•Energy
•AG Business
•Processing
•Corporate and
Other
•Sweeteners
•Starches
•Co-Products & Others
SBU w/
highest % of
revenue
47.01%
Agricultural
Services
N/A
65.9%
Agribusiness
62.04%
AG Business
52%
Sweetener
ADM
Competitor Analysis - Priority Markets/Revenues
(Star Represents Market with Highest Revenues)
Market
ADM
Cargill Inc.
(Major)
Bunge Ltd.
(Major)
CHS Inc.
(Minor)
Corn Prod. Int.
(Minor)
100%
North America
52.5%
South America
Africa/Mid. E
*Other Foreign
Countries
37%
26.5%
12%
39.5%
*Rev from Mkting
and Merchandising
not attributed to
other countries
n/a
Europe
18.2%
28%
*Asia/Africa
7%
0%
n/a
14%
29.3%
Asia Pacific
56%
25%
.04%
19%
33.6%
n/a
n/a
2%
Competitor Analysis
Resources & Expertise
Cargill Inc.
(Major)
Bunge Ltd.
(Major)
CHS Inc.
(Minor)
Corn Prod. Int.
(Minor)
•65 Countries
•30,000 Emp.
•Largest producer
of corn, soy, wheat,
and oil-seed
crushing refineries
in US
•63 countries
•138,000 employees
•Very diversified;
Agriculture to
Finance to Steel
•Long-standing ties
with China and
Russia (since 1970s)
•40 countries
•32,000 employees
•Profitability highest profit
margin of all
competitors
analyzed
•Largest producer
and supplier of
fertilizers in SA
•8,300
employees in 26
states (US)
•Owns 23rd
largest
convenience
store chain in US
•CHS is the
largest
cooperative
marketer of grain
in US
•Approx. 10,000
employees in 25 countries
•Use of a single
commodity - corn - which
is the most grown crop in
the Americas
•High demand for line of
products
•Vertically
integrated supply
chain management
•Risk Management
•Public Image Ranked Most
Admired Food
Production Co. 3 yrs
running (Fortune)
•Vertically
integrated supply
chain management
•Risk Management
•Revenue sources
from B2G, B2B, and
B2C
•Vertically
integrated supply
chain management
•Risk Management
•Procuring,
processing,
transforming, and
distributing oilseed
by-products
•Merch. and
Mkting serv. of
grain in US,
Switz., Brazil, and
Argentina
•Exports grain to
over 60 countries
•One of the
largest re-sellers
of refined fuel in
US
•Creating an array of
sweeteners and starches
from corn
•Developing several
inactive ingredients used
in the pharmaceutical
industry
ADM
Resources
Expertise
Market Analysis
• Global Population Distribution
• Global Population Growth
• Global Livestock Production by Country
– Cattle
– Chicken
– Swine
• Increase in CO2 Emissions
• Forecast Ethanol Production
– Global Maize Production by Country
• Commodity Prices
Market Analysis
Global Population - Distribution
Other than Africa, distribution of world
population will not see any dramatic changes over
the next 40 years
Market Analysis
Global Population - Growth
By 2050, the world will have 9 billion people substantially
increasing the amount of food and fuel needed. The vast
majority of growth will come from developing nations.
Market Analysis
Global Livestock Production by Country
• Substantial population growth, an increase in living
standards, and urbanization has fueled demand for
meat in regions that previously could not afford it.
• Currently, 33 percent of global arable land is used to
grow feed grain. This will grow to nearly 40% by
2040.
• The emerging markets of China and Brazil have seen
sizeable increases of cattle and chicken production,
which will continue to expand.
Market Analysis
Global Livestock Production by Country - Cattle
Market Analysis
Global Livestock Production by Country - Chicken
Market Analysis
Global Livestock Production by Country - Swine
Market Analysis
Increase in CO2 Emissions
The increase in meat consumption and livestock production are associated with
substantial greenhouse gas emissions, as well as land and habitat degradation.
The escalation of CO2 emissions will bring more scrutiny to the organizations that
operate in agricultural (and commodities) markets.
Market Analysis
Ethanol Production
Both corn and sugarcane ethanol production is expected to increase in the
future. Ethanol is viewed by countries as commercially viable alternatives to oilbased petroleum products. Ethanol can also reduce imports of foreign oil from
unstable regions (Middle East).
Market Analysis
Global Maize Production by Country
In the United States, 2011 was the first year that more corn
was used for ethanol than for food/animal feed.
Market Analysis
Commodity Prices
A substantial increase in the
price of commodities is
expected to occur in both
the short and long-run.
Risk Management will be
essential to mitigate
dramatic fluctuations in
prices as commodities will
continue to be volatile.
Climate change will
exacerbate the volatility by
reducing the overall number
of crops due to drought,
increased rainfall, and
inclement weather in
general.
