Archer Daniels Midland SWOT Analysis

Strengths

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.

Weaknesses

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.

Opportunities

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.