Individual Assignment Coversheet
DETAILS OF ASSIGNMENT
STUDENT NAME Alex Daniel Salomao da Cruz Rocha ID NUMBER 1796097
EMAIL ADDRESS 1796097@student.swin.edu.au PHONE CONTACT 0430318190
UNIT CODE * NAME MBM701 – STRATEGY AND DECISION MAKING
ASSESSMENT TITLE Assessment 3
TUTOR’S NAME: Dr. Ian Allsop DATE OF SUBMISSION: 9 June 2013
.
DECLARATION
I declare that ( the first four boxes must be completed for the assignment to be accepted):
□ This assignment does not contain any material that has previously been submitted for assessment at this or any other
university.
□ This is an original piece of work and no part has been completed by any other student than signed below.
□ I have read and understood the avoiding plagiarism guidelines at
http://www.swinburne.edu.au/ltas/plagiarism/students.htm and no part of this work has been copied or paraphrased from
any other source except where this has been clearly acknowledged in the body of the assignment and included in the
reference list.
□ I have retained a copy of this assignment in the event of it becoming lost or damaged.
□ (optional) I agree to a copy of the assignment being retained as an exemplar for future students (subject to identifying
details being removed).
Student
acknowledgement ( by
typing your name you
agree to the above):
Alex Daniel Salomao da Cruz Rocha Date: 9th June 2013
DETAILS OF FEEDBACK
2
Table of Contents
EXECUTIVE SUMMARY 3
INTRODUCTION 4
CONTEXTUAL ANALYSIS 5
INTERNATIONAL CONTEXT 5
INDUSTRY CONTEXT 5
ORGANIZATIONAL CONTEXT 6
JBS’S PURPOSE 7
SUSTAINABILITY CHALLENGES AND RISKS EXPOSURE 7
JBS’S RESPONSIBLE SOURCING STRATEGY 8
QUALITY CONTROL PROGRAMMES AT FARMS LEVEL 9
JBS’S SUPPLIER CODE FOR MEAT AND EDIBLE ANIMAL BYPRODUCTS PROCUREMENT 9
COURSE OF ACTIONS 10
ADAPTIVE APPROACH VS RATIONAL APPROACH 11
CONCLUSION 13
REFERENCES 14
3
Executive Summary
Potential businesses impacts have never been more concerned and multifaceted.
Globalization has led organizations to concentrate in maximizing operations by redefining
their strategies and sharing organizational wide understanding of risks.
Moreover, the increased difficulty to drive accountability for risks across the entire business
activity demands a continuous analysis to address social and environmental issues in this
complex world.
As an organization that proud itself for its global reach, JBS SA recognizes the importance of
promoting sustainable initiatives into its business operations. The company’s operations
have a strong connection with rural activities, being mandatory for the JBS take care of the
environment and the local communities.
In fact the company has been investing great efforts and money in sustainability
programmes, however the challenges are more and more difficult and complex, calling for
innovative actions. Besides, in the web era, social media adds an entirely new challenge by
instantly shining a global spotlight on even the smallest, most isolated problems, giving
companies no place to hide.
This report analyzes a responsible sourcing strategy to help JBS improve competitive
advantage and business performance through implementation of sustainable initiatives into
its rural activities. JBS’s strategic approach in the direction of sustainable development will
require deeply organizational change, where innovation and culture play important roles.
This paper focuses on contextual analyses to articulate vision and targets for the
development and implementation of a strategy for JBS. The strategy will enable JBS to
refocus its efforts and activities, engaging the right stakeholders in the process to mitigate
the impact that its business creates throughout the value chain.
4
Introduction
JBS SA is the largest Brazilian multinational food processing company. Founded in 1953,
the company produces fresh, chilled, and processed beef, chicken and pork, also selling byproducts
from the processing of these meats. With more than 120.000 employees and
revenue in excess of US$ 37 billion, the company leads the world in slaughter capacity, at
51.4 thousand head per day, and continues focusing on production operations, processing,
and export plants, worldwide (About Us 2013).
With its products present in more than hundred countries around the world, JBS has
dedicated significant attention to operational efficiency, focused on environmental
sustainability and compliance along its value chain (Sustainability, present in al our
operations, 2012). Notwithstanding, a more effective strategy seems needed to highlight the
company’s commitment to a long-term value creation for the society and stakeholders,
extending its responsibility beyond its own operations and covering the entire chain of value
of its business.
Following the principle that when embarking on a strategy formulation is fundamental
analyzing the four dimensions that are connected to real-life strategic problem situations, i.e.
strategy process, strategy content, strategy context and organizational purpose (De Witt &
Meyer 2010), this report will use this 4D map of strategy, to permit a clear view of the
dimensions’ interactivity and interconnectivity, yielding a deeper comprehension of the
situation.
This report will first provide a comprehensive analysis of the facts around the sustainability
challenges faced by JBS. Then it will construct, based on the coursework literature, a
reflection on the development and implementation of a value creation strategy to help JBS
mitigate risks and improve its environmental performance.
5
Contextual analysis
Considering that strategy context is the set of the existing conditions under which strategy
process and strategy are defined (De Witt & Meyer 2010), this section analyzes JBS
business environment and sustainability challenges. Strategy context can be divided into two
different dimensions: ‘industry versus organizations, and national versus international’,
suggesting three levels of contextual environments, that is, international, industry and
organizational (De Witt & Meyer 2010 p.11).