Internal and SWOT Analysis
Strategic Choice
Internal Analysis - Strengths
Strengths
Description
Vertical
Integration
ADM takes their source commodities and are able to transport, process, transform, distribute,
market, and sell their products (services). ADM’s vertically integrated supply chain has enabled
them to create value-added products from their source commodities, which boosts
profitability.
ADM also has well established investor services (ADMIS) that augments their supply chain.
Financial activities include futures commission merchant activities, private equity fund
investment, and captive insurance.
Diversity of
products
ADM has created a diverse number of products from their source commodities. Some of
ADM’s more popular value-added products:
•Corn - sweeteners (dextrose, glucose, and syrup), starches, amino acids, ethanol, animal feed,
sorbitol, xanthun gum, and glycols
•Oilseeds - biodiesel, soybeans, cottonseeds, sunflower seeds, canola oil, vegetable oil,
rapeseed, commercial livestock, and poultry feeds
•Cocoa - cocoa liquor, cocoa butter, cocoa powder, and chocolate
•Wheat - wheat gluten, wheat flour, high-gluten wheat flour, and wheat proteins
Internal Analysis - Strengths
Strengths
Description
Logistics
/Transportation
ADM owns or leases large numbers of the trucks, trailers, railroad tank and hopper cars, river barges,
towboats, and ocean-going vessels to transport their commodities.
•Deepwater vessels - ADM currently owns eight deepwater vessels (and has ordered three more) to transport
grain, grain products, and bulk commodities to and from North America, South America, Europe, W. Africa and
Asia
•River Transportation - ADM has a fleet of 1,750 covered barges, 85 tank barges, and 29 line-haul vessels to
transport liquid and dry commodities
•Trucking - ADM has access to over 6,000 carriers globally; ships both bulk and packaged freight
•Terminal Services - located on major inland waterways, rail lines and highways to allow efficient unload,
storage, and distribution
•Stevedoring (Crane) Services - ADM has partnered with St. James Stevedoring to provide dry bulk stevedoring,
lift operations and stevedoring labor services. Is the most efficient transfer of bulk cargo between ocean
vessel and river barge
Ethanol Production
ADM is the largest producer of Ethanol in the United States, currently producing 1.8 billion gallons annually
(more than double any other company). Ethanol production and consumption is projected to increase in the
US substantially by 2025. In fact, in 2011 more corn was used to produce ethanol than to feed livestock. Nearly
all of ADM’s ethanol production is currently from dry milling activities. However, in conjunction with Monsanto
and Deere & Co., ADM is using more corn Stover - stalks, cobs, and leaves of the corn plant - to produce ethanol.
Corn Stover is considered a viable supplement to traditional ethanol that will decrease corn use and CO2
emissions, while increasing ethanol supply and profits.
Internal Analysis - Weaknesses
Weaknesses
Government Reliance
(Foreign and Domestic)
Description
•ADM relies heavily on governments in which they operate, particularly the US and Germany, for subsidies, tax credits,
and federal protections
•It is estimated that ADM derives over one third of profits in the United States based on preferential treatment for
production of ethanol, corn, oilseeds, and sugar
•Competition in the agricultural industry is fierce. Emerging market nations, such as Brazil, often times choose
preferential treatment for individual organizations in lieu of the industry as a whole. For Example, in Brazil ADM is
currently receiving favored treatment for a new biodiesel plant, while Bunge Ltd. is garnering more support for their
fertilizer operations. Such agreements can be viewed as anti-competitive and politically motivated.
•ADM can also be substantially impacted by international trade disputes, which can limit or disrupt trade between
countries or regions
Raw Materials Commodities
All of ADM’s raw materials are agricultural commodities. The
availability and price of commodities are subject to many factors:
•Changes in weather conditions
•Government programs and policies
•Intense competition
•Changes in global demand resulting from population growth
•Changes in standards of living
•Global production of similar and competitive crops
•Volatile fluctuations in currency exchange rates
Some of the factors listed may be out of ADM’s direct control, but ADM chose to make agricultural commodities their
only raw material source
Dependence on US
The United States accounts for 54.1% of ADM’s net sales and other operating income. Significant gains in technology
and productivity have led to consolidation in all segments of the U.S. agricultural industry. Shrinking profit margins
require organizations to grow to obtain better economies of scale. Significant investments in the US agricultural
industry will (most likely) result in a net loss and have substantial opportunity costs. Agriculture accounts for less
than 2% of GDP and is expected to decline as emerging economies increase their agricultural output.
