This question has to be answered by the case that he gave me. The question is, Is NAFTA a good development for this company? I just want a normal paragraph just one page.
Case One: Iowa Beef Processors
> Initially, Robert Peterson, the Chairman, President, and CEO of Iowa Beef Processsors (IBP) had greeted NAFTA with great enthusiasim. With 1994 export revenues of $1.5 billion, IBP was already the twenty-sixth largest exporter in the United States, and the largest processor of beef and pork products in the world. Over the past decade, Peterson had seen his company’s exports soar and he was anxious to maintain this momentum. For 1995, IBP was projecting export revenues to reach $1.8 billion, a 20% increase from 1994 and four times the amount it had shipped a decade ago. The passage of NAFTA, Peterson figured, could only help IBP achieve this growth.
> With these optimistic expectations, IBP moved quickly into the expanded North American market. In 1994 the company purchased Lakeside Farm Industries, the second largest meat processing firm in Canada. It also began exploring joint venture possibilities with Grupo Gigante, Mexico’s third largest supermarket chain. These two ventures were IBP’s first non-marketing investments outside of the United States.
> To Peterson and his colleagues at IBP, these movements into Mexico and Canada were a natural response to NAFTA — a way of gaining the economies of scale inherent in an expanded market. With access to 121 million potential customers and a plentiful supply of livestock, the Canadian and Mexican operations could give IBP the size and increased cash flows that it needed to fund and support its growth. Others in the industry, however, regarded IBP’s actions in a wholly different light: as manipulative, unfair, and possibly even illegal. In the wake of NAFTA, these groups began to fight.
> The protests came largely from the U.S. ranching community, producers of the livestock bought by IBP and its competitors. For the ranchers, the early warning signs of NAFTA had been ominous. Indeed, in the months following NAFTA’s passage, many small farmers and ranchers had seen cattle prices plummet to 20-year lows. Between 1993 and 1994 alone, cattle prices had dropped 35%. There was a 50% increase in the percentage of commercial farmers on the brink of bankruptcy or foreclosure. While most experts, including those at the National Cattlemen’s Association, attributed falling prices to a cyclical oversupply of livestock, rising corn prices, the devalued peso, and a severe drought in Mexico, many ranchers placed the blame squarely on NAFTA, citing NAFTA’s abolishment of tariffs and import quotas on Mexican cattle as the reason for their dire situation. As evidence, they pointed to the 92% increase of Mexican beef imports in 1995, and the resulting loss to U.S. producers of an estimated $90 million.
> To make matters even worse for the ranchers, the apparent source of their ill-fortune — low-priced Mexican livestock — was also the source of IBP’s growing profits. Thus, the ranchers began in 1994 to mobilize against IBP and its competitors, charging them with collusive practices and calling for congressional investigations into their business operations. Despite a recent U.S. Department of Agriculture (USDA) study which had concluded that meat processors were not acting collusively, arguments advanced by the National Family Farm Coalition, the American Farm Bureau Federation, and other rancher organizations began in 1995 to resonate throughout the U.S. political system. Dan Glickman, the U.S. Secretary of Agriculture, created a commission to study the meat processors and directed the USDA’s antitrust organization, the Packers and Stockyard Administration, to investigate allegations that IBP had manipulated the Chicago Mercantile Exchange’s futures market. Meanwhile, a bipartisan group of congressional representatives, including Senate Minority Leader Tom Daschle, was urging remedial action. At a press conference Daschle stated emphatically that “Something is wrong …when packers make record profits and producers take a huge loss. Something is wrong when three firms control over 80% of the livestock market.”11 Explicitly, many local farmers blamed NAFTA for their woes: “NAFTA,” explained one Montana rancher, is “a terrible thing that’s been done to us. We’re taking the brunt of this thing. It’s benefiting the packers, the feeders and the banks and it’s hurting the producers, the consumers and the taxpayers.”12 These sentiments quickly made their way into presidential politics, where the anti-NAFTA rhetoric of Pat Buchanan and Ross Perot continued to highlight the plight of U.S. ranchers and point the finger of blame at IBP and its competitors.
Peterson was well-aware of the political power that farmers wielded. A clear majority of representatives in Congress, including every Senator, was backed in part by agricultural interests. The meat processing industry had felt the power of these interests before. At the turn of the century, high levels of concentration in the meatpacking industry had become the target of “trust- busting” producers. The result was the 1921 Packers and Stockyards Act which broke up the dominant players and imposed a tight regulatory framework on the raisers and packers of livestock — a chilling precedent for Peterson in his current situation. Another more recent precedent lay in the anti-NAFTA lobbying efforts of Florida farmers, who had persuaded Congress to pass legislation that significantly curtailed the import of Mexican-grown tomatoes. If similar legislation were imposed on Mexican cattle imports, IBP would surely find itself in a much more hostile and less viable commercial environment.
Personally, Peterson remained convinced that an unlikely combination of market phenomena was to blame for the crash in U.S. cattle prices, and that IBP and NAFTA had simply become convenient targets for the ranchers’ blame. He could not, however, ignore the ranchers’ political protests against North American free trade and those who benefited from it. In t h i s environment, the strategic response
preview of the answer..
NAFTA is not a good development Iowa Beef Processors. This is because the association of the company with NAFTA is greatly jeopardizing the Public Relation of the company with its domestic customers. According to the study case, one of the immediate partners to the company is the US ranching community who greatly depend on the company for their survival. The ranchers were the primary suppliers of the company prior to its association with the NAFTA. This means that the rancher communities form a very important component in regards to the customer publics of the company…
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