International context
In order to adapt and thrive in more and more complex and competitive environments,
organizations are focusing on finding new ways to be more profitable, and as a result
companies are turning to apply innovative initiatives to explore new markets as a means to
create more opportunities.
Moreover, organizations are concentrating in reducing costs and maximizing operations by
redefining operational strategies and sharing organizational wide understanding of risks to
mitigate the negative effects that risks can cause to their business activities (Zsidisin et al
2004). JBS as a global business must be attentive to the changes and trends in this context.
Industry context
In the food industry, where large organizations are more innovative, creating different ways
to reach far-flung corners of the world for sourcing raw materials, pressures on sustainable
practices are more and more challenging. The big players of this sector are working hard to
sell more products to more of the world, as their duty to the shareholders to boost profit, but
on the other hand, many of the products that are highly profitable are also unhealthy, what
can be a serious threat for their reputation.
By embracing sustainability as strategy, JBS recognizes the need to dedicate its internal
resources to understand the world in which it operates, so that it can respond accordingly.
Muller-Christ & Hulsman (cited in Lopez 2007, p.172) suggest that, as sustainable
development focuses on the sustainable use of resources, sustainability can be considered
as an extension of the resource-based view of strategic management.
6
Moreover, sustainability is about not only complying with the law in a due diligent way, but it
also about taking account of society’s needs and finding more effective ways to satisfy
existing and anticipated demands to build a sustainable business (Kotler & Lee 2005),
providing enhanced goods and services for customers; building trust and credibility in the
society (Frederick 2006).
Organizational Context
JBS has plants installed in the world's 4 leading beef producing nations, Brazil, Argentina,
USA and Australia, exporting for 110 countries. Its business is highly integrated, raising
cattle as well as buying from on the open market, selling fresh meat internationally and using
some as raw material in its prepared meats business. Edible animal byproducts such as
skin, internal organs and blood also play a role as raw materials. Byproducts are wholly
recycled by its rendering operations into tallow, feed additives and other products.
JBS plants receive meat from a variety of sources, including JBS’s own farms and livestock
from the open market. The animals are slaughtered at local farms and than transported to
JBS’s plants, where the quality control takes place. Quality management is one area that is
constantly being improved as new procedures and new technologies become available
regularly. However, rural activities seem to be inefficiently inspected, monitored and
supported.
According to De Witt & Meyer (2010), organizational context refer to situations of disorder
that are often a prerequisite for strategic renewal.
7
JBS’s Purpose
According to De Witt & Meyer (2010) the organizations’ purpose have significant impact on
the role of society; therefore it is an important topic that should be considered before moving
on to strategy process. Organizational purpose can perform as a fundamental principle
against which strategic options can be assessed, as it stimulates strategy activities. Tzu
(2005) suggests that in today’s business world the assessment of the situation needs to be
conduct before the plan to avoid people working on the wrong direction.
JBS is built on the principles of ‘excellence, planning, determination, discipline, availability,
honesty and modesty’ and for over fifty years these principles have conducted the company
to the right thing (Sustainability, present in al our operations, 2012). JBS is embracing
sustainable initiatives as a strategy not only to gain competitive advantage, but also to be
recognized by the society for promoting long-term value creation in its business activities.
According to Kurucz et. al (cited in Crane et. al 2008) there are four categories of benefits
that firms may achieve from sustainable initiatives: cost and risk reduction, gaining
competitive advantage, developing reputation and legitimacy and seeking win-win outcomes
through synergetic value creation.
Indeed, economic, legal, ethical and philanthropic responsibilities are the expectations of
stakeholders and society, leading organizations to identifying specific types of benefits to
focus on. The paradox of profitability and responsibility seems to be well managed by JBS.
Sustainability challenges and risks exposure
JBS has been facing many sustainability challenges when creating value within the
environment in which it carries out its operations (Sustainability, present in al our operations,
2012).
JBS operates within complex supply chains. The company sources raw materials from
various farms, many of them small farmers with inappropriate facilities and poor working
conditions, which have a serious impact on the quality of raw materials that JBS rely on.
Moreover, problems with deforestation practiced by some of its supply chain partners have
been seriously affecting JBS activities.
According to Boone et al (2012) in sustainable supply chains it is difficult to accurately
identify the cost or benefits of an initiative, therefore quantitative and qualitative analysis
may lead to a decision-making based on both evidences and probabilities.
8
McElhaney (2009) suggests that sustainability can help organizations to create value and
positive social change by influencing business culture and operations.
Hence, by adopting sustainable initiatives, JBS may be able to manager its economic,
social, ethical and environmental impacts, and its stakeholders relationship, in all their key
spheres of influence, providing benefits in the financial performance, including different
areas such as people management, reputation and operations (McElhaney, 2009).
Positive actions that reduce the negative impact of an organization on environmental,
ethical, social, and economic issues can be seen as a way of managing risks (Brindley
2004). Thus, its is important to effectively identify the risks associated to JBS’s operational
activities in order to reduce the probabilities of expected environmental crisis that could
negatively affect the organization.
