Post on 30-Jan-2023
JBS BRAZILBy:
Karl Evans James Jones
Christopher Mattocks Rhonda Mull Renee Noll
Kelly Hooker
CEO MR. ROBERT TIPPLEAMBA 660 9044JUNE 10, 2014
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JBS BRAZILBy:
Karl Evans James Jones
Christopher Mattocks Rhonda Mull Renee Noll
Kelly Hooker
CEO MR. ROBERT TIPPLEAMBA 660 9044JUNE 10, 2014
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Executive Summary
JBSSA is the world’s largest animal protein provider with
plans for continued growth through expansion into South Korean
market. Expanding deeper into the global market also means an
expanding or altering organizational, operational, managerial,
human capital, and policy codes to meet the “changing scale and
scope” of global expansion and the “challenges of managing
strategy, costs, people, and risk” associated with global growth
(Gibbs, Haywood, Weiss, & Jost 2012). This change requires
balance in managing the “internal consistency” with the “external
complexities of managing different businesses (Ito & Rose 2004,
p.63).
Strategies used by JBSSA to infiltrate the South Korean
market are acquisition and exportation. JBSSA uses the geographic
organization structure to accommodate its varied product
offerings and divisions to serve the international market and
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acquire free trade agreements with South Korea. Operational
issues regarding financial and accounting are influenced by
Brazilian reporting standards and currency value. JBS has control
systems in place to deal with managerial issues surrounding food
safety and importation laws, as well as its global supply chain.
Standard ethics codes govern international operations and
customized corporate social responsibility plans ensure positive
perception. Overseas human capital management incorporates
traditional South Korean business practices with JBSSA’s current
structure.
Strategic Practices
JBS-SA based in Brazil is the world’s largest food
processing company with revenue of $40 billion (JBS, 2013). It is
the world’s largest global beef and lamb producer, as well as a
global chicken producer. JBS is the third largest diary producer
in Brazil and third largest pork producer in the United States.
JBS has a presence in more than 100 countries worldwide on six
continents, making it a well-positioned organization to serve
global demand for animal products.
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Multinational organizations can use various modes of entry
to gain specific country and market, including acquisitions (to
create a wholly owned subsidiary), joint venture, exporting and
importing, and strategic alliances. To gain a foothold in the
international market JBS strategized by acquiring Swift Argentina
in 2005 and Pilgrim’s Pride in 2009. The organization has
distribution centers in Brazil, the United States, and Australia,
which are three of the top animal product producing nations.
These centers allow JBS to penetrate the South Korean market
through the exporting strategy.
Drought conditions, rising feed costs, or any national
shortages of cattle or other sources of meat can affect the
supply and demand of product in South Korea. Competition in the
country is fierce as South Korea is one of the top meat importers
according to the U.S. Meat Export Federation, with a projected
estimate of 430,000 metric tons by 2017 (U.S. Meat Export
Federation, 2014). The top competitors to JBS include Tyson Foods
Inc., Cargill Meat Solutions, Sysco Corporation, and ConAgra
Foods Inc., and Hormel Foods Corporation, all of which export
their products to the Korean market. Local partners in South
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Korea would be any big famers who could supply a processing
center in the country, but JBS already is established in
Australia, where the climate is better served for raising
livestock.
Organization Structure
A multinational company’s (MNC) organizational structure is
critical when expanding into international markets. As the world
adapts to changes such as technological advances and economic
issues, MNCs must change the way the company is structured in
order to stay competitive. Organizational structure is molded
and shaped to provide the best strategic process and competitive
advantage to operate an effective and efficient company. JBS S.A
has adapted a geographical organizational structure since
expanding into the international market (Annual Report, 2013).
Operations are divided into segments of food, leather, and
related businesses based on their geographical locations. This
allows the organization to pursue a multi-domestic strategy and
product differentiation into each of the continents in which it
operates (Daniels et. al., 2013). The organizational structure of
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the company is vertically integrated to provide a better
threshold to control and manage all areas, including customer
service, food safety, and quality, and the value chain to
effectively control margins and processing (Pilgrims, 2012).
