Epsilon Archive for Student Projects

Abstract

The changes in the Swedish meat- and meat processing industry have been substantial in recent years. These changes will alter the business environment for many companies. In order to be prepared to face new threats and new opportunities, companies should be actively working on these issues. Risk awareness and by developing of risk management strategies companies can act quickly and effectively when the conditions changes.

The objective of this study is to analyse whether and why companies in the Swedish meat- and meat processing industry use various forms of risk management strategies. The theories used in the study are based on expected utility theory, agent theory and the theory of social capital. Based on these theories and previous studies, suitable models have been developed.
The study also identifies the risks that these companies face. The risk management strategies analysed in the study are "contracting", "certification", "local market - sales" and "local market - supply".

The empirical data collection was made by a survey which was sent to 248 companies in the Swedish meat processing industry. The information from the survey was analysed with the Logit method. The Logit method makes it possible to analyse how different factors affect the likelihood of a given outcome, in this case choose or not choose a specific a risk management strategy.

In order to make sure that the right quality and right quantity is delivered, companies contract with suppliers. A study of Poray et al (2003) shows that by contracting, companies can increase both the quality of meat and increase productivity in their facilities. The study shows that the contracting companies experience a high level of productivity in the facilities. Moreover, the contracting companies perceive quality as an important factor for success in their business activities, indicating a high degree of quality awareness in these companies. The result shows that companies with a low level of cost variation tend to contract less frequently. Moreover, when companies experience a reliable supply they tend to contract less frequently.

The companies that practice third-party certification, experience an increase in productivity in their facilities and at the same time as a high degree of quality awareness is observed within these companies. There is within the certified companies a high awareness of the environmental impact concerning emissions of climate gases and discharge of nutrients into the air and water. Cooperation with the authorities is considered by the certified companies to be less laboriously than for the other companies in the study. The result shows that when risk increase, perceived to be detrimental to the company's reputation, the likelihood increases that companies certify the business.

The analyses of the strategies "local market - sales" and "local market - supply" is based on the theory and social capital. The close relationship with customers and suppliers builds to a large extent on trust. Instead of formal contracts, there is a more informal relationship between the parties. The productivity of these company facilities is lower than for the other companies as well as the ability to compete with lower prices. These companies tend to produce products with a strong brand name and are thereby provided the opportunity to charge a higher price. It is also noted that when the perceived impact of policy decisions is decreasing for the company they tend to make greater use of the strategy "local purchases".