Often the biggest part of a company’s environmental footprint falls outside of its direct
control (Handfield and McCormack 2008). The inappropriate facilities and poor working
conditions in many of the small farms JBS sources from, may represent a risk for food
quality and safety. Besides, the social responsibility transgressions of JBS’s supply chain
partners may expose the company to a serious reputational damage.
Handfield and McCormack (2008) argue that eliminating risk isn’t an achievable goal.
Instead, resilience is what really matters, as with greater resiliency, the organization is better
able to respond quickly to risks as they present themselves, absorbing unexpected hits and
minimizing impacts to the business.
JBS’s Responsible Sourcing Strategy
The project is to expand JBS’s sustainable sourcing program as a means to improve
environmental performance in the supply chain, and guarantee quality and safe raw
materials, without affecting the core values of the company. Additionally, the project
represents an important tool to mitigate risks of reputational damage.
The goal of this project is to build strong relationships with JBS’s supply base, resembling a
joint venture rather than a buyer-supplier transaction, to ensure the company can trace its
product’s origins and assure their quality.
In order to achieve this goal, the project proposes introduction of quality control programmes
at the farms level, and the development of JBS’s supplier code for meat and edible animal
byproducts procurement establishing a series of conditions that should cover all of JBS’s
agreements and relation with its suppliers.
9
The permeability of sustainable practices in the entire supply chain remains a big challenge
for JBS, evidencing that stakeholders’ cooperation is an important key to improve
sustainable performance.
(Flynn 2010) argues that not keeping good relationships with stakeholders can result in a
damaging effect, not just on reputation but also on actual business outcomes.
Notwithstanding, there can be misunderstandings and pitfalls in stakeholder engagement,
requiring a deliberate analysis on what works and what does not. Stakeholder engagement
should be considered as part of day-to-day operations in organizations’ core business, and
stakeholders involved appropriately, with focus and the adequate processes (Basu 2011).
Quality control programmes at farms level
Poor quality raw materials can cause serious problems to an organization that is dependent
upon supply chain partner performance. Thus, quality management policies and practices of
suppliers must be aligned with the standards of the company (Larsen et al 2007).
Moreover, acceptable quality standards require that buyers and suppliers work together to
develop practices, policies, and management systems (Larsen et al 2007). In this way,
constant improvements in quality management help to reduce risks of costly and
embarrassing failures in supply chains that can result in consumer dissatisfaction, regulatory
noncompliance and, in some cases, public criticism of the corporate management practices
(Flynn 2010).
JBS’s supplier code for meat and edible animal byproducts procurement
Blowfield (2007) and Prieto-Carron et al. (2006) argue against the benefits of relying on
codes of conduct in bringing about environmental improvements. Brammer, Hoejmose &
Millington (2011) claim that codes tend to be relatively static and unresponsive to new issues
or changes in stakeholder expectation. More specifically, Andersen and Skjoett-Larsen
(2009) criticize the codes of conduct as being irrelevant to the needs of the employees
generating resistance to their content. Codes can also embody culturally alien demands that
do not fit local needs, reinforcing further resistance to them (Brammer, Hoejmose &
Millington 2011). Besides, Lund-Thomsen (2008, p. 1016) suggests that for the codes to
work, the ‘concerns of the beneficiaries of the codes must be incorporated into the design,
implementation, monitoring and impact assessment of the codes in order to achieve
environmental improvements.’
10
While cognizant of problems with the use of codes, the UN Global Compact (2010, p. 21)
states that the ‘codes of conduct are critical to establishing and managing expectations for
both customers and suppliers, creating a shared foundation for sustainability’ in order to
make informed decisions.
JBS’s supplier code is proposed based on the concept of moving towards ‘collaboration’
rather than ‘command and control’ style of management of relationships. Using this method
the focus is on generating shared value. The goal is to build strong relationships with the
farmers resembling a joint venture relationship.
Course of Actions
JBS will establish a partnership with The Forest Trust (TFT). TFT will engage suppliers to
analyze their policies and systems as a means to identify specific farms that supply to JBS
and undertake Responsible Sourcing Guidelines (RSG) assessment of these farms (TFT
2011).
A risk analysis will be conducted to ensure JBS does not outsource meat or byproducts from
an RSG compliant farm if the parent company’s other operations, does not have quality
control standards approved by JBS and/or have a deforestation footprint. Notwithstanding,
TFT will collaborate with suppliers on a continuous basis to provide them with the expertise
and resources to improve their environmental performance, as the exclusion of noncompliant
suppliers is not an effective way to secure compliance (Lund-Thomsen 2008). TFT
will develop a risk management plan for each company in order to minimize breaches of
RSG.
JBS will provide quality control training and technical assistance to non-RSG compliant
suppliers to facilitate improved agricultural techniques and environmental practices (Perez-
Aleman 2008).
A dedicated JBS’s quality training team will be established to plan, execute and maintain a
robust ‘Quality Control Programme at farms level’ that is aligned and integrated into the
corporate training programme.
JBS’s Responsible Sourcing Strategy will be promulgated to the business leadership team
via the filter of systems thinking to encourage collaboration and breaking down of silos.
“What needs to be measured is social impact” (Porter & Kramer 2006).
JBS will conduct, in partnership with suppliers, a complete mapping of JBS’s supply base, to
identify specific farms as sources of meat and Edible animal byproducts (TFT 2011).