Operations are structured into three main geographical
divisions, JBS Mercosul, JBS USA, and JBS Food. JBS Mercosul
focuses on beef, leather, biodiesel, collagen, and cleaning
products as their main production of products (Annual Report,
2013). The business units in Brazil, Argentina, Paraguay, and
Uruguay are concentrated on ensuring these activities penetrate
both the domestic and export markets. JBS USA maintains
processing operations for beef, poultry, pork, and lamb in
Australia, Canada and the United States. The business units also
manage plants in Mexico and Puerto Rico, allowing the company to
coordinate production activities to their other units and meet
the demands in the United States. Operating in the United States
has given JBS access to opening a free trade agreement with South
Korea to export meat free of tariffs and to capitalize in the
growing demand for beef and pork in the country. JBS Foods is a
newer addition to the company’s operational structure. Created in
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2013, the new sector was developed to maintain existing business
units in Brazil and expand the company’s international portfolio.
JBS Food increased processing production volume, added brand
value, and consolidated the company’s position in the global food
industry (Annual Report, 2013).
The centralized structure of corporate activities and
geographic diversifications was chosen to prove JBS with an
efficient operation process to serve customer, manage costs,
capitalize on international trade opportunities, and mitigate
global market barriers. The structure allows units to be
incorporated or transitioned into current operations easily
without disrupting the operating activities in other locations.
JBS has also managed to Streamline sales channels, improve
product mixes, and increase the company's ratio on value added
products (JBS Annual, 2010). The diversifications provide JBS the
opportunity to maximize returns by reducing exposure to
individual markets. Additionally, management teams are able to
focus on improving the performance of individual sectors
utilizing their experience in their industry field (Annual
Report, 2013). See Appendix A for Organizational charts
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Operational Practices
Brazilian Real (BRL) is the official currency of Brazil ans
was introduced to Brazil in 1994 (Oanda, 2014). The first
currency of South Korea is the won, which has been used from
August 15, 1945 to February 15, 1953 (Investopedia, 2014). Thee
won is very similar to the Chinese yuan and the Japanese yen;
shortly after the Colonial Era and the separation of Korea, the
won was introduced and replaced the yen (Investopedia, 2014).
The first bank notes were issued by the Bank of Joseon until the
1950’s, when the bank was changed to the Bank of Korea. When the
won was introduced in 1945 the rate was, one won to one yen, but
in October of that same year the currency was changed to the US
dollar where the rate was 15 won = 1 USD (Investopedia, 2014).
The won continued to devalue and at the end of the Korean war the
value had decreased so much that the rates were 6000 won = 1USD,
and do to the drastic devalue of the currency, the hwan was
introduced at a rate of 1 hwan = 100won (Investopedia, 2014).
Brazil JBS uses an accounting practice to ensure financial
reports are in line with standard guidelines. Brazil JBS follows
the International Finance Reporting Standards (IFRS) which is
issued by the International Accounting Standards Board (IASB)
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(IFRS & CPC, 2013). Prior to 2010, JBS followed the guidelines of
the Brazilian Generally Accepted Accounting Principles (GAAP).
The IFRS was incorporated the financial statements of all
Brazilian companies to set an accepted standard across all
companies, as IFRS is principle- based rather than rules-based,
allowing for different accounting treatments for similar
circumstances (IFRS & CPC, 2013).
JBS Brazil posts their financial statements on their website
for all to view. They are posted Portuguese, which is Brazil’s
main language, and in English but on statements the value is
displayed in Reais. Under IFRS financial statements must
include a comparative year, if the company is posting the
financials for December 31, 2013, then the statement must include
the financials for December 31, 2012 (IFRS & CPC, 2013), unlike
American businesses, financial statements which include three
years of data (Yahoo Finance, 2014). Appendix A
Managerial Practices
Managerial issues causing concern JBS for overseas operation are
laws and restrictions on food and products in South Korea. MNE’s
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must be aware of trade restrictions, import and export policies
that will influence economic losses and strategic implementation
(Daniels, et al, 2013). JBS is currently working with the US
department of Agriculture and South Korean government to resolve
South Korea’s suspension of some beef imports from the U.S. due
to some concerns of traces of Zilpaterol were found in a
consignment (Shruti 2013). The problem is the substance
Zilpaterol, a FDA approved supplement, is banned in South Korea
and was detected in a large shipment from Swift Beef Company in
Colorado that is a unit of JBS (Shruti 2013). Managers can
convince government that their business practices improve the
economy and the industry as a whole.
