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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Table of Contents

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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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Table of Contents

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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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