11
Responsible Sourcing Guidelines (RSG) and other company documents will be translated
into local and regional languages and dialects to enhance understanding and
communication (Brammer, Hoejmose & Millington 2011). Additionally, JBS will contact and
consult local NGOs, government bodies and industry representatives to assist in improving
the RSG (TFT 2011).
JBS will implement education and awareness programmes to close the gap between
findings and field implementation.
Adaptive approach Vs Rational approach
Development and implementation of a strategy is not a simple task as it has to be effective
in determining and communicate a picture of an organization through a system of major
objectives and polices, concerning with a unified direction and efficient allocation of
resources (Duhaime et al 2012).
Hence, discussions emerge around strategy development and how it should be approached:
through a logical, sequential description of processes, in terms of process elements and the
rationale behind them; or based on the cumulative effect of day-to-day prioritization
decisions emerged from a dynamic complexity.
Farjoun & Lai (1997) argue that normative models of strategy formation seem to be
unrealistic, as they do not consider the practical and realistic side of strategy development.
Moreover, rational models incorporate assessments considering that environments and
industries do not change rapidly. Moreover, in this model, leaders and managers own the
challenging task of rational assessment, while employees’ inputs may not be used in the
process. Perhaps, rational models of strategy are too incomplete or already outdated in such
complex and adaptive system (Bar-Yam 1997).
Differently to the rational models, adaptive schools are closely related to the understanding
that organizations exist in complex and adaptive systems that are gradually becoming larger,
and constantly changing its purpose and directions (Bar-Yam 1997). Furthermore, adaptive
models monitor explicit outcomes intentions, allowing organizations to learn about the
environment changes and relationships to adjust actions (Simon 2000). In the adaptive
schools, significant strategic courses can rise from the functional levels (Burgelman & Grove
1996), and being accepted by higher levels, as alternative business opportunities.
In this way, JBS may use both rational and adaptive strategy approaches. The company
may use rational approach because of the enormous flow of information that inevitably
12
demands more staff. Fredrickson (1986) states that the fundamental characteristics of a
rational approach lay on comprehensiveness, accuracy, and carefulness.
On the other, JBS is a company that constantly innovates and embarks on new ventures,
always focused on exploring new markets, which evidence that the company strongly adopts
the adaptive strategy approach.
JBS adaptive approach is evidenced when the company stimulates continuous changes and
monitors the environment. Also when JBS’s leaders focus attention on propose, values and
beliefs considering that goals are symbolized by the lining up of the company and its
context. In traditional approaches decisions are strongly concentrated on goals.
Additionally, the company seeks to incorporate, not only major changes, as in rational
models, but also fine changes such as in quality, marketing and styles.
A great strength of this approach is that the environment is considered to be a complex
organizational life support system, encompassing trends, events, competitors and
stakeholders, demanding great attention to the organizational action, since the
organizational context is too dynamic. Hence, the actions are more responsive in
accordance with the nature and importance of the environmental pressures.
Finally, by adopting adaptive approach JBS assumes that the contextual environment is
highly interconnected, and the environment is extremely dynamic and unpredictable,
requiring that the company do not only deal with the environment but also change with them.
13
Conclusion
Sustainability is a strategic priority for many organizations in the today’s world. Through the
developing of an effective sustainability strategy, organizations may be able to match their
internal resources and capabilities with the opportunities presented by the external
environment, enabling them to fulfil their social, financial, ethical and environmental
responsibilities to stakeholders and society.
However, implementing and developing a sustainability strategy presents a number of
challenges that involves uncertainties, diversities and disagreements. To be strategic about
sustainability, organizations need to know where they are ahead. They need to know what
success is, in terms of sustainability.
Many organizations are integrating sustainability as a core element of business strategy, by
undertaking a strategic sustainability review of the business and developing sustainability
strategy to guide the implementation of sustainable initiatives.
Notwithstanding, a strategic approach in the direction of sustainable development requires
deeply organizational change, where innovation and culture play important roles.
The Responsible Sourcing Strategy proposed for JBS may provide many benefits to the
company, including cost and risk reduction, strategic position and competitive advantage,
green image and a green profile reputation as well as strong synergies between
stakeholders in the process of value creation.
14
References
About Us 2013, JBS, viewed 15 May 2013,
Andersen, M & Skjoett-Larsen, T 2009, ‘Corporate social responsibility in global supply
chains’, Supply Chain Management: An International Journal, vol. 14, no. 2, pp. 75-
86, Emerald Management Xtra Plus, Emerald Group, viewed 15 May 2013.
Bar-Yam, Y 1997, Dynamics of complex systems, Addison Wesley, England.
Basu, R 2011, Managing project supply chains, Gower publishing limited, England.
Blowfield, M 2007, ‘Reasons to be cheerful? What we know about CSR’s impacts’, Third
World Quarterly, vol. 28, no.4, pp.683-695, Business Source Complete, EBSCOhost,
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Boone, T, Jayaraman, V & Ganeshan, R 2012, Sustainable supply chains models, methods,
and public policy implications, Springer, USA.
Brammer, S, Hoejmose, S & Millington, D 2011, ‘Managing sustainable global supply chains:
a systematic review of the Body of Knowledge’, Network for Business Sustainability,
viewed 10 May 2013,Supply-Chains.pdf>.
Brindley, C 2004, Supply chain risk, Ashgate, USA.
