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OM in the News: Clustering Technology and the Danish Pig

February 3, 2014

hogsEvery weekday 20,000 pigs are delivered to the Danish Crown company’s slaughterhouse in central Denmark, writes The Economist (Jan.4, 2014). They trot into the stunning room, guided by workers armed with giant fly swats. They are hung upside down, divided in two, shaved of their bristles and scalded clean. A machine cuts them into pieces, which are then cooled, boned and packed.

The slaughterhouse is enormous, ten football fields long with 7 miles of conveyor belts. Its managers attend to the tiniest detail. The fly-swatting workers wear green rather than white because this puts the pigs in a better mood. The cutting machine photographs a carcass before adjusting its blades to its exact contours. The company calibrates not only how to carve the flesh, but also where the various parts will fetch the highest prices.

Denmark is a tiny country, with 5.6 million people and wallet-draining labor costs. But it is an agricultural giant, home to 30 million pigs and numerous global brands. In 2011, farm products made up 20% of its goods exports. The value of food exports grew from $5.5 billion in 2001 to $22 billion in 2011. The government expects it to rise by a further $9 billion by 2020.

Why, in a post-industrial economy, is the food industry still thriving? Much of the answer lies in a cluster in the central region of the country. The cluster includes several big companies, which act as its leading investors: Danish Crown, Arla, Rose Poultry and DuPont Danisco.  Plenty of smaller firms are also sprouting, which act as indicators of nascent trends and incubators of new ideas. Interestingly, among the Danish public, distaste for “factory farming” is increasing. Borgen, a popular television political drama, devoted an entire episode to criticizing pig farming.

Classroom discussion questions:

1. Why is clustering so important (see Chapter 8)?

2. How is technology impacting the food processing industry?

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