Corporate Strategy- Esmark Inc.

1. Swift’s costs were much higher than many newer meat-packers due to its agreement with the national meat cutters’ union. Its agreement forced it to pay similar wages regardless of location. Swift paid an hourly wage of $8.25 plus an additional 60% in fringe benefits, whereas Iowa Beef only paid $6.50 an hour plus 30% in additional fringe benefits. Iowa Beef also enjoyed significant production efficiency. They installed modern facilities that enabled them to decrease labor time to 45 minutes per head of cattle. Its operations were in livestock producing regions rather than consumption centers which further decreased additional costs.

2. The average share price for 1979 was $27.9, which is much lower than the analysts’ reports and estimates. Several reasons are causing the stock price to underperform its potential value. Its largest business, Swift, had seen operating profits decrease around 75% from 1975 to 1979. Even though it found success with its additions of Playtex and Jensen, its total earnings had declined over this period. Individually, many of its business lines offer an enormous opportunity if sold or liquidated, but Esmark has unfunded liabilities totaling $135 million. They may not be able to transfer these liabilities to a buyer without affecting the purchase price. Esmark also damaged its credit rating from 1968 to 1979 by quadrupling its total debt outstanding.

3. Esmark has several available options to deal with Swift’s problems: * Reorganizing the division and renegotiating the UFCW contract * Divestiture * Spin-off the division * Liquidate the division’s