Tyson Foods is an American food company that sells diverse food products including beef, pork, and chicken. Since its establishment in 1931 as a family business, Tyson Foods has continued to grow over the years to become one of the leading public companies in the food industry (Tyson Foods Company, 2021). The company has operations both locally and internationally, whereby it operates diverse brands under its wings including Hillshire farm, Wright brand, Jimmy Dean, and Ball Park. The company has exhibited success through its constant growing profit and revenue amid the raging Covid-19, whereby it was ranked position 79 in the Fortune 500 list. Kuhn et al. (2018) attribute the success of Tyson Foods to its ability to align with the interest of the customers, therefore posing as a strong force against its competitors such as Sanderson Farms, Perdue Farms, Conagra Brands, Pilgrim Pride, and Golden State Foods. The Statistics by Statista show that the food industry in the U.S records approximately $6.2 trillion because they target customers that are within and outside the U.S (Coppola, 2021). The paper examines the financial position of Tyson Foods Company compared to its competitors and the strategies that have influenced its position in the industry.
The current state of the financial health of the company
The financial health of the company can be determined by examining using financial ratios. The financial position of a company is critical in the future success of the company because it influences the decision of the investors. Based on the 2019 balance sheet of Tyson Foods, its assets amount to US$ 33.097 billion, with total equity of US$ 14.226 billion, and a total liability amounting to $18,824 billion (United States Securities And Exchange Commission, 2019). Given that Tyson Food has more assets as compared to its liabilities, it means that is solvent; meaning that it is well poised to meet its long-term debt. Based on its 2019 records, showed that Tyson Foods has a current ratio of 1.3 meaning that it has more assists than liabilities, therefore in a good position to meet its short-term liabilities. In 2019, between June and July, Tyson Foods sold a total of 84,436, and 183,279 between July and August (United States Securities and Exchange Commission, 2019). The growth in the number of shareholders means that Tyson Foods is a company with a promising future.
The debt-equity ratio is another important aspect that can help to determine the financial health of a company. According to a record by the United States Securities and Exchange Commission (2019), Tyson Foods Company has a debt-equity ratio of 0.8, meaning that in every $1 equity 0.8 was debt. However, in 2020, the debt-equity ratio reduced to 0.7, meaning growth in performance. A reduction in the debt-equity 2020 means that Tyson Foods had reduced its debt financing, therefore in a strong financial position.
Trends in the financial health over recent years and potentially into the future
Based on their financial data of Tyson Foods, the company has been experiencing a constant increase in the amount of revenue from 2017 to 2020. The record showed that the company experienced a 4.68% increase from 2017 to 2018, and 5.87% increase from 2018 to 2019, and a 1.84% increase from 2019 to 2020 (United States Securities and Exchange Commission, 2019). Although the profit increased from 2017 to 2019, the increase from 2019 to 2020 was relatively low. Based on this trend, it is clear that Tyson Foods likely to experience a further decrease in profits, and even record losses if it fails to address the contributing factors.
Comparison of the subject company with competitors and/or industry sector
Tyson Foods Company faces stiff competition from different players in the industry including Conagra, Hormel. Although Tyson Foods Company records higher revenue compared to Conagra, Conagra has a higher reputation, whereby it has received awards for its culture and focus on safeguarding the environment. For instance, Conagra has a more diverse workforce compared to Tyson because it has hired relatively more women.
In the same way, Hormel Foods has also outperformed Tyson Foods because of its focus on culture and social factors. Although Tyson Foods is strongly focused on enhancing its revenue and profits, it lags among its competitors in some aspects (Kuln et al., 2019). Unlike its competitors, Tyson is rated relatively low based on aspects such as work culture, and diversity.
Analysis of the subject company’s industry sector Relative strengths or weaknesses
Tyson has strongly embraced technology by heavily investing in the automation of its operations. Automation has helped the company to considerably reduce the cost of operations, in addition to enhancing efficiency and maintain the quality of its food products (Tyson Foods Company, 2021). The many years of maintaining efficiency and quality have enabled Tyson Foods to develop a strong reputation in the market, therefore, increasing its brand equity. The success of the company is attributed to its extensive investment in research and development used to identify areas of success and ensure that its employees are equipped with the right knowledge and skills.
Since it was founded in 1935, Tyson Food Company has achieved considerable success in the U.S, setting bases across all the states. However, the stiff competition from the company that entered the market later such as Amazon, and Walmart have continued to pose a threat to the company. The weakness of the company is that it has not managed to develop an effective online presence to capitalize on the fast-growing e-commerce sector (Kuln et al., 2019). Additionally, the company lacks a strong market presence in markets outside the U.S, in addition to suffering from a bad reputation of price-fixing scandal, and effects of its operations on the environment (Tyson Foods Company, 2021). The weaknesses help to shows the new opportunities and strategies that Tyson Foods Company can use to promote its performance.
