Archer Daniels Midland SWOT Analysis
Archer Daniels Midland is considerably larger than many of the large ingredient companies and its strong business position act as its strength and adds to its competitive edge. As recorded by Archer Daniels Midland, it has strong financial performance in year 2005-06. The company registered the consolidated income of $36.6 bn, which meant up to 1.8% from the preceding years. Gross profit of the company was reported to be 22.0% to $ 3.0 bn
The increasing demand for sweetener and related products provides strong growth potential for the Archer Daniels Midland’s Corn Processing division. Sweetener and related products constitute 43.9% of the amount income of division. The income generated by sweetener and related products rose 12.0% to $2.1 bn.
Archer Daniels Midland has strong logistics operations. The company’s fast transportation facilities include more than 2,000 barges, 20,000 railcars and 1,500 tractor-trailers which enter 500 pasture storage elevators. The company also has 100 ships on low charter, operative on six continents.
In 2005, there were 474,000 rail cars in US, of which the company owns 4.0%, which gives it substantial plus. Additionally, the company also earns revenues by leasing its transportation facilities.
The activeness of its processing plants depends greatly on energy sources like electricity, coal and natural gas. Also the company’s transportation facilities are dependent on diesel and other fuel products. Hence fluctuations in prices of these fuels and energy products can have adverse effects on the company’s production costs and profitability. This is also increasing the carbon foot of the company.
R&D expenditure of Archer Daniels Midland is very low about $ 45.0 m which constitutes just 0.1% of the total revenue of the company and is very less as compared to other companies spending on research and development. On an absolute as well as relative basis, R&D spend is lower than other ingredient companies. With rising competition in ingredients as well as bio energy and biodegradable plastics, this could prove to be a setback for the company.
A number of authoritarian and environmental factors, and high oil prices, have led to an increase in demand for bio energy products much as ethanol and biodiesel. The obligation for both products is likely to rise sharply in the US and Europe. Archer Daniels Midland is a leading shaper of these products and well positioned to capture a large market share.
The growing economies in Asia modify future opportunities for growth for Archer Daniels Midland. The rising population and increasing income levels lead to refined dietary and food products demands. Growing income levels are likely to process obligation for meat and oil. This change provides new opportunities for ADM’s feed playing and Oilseeds Processing businesses.
Archer Daniels Midland faces cut throat competition all segments of the markets in which it operates. These markets are highly competitive and sensitive to creation of substitution products. ADM’s main competitors include Bunge, Barry Callebaut Corn Products International Cargill, and Tate & Lyle.
The use of genetically modified organisms (GMOs) in matter and animal has faced varying acceptance in markets all over the world. The US and Argentina approved the use of GMOs while markets such as the EU and Brazil, government regulations bounds income or order of GMO products over the risks to health and the environment. This has caused the business to lose the market in Europe and Brazil.