Burgelman, R. A & Grove, A S 1996, ‘Strategic dissonance’, California management review,
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Crane, A, McWilliams, A, Matten, D, Moon, J & Siegel, D 2008,The Oxford Handbook of
Corporate Social Responsibility, Oxford University Press, The United States.
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De Witt, B & Meyer, R 2010, Strategy synthesis resolving strategy paradoxes to create
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Management Xtra Plus, Emerald, viewed 13 March 2013.
15
Flynn, B, Morita, M, Machuca, J 2010, Managing Global Supply Chain Relationships:
Operations, Strategies and Practices, IGI Publishing, USA.
Frederick, W.C. 2006, Corporation, Be Good! The Story of Corporate Social Responsibility,
Dogear Publishing, Indianapolis.
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3rd edn, Copenhagen Business School Press, Denmark.
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five recommendations’, Development and Change, vol. 39, no. 6, pp. 1005-1018,
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92, Business Source Complete, EBSCOhost, viewed 18 May 2013.
16
Prieto-Carron, M, Lund-Thomsen, P, Chan, A, Muro, A & Bhushan, C 2006, ‘Critical
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.
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18 May 2013
DETAILS OF ASSIGNMENT
STUDENT NAME Alex Daniel Salomao da Cruz Rocha ID NUMBER 1796097
EMAIL ADDRESS 1796097@student.swin.edu.au PHONE CONTACT 0430318190
UNIT CODE * NAME MBM701 – STRATEGY AND DECISION MAKING
ASSESSMENT TITLE Assessment 3
TUTOR’S NAME: Dr. Ian Allsop DATE OF SUBMISSION: 9 June 2013
.
DECLARATION
I declare that ( the first four boxes must be completed for the assignment to be accepted):
□ This assignment does not contain any material that has previously been submitted for assessment at this or any other
university.
□ This is an original piece of work and no part has been completed by any other student than signed below.
□ I have read and understood the avoiding plagiarism guidelines at
http://www.swinburne.edu.au/ltas/plagiarism/students.htm and no part of this work has been copied or paraphrased from
any other source except where this has been clearly acknowledged in the body of the assignment and included in the
reference list.
□ I have retained a copy of this assignment in the event of it becoming lost or damaged.
□ (optional) I agree to a copy of the assignment being retained as an exemplar for future students (subject to identifying
details being removed).
Student
acknowledgement ( by
typing your name you
agree to the above):
Alex Daniel Salomao da Cruz Rocha Date: 9th June 2013
DETAILS OF FEEDBACK
2
Table of Contents
EXECUTIVE SUMMARY 3
INTRODUCTION 4
CONTEXTUAL ANALYSIS 5
INTERNATIONAL CONTEXT 5
INDUSTRY CONTEXT 5
ORGANIZATIONAL CONTEXT 6
JBS’S PURPOSE 7
SUSTAINABILITY CHALLENGES AND RISKS EXPOSURE 7
JBS’S RESPONSIBLE SOURCING STRATEGY 8
QUALITY CONTROL PROGRAMMES AT FARMS LEVEL 9
JBS’S SUPPLIER CODE FOR MEAT AND EDIBLE ANIMAL BYPRODUCTS PROCUREMENT 9
COURSE OF ACTIONS 10
ADAPTIVE APPROACH VS RATIONAL APPROACH 11
CONCLUSION 13
REFERENCES 14
3
Executive Summary
Potential businesses impacts have never been more concerned and multifaceted.
Globalization has led organizations to concentrate in maximizing operations by redefining
their strategies and sharing organizational wide understanding of risks.
Moreover, the increased difficulty to drive accountability for risks across the entire business
activity demands a continuous analysis to address social and environmental issues in this
complex world.
As an organization that proud itself for its global reach, JBS SA recognizes the importance of
promoting sustainable initiatives into its business operations. The company’s operations
have a strong connection with rural activities, being mandatory for the JBS take care of the
environment and the local communities.
In fact the company has been investing great efforts and money in sustainability
programmes, however the challenges are more and more difficult and complex, calling for
innovative actions. Besides, in the web era, social media adds an entirely new challenge by
instantly shining a global spotlight on even the smallest, most isolated problems, giving
companies no place to hide.
This report analyzes a responsible sourcing strategy to help JBS improve competitive
advantage and business performance through implementation of sustainable initiatives into
its rural activities. JBS’s strategic approach in the direction of sustainable development will
require deeply organizational change, where innovation and culture play important roles.
This paper focuses on contextual analyses to articulate vision and targets for the
development and implementation of a strategy for JBS. The strategy will enable JBS to
refocus its efforts and activities, engaging the right stakeholders in the process to mitigate
the impact that its business creates throughout the value chain.
4
Introduction
JBS SA is the largest Brazilian multinational food processing company. Founded in 1953,
the company produces fresh, chilled, and processed beef, chicken and pork, also selling byproducts
from the processing of these meats. With more than 120.000 employees and
revenue in excess of US$ 37 billion, the company leads the world in slaughter capacity, at
51.4 thousand head per day, and continues focusing on production operations, processing,
and export plants, worldwide (About Us 2013).