Factors affecting the industry
Technology is dynamic, therefore corporations are required to constantly keep up with the changes to maintain their competitiveness. For instance, corporations are increasingly turning to automation to promote operation. In order to understand customers and their purchase decisions, corporations have continued to embrace analytics or big data and knowledge in algorithm to better understand the customers (Tyson Foods Company, 2021). In this regard, Tyson Food Companies should contently research new technological strategies that can help enhance their competitiveness.
Although the election of Joe Bidden was positive received across the U.S, the new decision to increase the corporate tax from the current 21% to 28% may have a negative implication on Tyson Food Company (Aratani, 2021). Bidden has continued to engage with leaders and representatives of mega-companies on the need to increase taxes to boost tax revenue. With an increase in the tax rate, companies are likely to suffer a high cost of operation, which may force them to cut costs on other areas of operations or increase the price of their products. Additionally, food companies in the U.S are required to align with the guidelines provided by the Environmental Protection Agency to prevent pollution, waste management, and reducing toxins. For instance, Tyson Foods was charged a fine of $500,000 for cleaning costs because of polluting the water in the community (United States Securities and Exchange Commission, 2018). Companies are required to align with EPA regulation to avoid litigation as well as safeguard their image in the market.
The economic factors in a country influence the performance of a company with regard to the cost of operation, purchases made by the customer, and overall income earned by the companies. In the U.S, for instance, the positivity in the market due to the election of Joe Bidden has come with a positive performance of the stock market. The inauguration of Joe Bidden enabled the U.S to achieve political stability that is good for the economy (Boskin, 2020). The political stability combined with the new post-Covid19 economic recovery policy by Bidden shines a brighter future for companies such as Tyson Food Company.
The legal framework in a given market influences the operations of a company. In the American Market, organizations are required within the free-market framework, whereby economic activities are influenced by the forces of demand and supply. The Department of Justice is tasked with ensuring that businesses are aligning with the laws of operations in the country. For instance, Tyson Foods Company was fined $221.5 million for price-fixing for some of its chicken products (Tyson Foods Company, 2021). Apart from fines, violation of business laws can dent the reputation of the company and have long-term implications on its performance.
Tyson Foods is ranked among the leading players in the U.S. It is ranked number 79 in the Fortune 500 Companies list (Fortune, 2021). Tyson Foods has various advantages that help it to remain among the leading food companies in America. Firstly, having been in the industry for over 85 years, combined with its quality products, Tyson Foods has considerably established strong brand equity. With the growth of technology, Tyson has continued to embrace automation in a bid to enhance efficiency and reduce the overall cost of operation. Additionally, through automation, Tyson Foods has managed to increase or reduce the production and distribution of its food products to customers based on demand (Kuln et al., 2019). The extensive use of technology has enabled the company to innovate new products and tracking of their performance in the market. Another competitive advantage of Tyson Foods is its strong distribution network and combines technology to ensure fast and reliable delivery of products to the customers both locally and internationally. Its success in integrating technology and strong relation with the customers is contributed by its highly skilled workforce (Tyson Foods Company, 2021). Tyson Foods Company has training programs for its employees which is geared toward equipping them with new skills and knowledge based on the changes taking place in the market.
The food industry in America is highly competitive because of the presence of some major players in the industry. In this regard, Tyson Foods Company is forced to establish effective competitive strategies to maintain its position in the market. Tyson Foods Company uses both cost leadership and differentiation strategy to win more customers in the market. Cost leadership is the primary strategy that it uses to win more customers (Tyson Foods Company, 2021). In order to achieve cost leadership, the company majorly uses technology. By automating most of its processes and ensuring that its supply chain is highly efficient, Tyson Foods has managed to considerably cut its cost of operation, therefore, boosting its revenue and profits. The cost-leadership strategy enables Tyson Foods to expand its market share, target middle-class customers, and make its food products to be much affordable. Apart from selling its products at relatively low prices, Tyson Foods also offer discounts and coupons to attract more customers (Kuln et al., 2019). The use of cost leadership is an effective strategy that Tyson uses to win customers but utilize a differentiation strategy to keep them coming back.
Tyson Foods Company has maintained relatively stable financial stability over the years because of its approach to operation. Based on its 2019 balance sheet, Tyson Foods has more assets than liabilities, and the current ratio, as shown above, means that Tyson Foods is well poised to meet its current expenditures and address its short-term liabilities. As one of the leading players in the food industry, Tyson Foods has managed to maintain its position because of the extensive use of technology to achieve automation, and its provision of quality products has enabled the company to achieve strong brand equity. However, the decreasing profits mean that the company is not doing well especially during this of Covid19. The company has not managed to counter the stiff competition from its relatively new competitors such as Amazon and Walmart because of their strong use of technology and adoption of e-commerce. While Tyson Foods is facing both international and external challenges, it has the large pull of financial resources that it can use to revamp its operation and overcome the stiff completion. Therefore, its high level of solvency characterized by its huge amount of assets, means that Tyson Foods is a good company for investing with because it cannot easily sink into bankruptcy.