Fundamental Forces Affecting Livestock Producers

John Lawrence and James Mintert

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: In a seminal Harvard Business Review article published in 1979, Michael Porter identified five competitive forces that shape industry competition, all of which feed into rivalry among existing competitors. Porter’s framework has most often been applied to industries producing and marketing differentiated products. Conversely, U.S. livestock and milk production still mostly resembles a commodity market with largely undifferentiated products marketed to a processing sector that, based on the Herfindahl-Herschman Index (HHI)-an industry concentration measure based on market shares that is easily computed and compared across industries- and Department of Justice and Federal Trade Commission definitions, is unconcentrated to approaching moderately concentrated. Despite this distinction, we find that several aspects of Porter’s forces are important in analyzing the U.S. livestock sector. The remainder of this article reviews the key aspects of Porters five forces as they relate to the competitive structure of the U.S. livestock sector, plus two additional dynamic forces which we believe are also important; technology and drivers of change.

Date: 2011-01-01
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