With its products present in more than hundred countries around the world, JBS has
dedicated significant attention to operational efficiency, focused on environmental
sustainability and compliance along its value chain (Sustainability, present in al our
operations, 2012). Notwithstanding, a more effective strategy seems needed to highlight the
company’s commitment to a long-term value creation for the society and stakeholders,
extending its responsibility beyond its own operations and covering the entire chain of value
of its business.
Following the principle that when embarking on a strategy formulation is fundamental
analyzing the four dimensions that are connected to real-life strategic problem situations, i.e.
strategy process, strategy content, strategy context and organizational purpose (De Witt &
Meyer 2010), this report will use this 4D map of strategy, to permit a clear view of the
dimensions’ interactivity and interconnectivity, yielding a deeper comprehension of the
situation.
This report will first provide a comprehensive analysis of the facts around the sustainability
challenges faced by JBS. Then it will construct, based on the coursework literature, a
reflection on the development and implementation of a value creation strategy to help JBS
mitigate risks and improve its environmental performance.
5
Contextual analysis
Considering that strategy context is the set of the existing conditions under which strategy
process and strategy are defined (De Witt & Meyer 2010), this section analyzes JBS
business environment and sustainability challenges. Strategy context can be divided into two
different dimensions: ‘industry versus organizations, and national versus international’,
suggesting three levels of contextual environments, that is, international, industry and
organizational (De Witt & Meyer 2010 p.11).
International context
In order to adapt and thrive in more and more complex and competitive environments,
organizations are focusing on finding new ways to be more profitable, and as a result
companies are turning to apply innovative initiatives to explore new markets as a means to
create more opportunities.
Moreover, organizations are concentrating in reducing costs and maximizing operations by
redefining operational strategies and sharing organizational wide understanding of risks to
mitigate the negative effects that risks can cause to their business activities (Zsidisin et al
2004). JBS as a global business must be attentive to the changes and trends in this context.
Industry context
In the food industry, where large organizations are more innovative, creating different ways
to reach far-flung corners of the world for sourcing raw materials, pressures on sustainable
practices are more and more challenging. The big players of this sector are working hard to
sell more products to more of the world, as their duty to the shareholders to boost profit, but
on the other hand, many of the products that are highly profitable are also unhealthy, what
can be a serious threat for their reputation.
By embracing sustainability as strategy, JBS recognizes the need to dedicate its internal
resources to understand the world in which it operates, so that it can respond accordingly.
Muller-Christ & Hulsman (cited in Lopez 2007, p.172) suggest that, as sustainable
development focuses on the sustainable use of resources, sustainability can be considered
as an extension of the resource-based view of strategic management.
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Moreover, sustainability is about not only complying with the law in a due diligent way, but it
also about taking account of society’s needs and finding more effective ways to satisfy
existing and anticipated demands to build a sustainable business (Kotler & Lee 2005),
providing enhanced goods and services for customers; building trust and credibility in the
society (Frederick 2006).
Organizational Context
JBS has plants installed in the world's 4 leading beef producing nations, Brazil, Argentina,
USA and Australia, exporting for 110 countries. Its business is highly integrated, raising
cattle as well as buying from on the open market, selling fresh meat internationally and using
some as raw material in its prepared meats business. Edible animal byproducts such as
skin, internal organs and blood also play a role as raw materials. Byproducts are wholly
recycled by its rendering operations into tallow, feed additives and other products.
JBS plants receive meat from a variety of sources, including JBS’s own farms and livestock
from the open market. The animals are slaughtered at local farms and than transported to
JBS’s plants, where the quality control takes place. Quality management is one area that is
constantly being improved as new procedures and new technologies become available
regularly. However, rural activities seem to be inefficiently inspected, monitored and
supported.
According to De Witt & Meyer (2010), organizational context refer to situations of disorder
that are often a prerequisite for strategic renewal.
7
JBS’s Purpose
According to De Witt & Meyer (2010) the organizations’ purpose have significant impact on
the role of society; therefore it is an important topic that should be considered before moving
on to strategy process. Organizational purpose can perform as a fundamental principle
against which strategic options can be assessed, as it stimulates strategy activities. Tzu
(2005) suggests that in today’s business world the assessment of the situation needs to be
conduct before the plan to avoid people working on the wrong direction.
JBS is built on the principles of ‘excellence, planning, determination, discipline, availability,
honesty and modesty’ and for over fifty years these principles have conducted the company
to the right thing (Sustainability, present in al our operations, 2012). JBS is embracing
sustainable initiatives as a strategy not only to gain competitive advantage, but also to be
recognized by the society for promoting long-term value creation in its business activities.
According to Kurucz et. al (cited in Crane et. al 2008) there are four categories of benefits
that firms may achieve from sustainable initiatives: cost and risk reduction, gaining
competitive advantage, developing reputation and legitimacy and seeking win-win outcomes
through synergetic value creation.
Indeed, economic, legal, ethical and philanthropic responsibilities are the expectations of
stakeholders and society, leading organizations to identifying specific types of benefits to
focus on. The paradox of profitability and responsibility seems to be well managed by JBS.
Sustainability challenges and risks exposure
JBS has been facing many sustainability challenges when creating value within the
environment in which it carries out its operations (Sustainability, present in al our operations,
2012).
JBS operates within complex supply chains. The company sources raw materials from
various farms, many of them small farmers with inappropriate facilities and poor working
conditions, which have a serious impact on the quality of raw materials that JBS rely on.