BCG Matrix - Strategic Business Unit
High
Market Share
High
Ag. Services
Oilseeds Processing
Market
Growth
Corn Processing
Low
Low
SWOT Analysis
Strengths
•
•
•
•
Vertical Integration
Diversity of Products
Logistics/Transportation
Ethanol Production
Opportunities
•
•
•
•
•
•
US, Germany, Brazil, Japan, India,
China and more have contracts with
ADM for multiple ag. Services
(potential for expansion)
China and SA are making substantial
investments in Ag. Services
Emerging markets increase demand
for ADM’s products/services
European and US govts. subsidizing
ethanol, biofuels and oilseeds byproducts
BRIC and ASEAN countries need
bigger quantities of human and animal
feed as living quality increases
Trade deficit from imported oil is
political priority
Weaknesses
•
Government Reliance (Foreign and Domestic)
•
Raw Materials - Commodities
•
Dependence on US
Threats
•
•
•
•
•
•
•
•
•
Cost of fuel is increasing
US exports of oilseed products are subject to
substantial tariffs
Currency Exchange Rates - volatile
Growing of oilseed crops is land and capitalintensive
Many countries, farmers, and consumers are
against GM oilseeds
Commodity yields are dramatically affected by
global weather conditions
Consumers and businesses are refusing to buy
products made with HFCS
Taxpayers are upset with orgs. that have large
subsidies
US may remove $.45 tariff on imported ethanol
Strategic Choice - Ansoff Matrix
Strategic Business Unit
Products
Existing
Existing
Markets
New
•Corn Processing - Market Penetration Ethanol, Sweeteners, Starches. Maintain
position in United States through
government contracts with Ethanol
production including investments in Corn
Stover; “Big 7” processing plants to increase
market share
• Oilseeds Processing - Soybeans, Biofuels,
and Vegetable Oil; Continued investment in
new plants in SA - Brazil and Argentina in
particular - gain economies of scale through
market penetration
- Increased production of cocoa;
procurement, processing, and
exportation out of W. Africa
•Agricultural Services - Enter new markets
in Asia through continued horizontal
integration (ADM currently has a 16% stake
in Wilmar Int. Ltd.); ADM’s transportation
and logistics infrastructure will create
synergistic qualities to any mergers and
acquisitions
New
Strategic Choice
Generic Strategy - Regional
Archer Daniels Midland is employing a differentiation
strategy geographically
• ADM is located in over 65 countries and is committed to
substantial investment in the United States and emerging
markets. Made clear by shareholder presentations, investments
in emerging markets will increase relative to investments
domestically
• Brazil and Southeast Asia are the focus of ADM’s largest
investments outside of the US. However, the United States is still
by far the largest region ADM has recently invested in. In fiscal
years 2006-2010 over 80% of investments globally were in US.
• ADM is utilizing different markets to obtain a diverse portfolio of
commodities and value added products (Biofuels in SA, Ethanol in
US, Cocoa in W. Africa, etc.)
Strategic Choice
Generic Strategy - Products/Services
Archer Daniels Midland is becoming a low cost
provider of products and services in the agricultural
industry
• ADM is investing heavily in agricultural services, logistical
capabilities in particular, to achieve economies of scale
• ADM is continually expanding their vertically integrated supply
chain into new markets. Brazil would be the most recent
example; ADM now has the ability to transform, transport,
distribute, market and sell their expanding biofuels products and
services (B2B and B2G).
• Value-added products and services are essential to remain
competitive and maximize profits since ADM’s raw materials
consist of nothing, but commodities
Strategic Choice
Grand Strategy - Market Penetration
Focus on market penetration in the United States
• ADM has excellent footing in US; 47 oilseed processing plants, 17
corn processing plants, 23 wheat mills, 6 cocoa processing plants,
and produces more than twice the amount of ethanol than any
other company
• Cargill is a highly profitable major competitor of ADM; Cargill’s
success demonstrates that there is significant market share to be
gained in the US
• ADM recently finished the “Big 7” in the US. These seven plants
consist of two cogeneration power plants, one PHA plastics
processing plant, two corn dry milling plants, one cocoa
processing plant, and one PG/EG plant
• Technological advances in Ethanol production are key to
capitalize on generous government subsidies (Corn Stover)
Strategic Choice
Grand Strategy - Market Penetration
Focus on market penetration in the South America
• Brazil and Argentina provide significant revenue for
the Oilseeds Processing segment
• Continued investments into oilseeds procurement
and processing plants are required to take
advantage of rapidly growing markets
• ADM’s biodiesel products are becoming more
available and widespread for use in farming
equipment
Strategic Choice
Grand Strategy - Horizontal Integration
Horizontal Integration is needed to gain a
foothold in Southeast Asia, specifically China
• Further horizontal integration is crucial to gain relevant
insight and expertise into a rapidly growing market
• ADM currently has a 16% stake in Wilmar Int. Ltd., Asia’s
leading agribusiness organization
• Long-term strategy must consist of gaining a larger
stake in Wilmar, possibly a complete acquisition
• Acquisitions in Southeast Asia must ultimately support
ADM’s ability to become vertically integrated
Sources
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