Land O'Lakes

I. Executive Summary:

Purpose Statement:

General Objectives:

Faced with intensely competitive pressures, what actions should Land O'Lakes adopt in order to stay as industry leader?

Problem:

Unexpected challenges in recent years had included price declines in various farm industries--dairy, feed, layers (chickens that lay eggs), and swine--and increased competitive pressures in the farm input supply industry.

Land O'Lakes had been badly hurt by downturns in its swine and fertilizer segments. Similar downturns had contribu;ed to the bankruptcy of two other large regional cooperatives- Farmland Industries and Ag-way. In September 2002. the financial community pointed out that Land O'Lakes' debt was trading below par shortly after it released its quarterly earnings report in July 2002. The markets Judged the company's performance outlook as neutral to not good.

Alternative Courses of Action

A. To develop high quality and innovative products and the most well- known brands.

B. To expand operations and increase product capacity.

C. To seal mergers and acquisitions joint ventures and asset sales to grow the business.

Recommendation

Jack Gherty's leadership has been an important part in organization's success to this point but rumours exist that he may be moving on in the near future. A change at the head of the organization could be considered a potential weakness until it is proven otherwise.

Implementation

In implementing its proposed competitive measures, Land O' Lakes should:

- Continue to develop and strengthen its hold in the dairy and agricultural industry by providing quality products and services.

- To adopt a more aggressive operation and acquisition strategies for expansion and increase of market hold.

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Methods of Analysis:

A) SWOT

i. Strengths

Land O'Lakes clearly has strengths with the economies of scale which in turn provides significant cost advantages. A very successful brand and leader in farm management along with genetically differentiated products puts Land O'Lakes in a strong position for the immediate future. The fact that the organization is a cooperative ensures that the wealth created from value-added business remains within the community as a result of local ownership. This local ownership provides consistency for planning, facility operations and assists with product quality and refinement. The vertical integration established with a cooperative organization allows farmers to retain ownership of their commodities beyond the farm and therefore contribute to the value added process.

ii. Weaknesses

The existing weaknesses for Land O'Lakes, that stand out are the inherent weaknesses that come with the cooperative organization. For example, originators of the business venture may want more control and more reward for their efforts in developing the concept and the business. Additionally members and directors may not have the required expertise in running the processing business or finding and distributing the finished product to the market. Land O'Lakes tries to combat this issue to some degree with the election of 24 directors from across the dairy and agricultural areas.

iii. Opportunities

There are many opportunities for Land O'Lakes to capitalize on the current industry and economic situation as well as just improve business efficiency and focus. For example, Land O'Lakes needs to undertake meaningful cost reductions and improved efficiency by undertaking continued systematic evaluation of all processes and overhead costs in all its businesses. They need to build a high-performance, winning culture with the best people. To do this they need to further promote their business via the website, not just for sales, but for educating people about employment opportunities.

iv. Threats

There are always threats to an organizations continued prosperous future. Competitors are generally the foremost. Land O'Lakes has many competitors due to the extent of the markets in which its operates. There are many small dairy and agricultural organizations that are focusing efforts on small niche markets.

B) Porter's Five forces Model of Industry Attractiveness

1) Barriers to Entry

Land O'Lakes relies heavily on brand recognition. Jack Gherty's leadership has been an important part in organization's success to this point but rumors exist that he may be moving on in the near future. A change at the head of the organization could be considered a potential weakness until it is proven otherwise. Internet marketing and sales are not prominent for Land O'Lakes and these needs to be embraced and exploited. Federal Market Order regulations can impact this segment by imposing restrictions on producer-handler processing. As this predominately affects cooperative organizations, they are more at risk than non cooperatives.

2) Determinants of Rivalry

A key threat is the influence of government, state and international policies and tariffs. These can have a large impact on both the national and export market. However, they generally impact all organizations in the same or similar way. To stay in front