Moreover, problems with deforestation practiced by some of its supply chain partners have
been seriously affecting JBS activities.
According to Boone et al (2012) in sustainable supply chains it is difficult to accurately
identify the cost or benefits of an initiative, therefore quantitative and qualitative analysis
may lead to a decision-making based on both evidences and probabilities.
8
McElhaney (2009) suggests that sustainability can help organizations to create value and
positive social change by influencing business culture and operations.
Hence, by adopting sustainable initiatives, JBS may be able to manager its economic,
social, ethical and environmental impacts, and its stakeholders relationship, in all their key
spheres of influence, providing benefits in the financial performance, including different
areas such as people management, reputation and operations (McElhaney, 2009).
Positive actions that reduce the negative impact of an organization on environmental,
ethical, social, and economic issues can be seen as a way of managing risks (Brindley
2004). Thus, its is important to effectively identify the risks associated to JBS’s operational
activities in order to reduce the probabilities of expected environmental crisis that could
negatively affect the organization.
Often the biggest part of a company’s environmental footprint falls outside of its direct
control (Handfield and McCormack 2008). The inappropriate facilities and poor working
conditions in many of the small farms JBS sources from, may represent a risk for food
quality and safety. Besides, the social responsibility transgressions of JBS’s supply chain
partners may expose the company to a serious reputational damage.
Handfield and McCormack (2008) argue that eliminating risk isn’t an achievable goal.
Instead, resilience is what really matters, as with greater resiliency, the organization is better
able to respond quickly to risks as they present themselves, absorbing unexpected hits and
minimizing impacts to the business.
JBS’s Responsible Sourcing Strategy
The project is to expand JBS’s sustainable sourcing program as a means to improve
environmental performance in the supply chain, and guarantee quality and safe raw
materials, without affecting the core values of the company. Additionally, the project
represents an important tool to mitigate risks of reputational damage.
The goal of this project is to build strong relationships with JBS’s supply base, resembling a
joint venture rather than a buyer-supplier transaction, to ensure the company can trace its
product’s origins and assure their quality.
In order to achieve this goal, the project proposes introduction of quality control programmes
at the farms level, and the development of JBS’s supplier code for meat and edible animal
byproducts procurement establishing a series of conditions that should cover all of JBS’s
agreements and relation with its suppliers.
9
The permeability of sustainable practices in the entire supply chain remains a big challenge
for JBS, evidencing that stakeholders’ cooperation is an important key to improve
sustainable performance.
(Flynn 2010) argues that not keeping good relationships with stakeholders can result in a
damaging effect, not just on reputation but also on actual business outcomes.
Notwithstanding, there can be misunderstandings and pitfalls in stakeholder engagement,
requiring a deliberate analysis on what works and what does not. Stakeholder engagement
should be considered as part of day-to-day operations in organizations’ core business, and
stakeholders involved appropriately, with focus and the adequate processes (Basu 2011).
Quality control programmes at farms level
Poor quality raw materials can cause serious problems to an organization that is dependent
upon supply chain partner performance. Thus, quality management policies and practices of
suppliers must be aligned with the standards of the company (Larsen et al 2007).
Moreover, acceptable quality standards require that buyers and suppliers work together to
develop practices, policies, and management systems (Larsen et al 2007). In this way,
constant improvements in quality management help to reduce risks of costly and
embarrassing failures in supply chains that can result in consumer dissatisfaction, regulatory
noncompliance and, in some cases, public criticism of the corporate management practices
(Flynn 2010).
JBS’s supplier code for meat and edible animal byproducts procurement
Blowfield (2007) and Prieto-Carron et al. (2006) argue against the benefits of relying on
codes of conduct in bringing about environmental improvements. Brammer, Hoejmose &
Millington (2011) claim that codes tend to be relatively static and unresponsive to new issues
or changes in stakeholder expectation. More specifically, Andersen and Skjoett-Larsen
(2009) criticize the codes of conduct as being irrelevant to the needs of the employees
generating resistance to their content. Codes can also embody culturally alien demands that
do not fit local needs, reinforcing further resistance to them (Brammer, Hoejmose &
Millington 2011). Besides, Lund-Thomsen (2008, p. 1016) suggests that for the codes to
work, the ‘concerns of the beneficiaries of the codes must be incorporated into the design,
implementation, monitoring and impact assessment of the codes in order to achieve
environmental improvements.’
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While cognizant of problems with the use of codes, the UN Global Compact (2010, p. 21)
states that the ‘codes of conduct are critical to establishing and managing expectations for
both customers and suppliers, creating a shared foundation for sustainability’ in order to
make informed decisions.
JBS’s supplier code is proposed based on the concept of moving towards ‘collaboration’
rather than ‘command and control’ style of management of relationships. Using this method
the focus is on generating shared value. The goal is to build strong relationships with the
farmers resembling a joint venture relationship.
Course of Actions
JBS will establish a partnership with The Forest Trust (TFT). TFT will engage suppliers to
analyze their policies and systems as a means to identify specific farms that supply to JBS
and undertake Responsible Sourcing Guidelines (RSG) assessment of these farms (TFT
2011).
