PREMIUM-BEEF

Premium-Beef is an American company which breed cow cattle in seven countries. Worldwide the
beef industry generally remains a commodity industry but is gradually moving toward an industry
characterized by more branded products. Industry attitudes (attitudes of seed stock breeders,
commercial producers and packers) are changing from being an industry that was inwardly focused
to becoming one that is more consumer responsive.

Per capita demand for beef has decreased considerably in most countries for two decades. The beef
industry is facing major issues, including consumer perceptions that beef is unhealthy, the high
levels of contamination which generates, a declining market share that has recently begun to
stabilize, segmentation, strong traditions, and a relatively slow rate of technology adoption among
production segments in the industry.

Smith (1999) described a total quality management approach to the entire beef industry when he
stated, "the beef industry should assure that domestic and international consumers receive
bacteriologically and chemically safe, healthful, high quality and consistently palatable beef that was
produced without compromising the environment or the animal’s welfare". There is a systematic
progression in the beef industry production process. We can observe this process through the
formation of strategic alliances in the beef industry.

Within the beef industry, there are multiple stages in the production/marketing chain: breeders,
commercial cow-calf producers, backgrounders feeders, packers, processors, retailers, and
consumers, some of which are becoming more vertically coordinated or even vertically integrated
today.

The vertically integrated alliances are generally regionally based alliances. As a rule, these alliances
involve producer-owned cooperatives. Their primary goal is full control of the product they produce,
while returning profits back to the members. The reasons why producers should consider forming
strategic alliances are the potential benefits to be gained. The benefits may include access to capital,
processing capacity, processing expertise, or new markets.

The purpose of the beef alliances is producing more consistent and uniform quality beef products. It
comprises specific management (production) practices, such as vaccination programs, health
programs, feeding programs, particular feedlots and packers, quality assurance programs, growth
implant programs, and antibiotic-use restrictions.

The Premium-Beef Board has received a proposal for joining to the International Beef Alliance (IBA).
IBA members are located across Australia, Canada, Mexico, the United States and New Zealand, and
represent approximately 25 percent of the fed cattle supply in the mentioned countries. The alliance
involves approximately 1,300 to 1,400 commercial cow-calf producers. IBA was established to supply
healthy humanely raised grass-fed beef for consumers and promote the use of environment-friendly
production management. The focus is to gain sustainability and profitability for producer members
by reducing duplication and costs through cooperative effort and group marketing. The alliance has
worked and supplied its grass-fed beef to several grocery stores and supermarkets.

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The IBA Alliance also sells cattle through order buyers via video or conventional auctions. The main
objective is to guarantee higher quality animals to the packer; if these animals can be procured
through conventional markets, then some will be purchased in this manner. The feedlots attract the
major packer buyers, so they are able to negotiate and receive higher prices.

The beef industry is responsible for a large share of global greenhouse gas emissions. According to
FAO data, 14.5% of all human-caused greenhouse gas emissions are attributable to livestock
farming, an industry that emits not only carbon dioxide (CO2), but also methane (CH4) and nitrous
oxide (N2O), two gases considered to play a similar role to CO2 in driving global warming. Though
methane and nitrous oxide do not remain in the atmosphere as long as CO2, their respective climate
warming potential is about 25 times and 300 times higher than that of carbon dioxide. It has
generated that part of public opinion reject the beef consumption.

You are working for Premium-Beef as strategic alliances consultant, answer the following questions.

YOU CANNOT SEND YOUR EXAM BY ELECTRONIC MEANS. IT HAVE TO BE DEVELOPED AND
DELIVERED IN THE PHYSICAL BOOKLET THAT YOU HAVE RECEIVED IN THE EXAM SESSION.
IT IS A HANDWRITTEN EXAM.

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