Coordination and controls systems work together by linking
and integrating activities into one unified system (Daniels, et
al 2013). Coordination systems manage all activities along the
supply chain and can consist of purchasing, production, storing
and delivery. Control systems rely on organizational structure
which helps measure performance and assist managers with
implementing its strategy. JBS strategy has positioned itself as
the world largest animal protein producer in the word by
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operating over 300 production facilities and using acquisitions
to align organizational coordination and control systems. JBS
coordination consists of processing, preparing, packaging and
delivering its products in over 150 countries and five continents
(JBSSA, 2014). JBS uses varied control mechanisms to maintain
its objectives and standards such as metrics to ensure its
products are in compliance and information systems to track
animals and monitor production facilities (JBSSA, 2014). JBS
monitors its subsidiaries through its parent company JBSSA as
the strategy is to expand business operations in its current area
of expertise. The parent company manages and aligns its
subsidiaries with the same organizational structure using the
same coordination and controls. JBS uses its state of the art
reporting tool to provide real time reports and measures to
management. JBS also has multiple leadership positions at their
subsidiaries such as CEO and COO who manage business operations
(JBSSA, 2014).
JBS manages its global supply chain suppliers by using
strategies such as cost/efficiency, and flexibility and
dependability strategies. MNE’s often decide for global
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efficiency due to the economies of scale with production and
labor costs in other countries (Daniels, et al, 2013). JBS has
hundreds of production facilities and takes advantage of its
ability to produce, package and deliver its product by reducing
labor and transportation costs (JBSSA, 2014). JBS has the
flexibility to compete in multiple markets and ship products
across regions that may encounter problems such as different
trade restrictions, measurements and even time zones. JBS through
supply chain management can provide efficient distribution,
through location choice and upgrades in existing facilities. JBS
is known for its ability to meet customer demands and needs for
quality meat products (JBSSA, 2014). Today’s customer demands
prompt delivery service for its product uses. JBS’s large
facilities and numerous locations will reduce supply chain risk
by ensuring timely delivery of all necessary components to meet
customers’ needs in South Korea.
Human Capital
According to Daniels, Radebaugh, & Sullivan (2013),
organizational culture is a “system of values” that requires
“unwavering faith and passion, rigorous discipline and focus,
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clearly communicated and practiced core values and timeless
principles, strong work ethics, and finding and promoting people
with the right outlook” (Daniels, et al, 2013, pp. 582, 583). JBS
organizational culture and human resources management staffing
approach will need to incorporate South Korea business
strategies. South Korea uses Confucian ethics based on honor,
trust, and respect and shares similar values of the importance of
family, clan, and friendship (World Business Culture, 2014). JBS
places high priorities on responsible stewardship and community
improvement; they are committed to all of our employees, their
families and communities (JBSSA, 2014), which compliments South
Korea style. Managers and trainers who deploy to the Korean
location would benefit from understanding Korea’s Confucian
approach to business ethics to promote future endeavors.