A risk analysis will be conducted to ensure JBS does not outsource meat or byproducts from
an RSG compliant farm if the parent company’s other operations, does not have quality
control standards approved by JBS and/or have a deforestation footprint. Notwithstanding,
TFT will collaborate with suppliers on a continuous basis to provide them with the expertise
and resources to improve their environmental performance, as the exclusion of noncompliant
suppliers is not an effective way to secure compliance (Lund-Thomsen 2008). TFT
will develop a risk management plan for each company in order to minimize breaches of
RSG.
JBS will provide quality control training and technical assistance to non-RSG compliant
suppliers to facilitate improved agricultural techniques and environmental practices (Perez-
Aleman 2008).
A dedicated JBS’s quality training team will be established to plan, execute and maintain a
robust ‘Quality Control Programme at farms level’ that is aligned and integrated into the
corporate training programme.
JBS’s Responsible Sourcing Strategy will be promulgated to the business leadership team
via the filter of systems thinking to encourage collaboration and breaking down of silos.
“What needs to be measured is social impact” (Porter & Kramer 2006).
JBS will conduct, in partnership with suppliers, a complete mapping of JBS’s supply base, to
identify specific farms as sources of meat and Edible animal byproducts (TFT 2011).
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Responsible Sourcing Guidelines (RSG) and other company documents will be translated
into local and regional languages and dialects to enhance understanding and
communication (Brammer, Hoejmose & Millington 2011). Additionally, JBS will contact and
consult local NGOs, government bodies and industry representatives to assist in improving
the RSG (TFT 2011).
JBS will implement education and awareness programmes to close the gap between
findings and field implementation.
Adaptive approach Vs Rational approach
Development and implementation of a strategy is not a simple task as it has to be effective
in determining and communicate a picture of an organization through a system of major
objectives and polices, concerning with a unified direction and efficient allocation of
resources (Duhaime et al 2012).
Hence, discussions emerge around strategy development and how it should be approached:
through a logical, sequential description of processes, in terms of process elements and the
rationale behind them; or based on the cumulative effect of day-to-day prioritization
decisions emerged from a dynamic complexity.
Farjoun & Lai (1997) argue that normative models of strategy formation seem to be
unrealistic, as they do not consider the practical and realistic side of strategy development.
Moreover, rational models incorporate assessments considering that environments and
industries do not change rapidly. Moreover, in this model, leaders and managers own the
challenging task of rational assessment, while employees’ inputs may not be used in the
process. Perhaps, rational models of strategy are too incomplete or already outdated in such
complex and adaptive system (Bar-Yam 1997).
Differently to the rational models, adaptive schools are closely related to the understanding
that organizations exist in complex and adaptive systems that are gradually becoming larger,
and constantly changing its purpose and directions (Bar-Yam 1997). Furthermore, adaptive
models monitor explicit outcomes intentions, allowing organizations to learn about the
environment changes and relationships to adjust actions (Simon 2000). In the adaptive
schools, significant strategic courses can rise from the functional levels (Burgelman & Grove
1996), and being accepted by higher levels, as alternative business opportunities.
In this way, JBS may use both rational and adaptive strategy approaches. The company
may use rational approach because of the enormous flow of information that inevitably
12
demands more staff. Fredrickson (1986) states that the fundamental characteristics of a
rational approach lay on comprehensiveness, accuracy, and carefulness.
On the other, JBS is a company that constantly innovates and embarks on new ventures,
always focused on exploring new markets, which evidence that the company strongly adopts
the adaptive strategy approach.
JBS adaptive approach is evidenced when the company stimulates continuous changes and
monitors the environment. Also when JBS’s leaders focus attention on propose, values and
beliefs considering that goals are symbolized by the lining up of the company and its
context. In traditional approaches decisions are strongly concentrated on goals.
Additionally, the company seeks to incorporate, not only major changes, as in rational
models, but also fine changes such as in quality, marketing and styles.
A great strength of this approach is that the environment is considered to be a complex
organizational life support system, encompassing trends, events, competitors and
stakeholders, demanding great attention to the organizational action, since the
organizational context is too dynamic. Hence, the actions are more responsive in
accordance with the nature and importance of the environmental pressures.
Finally, by adopting adaptive approach JBS assumes that the contextual environment is
highly interconnected, and the environment is extremely dynamic and unpredictable,
requiring that the company do not only deal with the environment but also change with them.
13
Conclusion
Sustainability is a strategic priority for many organizations in the today’s world. Through the
developing of an effective sustainability strategy, organizations may be able to match their
internal resources and capabilities with the opportunities presented by the external
environment, enabling them to fulfil their social, financial, ethical and environmental
responsibilities to stakeholders and society.
However, implementing and developing a sustainability strategy presents a number of
challenges that involves uncertainties, diversities and disagreements. To be strategic about
sustainability, organizations need to know where they are ahead. They need to know what
success is, in terms of sustainability.
Many organizations are integrating sustainability as a core element of business strategy, by
undertaking a strategic sustainability review of the business and developing sustainability
strategy to guide the implementation of sustainable initiatives.
Notwithstanding, a strategic approach in the direction of sustainable development requires
deeply organizational change, where innovation and culture play important roles.
The Responsible Sourcing Strategy proposed for JBS may provide many benefits to the
company, including cost and risk reduction, strategic position and competitive advantage,
green image and a green profile reputation as well as strong synergies between
stakeholders in the process of value creation.
14
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