Staffing a Korean-forwarded subsidiary requires a framework
that supports JBS’ mission strategies. The ethnocentric framework
requires headquarters depicts all business practices of its
subsidiaries while protecting core competencies and expecting
foreign employees to follow orders; whereas, the geocentric
framework uses a collaborative approach promoting equality and
eliminating ideas of inferiority (Daniels, et al, 2013, 2013, pp
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766-771). The business culture of South Korea is “at a
significant crossroads with a great need to find an accommodation
between traditional values and modern management practice” (World
Business Culture, 2014). The geocentric approach would most
likely fit the global and transnational strategy that supports
the flexibility required to help guide the Korean workforce
culture towards a modernization that would share Confucianism
ideals. Ethics, CSR
“JBS bases its conduct on the highest principles of ethics
and transparency, and strictly follows the corporate governance
model provided by the Brazilian Mercantile & Futures Exchange’s
(BM&F) Novo Mercado” stock exchange and is overseen by its 11
board of directors (JBS, 2013). The board of directors form
several smaller committees oversee specific issues such as
“evaluation of standards, business rules, internal systems and
the disclosure of financial results” (audit committee), and
“analyzes the economic situation to identifies possible impacts
on the Company” (financial committee) (JBS, 2013). Other issues
that are monitored are “development and proposal of policies
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relating to the Company's business strategy (corporate committee)
with independent auditors monitoring performance (JBS, 2013).
These committees establish the corporate governance for JBS,
including company ethics and standards, as well as track and
monitor behaviors to ensure adherence.
Ethical conduct in business can lend to a competitive
advantage through positive corporate perception and is an
essential part of a firm’s legal foundation (Daniels, et al
2013). JBS’ ethical conduct manual addresses issues such as
“conflict of interest, contracts, employment practices,
donations/gifts, and decision making” (JBS, 2013). The code of
conduct delineates ethical and compliance standards for
conducting business and serves as a guideline for employees when
they encounter ethical dilemmas. Directors, managers, support
teams, and employees must complete annual ethics training and
code of conduct training and must certify their understanding; it
may also apply to consultants, brokers, and other representatives
of JBS.
Governance polices are in place to curtail and control
dishonest dealings in obtaining or retaining business, such as
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bribery and corruption, with allowances made for local law
business facilitation operations, as approved by the company, in
adherence to guidelines. All employees are required to avoid
conflicts of interest with the organization and report any
suspected violation of the laws, rules, and regulations governing
the organization. Strict rules governing the interactions between
health officials and employees, including acceptable donations
and receipt of gifts are in place. Due to the nature of the meat
slaughter industry there are a multitude of laws and regulations
that must be obeyed as the health of consumers is at stake; all
employees must comply without the appearance of unlawful activity
during all business transactions including product procurement
and distribution.
Corporate social responsibility (CSR) is a “company’s
obligation to be sensitive to the needs of all of its
stakeholders in its business operations and produce an overall
positive impact on society (DRS, 2013, p. 799). JBS’ CSR focus is
on people, food (safety), animals, and Earth, addressing “the
fundamentals of training our staff, improving our communities,
playing the role of forward-looking, conscious corporate
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citizens, and being responsible stewards of the land and natural
resources on which (our) business depends” (JBS, 2014). According
to CSRHub (2014), JBS SA has an overall CSR rating of 51and
specifically a 49 for community, 47 for employees, 60 in
environment, and 48 in its governance practices, with the company
average being slightly higher in all categories and an increase
in each category of approximately 10 points in the past two
years. Brazil’s average CSR rating of 55 is extremely similar to
South Korea’s 53 rating, so the company should integrate well in
that respect (CSRHub, 2014). JBS’ ratings are average for the
industry when compared to its largest competitors, Tyson Food and
Cargrill Industries (CSRHub, 2014).
JBS’ governance and corporate social responsibility are
standards that apply to all operations, in every country. These
standards of process, procedure, and accountability ensure high
quality performance and product to all national and local
stakeholders.
Conclusion
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Appendix A:
JBS Brazil FinancialStatements
USA FinancialStatements
South KoreanFinancial Statements
Balance SheetIncome
Statement Income StatementStatement of Income Balance Sheet balance Sheet
Statement ofComprehensive Income
Cash FlowStatement
Cash FlowStatement
Statement of changes inEquity
Statement of Cash FlowStatement of Value
Added
(Yahoo Finance, 2014)
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Shruti, S. (2013). JBS Says It’s Working with USDA, South Korea to Resolve Beef Ban. Retrieved from:
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