Archer Daniels Midland

Understanding Management, Business and Organization

INDEX

Topic About ADM History & Evolution Value Creation Business Model Strategy Organizational Structure -

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Understanding Management, Business and Organization

About ADM The world's population is growing and along with it the demand for quality foods, livestock feed, alternative fuels, and environmentally friendly alternatives to traditional chemicals is also increasing. As one of the world's leading agricultural processing company, ADM plays a great role in meeting all of these needs. According to Forbes Fortune 500 Companies List of 2012, ADM is ranked 92nd . Today, 30,000 ADM employees around the globe convert oilseeds, corn, wheat and cocoa into products for food, animal feed, industrial and energy uses. With more than 265 processing plants, 400 crop procurement facilities, and the worlds premier crop transportation network, ADM helps connect the harvest to the home in more than 160 countries. They trade, transport, store and process corn, oilseeds, wheat and cocoa into products for food, animal feed, chemical and energy uses. The company turns crops, such as soybeans and corn, into renewable products with uses ranging from food to industrial. It is located in Decatur, Illinois. The Companys operations are classified into three reportable business segments: Oilseeds Processing, Corn Processing, and Agricultural Services. Each of these segments is organized based upon the nature of products and services offered. The oilseed processing segment extracts oils from resources like soybeans, cottonseed, sunflower seeds, canola, peanuts, and flaxseed that can be used for food and feed products. The firm processes oilseeds and sells them in the market as raw materials for other processing. The corn processing segment transforms corn into syrup, starches, glucose, dextrose, and sweeteners. These products are mostly used in the food and beverage industry, but can also be used to produce bio-products like ethanol alcohol. The agricultural services segment utilizes the companys grain elevator and transportation network to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, oats, rice, barley, etc. The firm resells these commodities primarily as food and feed ingredients for the agricultural processing industry.

Understanding Management, Business and Organization

History & Evolution 1902- George A. Archer and John W. Daniels begin a linseed crushing business. 1923- Archer-Daniels Linseed Company acquires Midland Linseed Products Company, and the Archer Daniels Midland Company is formed. Every decade since its corporate inception, ADM has added at least one major profit source to its agribusiness: milling, processing, specialty food ingredients, cocoa, nutrition, and more. 1971- Dwayne Andreas became Chief Executive Officer of ADM, and is credited with transforming the firm into an industrial powerhouse. Andreas remained CEO until 1997. He was one of the most prominent political campaign donors in the United States, having contributed millions of dollars to Democratic and Republican candidates alike. 1999- Executive Marty Andreas announced, under pressure from the European agricultural industry, they were going to separate crops into genetically modified and non-genetically modified groups to give their customers a choice. Previously the company had not disclosed their crop sources. 2001- Paul B. Mulhollem became the President of ADM. The Archer Daniels Midland Company made history by becoming the first U.S. Company to sign a contract with Cuba since the embargo against Cuba was imposed October 1960. 2006- Patricia A. Woertz became CEO. Formerly of Chevron, she is expected to focus on developing ethanol and biofuels. In February 2007 Ms. Woertz was elected Chairman of the Board at ADM. 2011- Archer Daniels Midland announced that the soybean processing facility in Galesburg, Illinois was closing immediately, and its operations would be transferred to other ADMoilseeds facilities. The facility has been idle since April11.

Understanding Management, Business and Organization

Value Creation Value creation is the sequence of activities and information flows that a company and its suppliers must perform to design, produce, market, deliver and support its products. ADMs operations span the entire agricultural processing value chain, and their unsurpassed global asset base enables them to add significant value at every stage. Sourcing- ADMs worldwide sourcing and trade operations use proprietary global crop intelligence and our unparalleled network of grain elevators and terminals to obtain agricultural products in quantities sufficient to meet customer demand. Transportation- They draw upon a vast global network of rail, shipping, trucking and storage resources to deliver crops to their intended destinations quickly and efficiently. Processing- Processing plants turn crops into hundreds of products for food, animal feed, chemical and energy uses by producing multiple products from a single crop, they extract the maximum possible value from each seed, kernel or grain. Distribution- Finished products leave processing plants and find their way to the global marketplace via the trucks, railcars and barges that make up transportation network. Sales- Sales, marketing and technology teams serve as consultants to customers is a host of different industries, where they work to identify opportunities for new and existing products alike. Archer Daniels Midland Company produces thousands of ingredients used worldwide in food, animal feed, nutrition, cosmetics, and even by the industrial and chemical industries. Within this extensive offering of products are brands known and respected around the globe. ADM grows or buys the raw crops, transports them as necessary between countries and facilities for processing, transforms them into the desired value added product, and then sells them to the customers around the globe. More than 230 processing plants around the world generate a remarkable array of products made from corn, wheat, cocoa, oilseeds and other feedstock, and the breadth of operations gives flexibility to adjust manufacturing activities to respond to shifts in a dynamic global marketplace. Value Creation is basically the end product of the Business Model which is described below.

Understanding Management, Business and Organization

Business Model 1. Customer Segmentation- For its Food Processing Business, customers are principally other manufacturers and processors. 2. Value Proposition- Value that the Company creates as described above is in regard to the the Customer Segments identified for ADM Products and Services. 3. Channels- Companys products are distributed mainly in bulk from processing plants or storage facilities directly to customers facilities. The Company has developed a comprehensive transportation system to efficiently move both commodities and processed products virtually anywhere in the world. The Company owns or leases large numbers of the trucks, trailers, railroad tank and hopper cars, river barges, towboats, and ocean-going vessels used in this transportation system.

4. Revenue Streams- Revenue of ADM is received from its three major business segments in food processing. Oilseed segement- 31% of Sales, Corn Segment- 11% of Sales, Agricultural Services- 46% of Sales. The ADMs remaining operations (8% of sales) include food and feed ingredient businesses and financial activities which also generate revenue for the company.

5. Key Activities- The Oilseeds Processing segment includes activities related to the origination, merchandising, crushing, and further processing of oilseeds such as soybeans, cottonseed, sunflower seeds, canola, rapeseed, peanuts, flaxseed, and palm into vegetable oils and protein meals. The Oilseeds Processing segment principally produces and markets processed oilseed products as ingredients for the food, feed, energy, and other industrial products industries. Crude vegetable oil is sold "as is" or is further processed by refining, blending, bleaching, and deodorizing into salad oils. Salad oils are sold as is or are further processed by hydrogenating and/or interesterifying into margarine, shortening, and other food products. Partially refined oil is used to produce biodiesel or is sold to other manufacturers for use in chemicals, paints, and other industrial products. Oilseed protein meals are principally sold to third parties to be used as ingredients in commercial livestock and poultry feeds. The Oilseeds Processing segment also produces natural health and nutrition products and other specialty food and feed ingredients. In North America, cottonseed flour is produced and sold primarily to the pharmaceutical industry and cotton cellulose pulp is manufactured and sold to the chemical, paper, and filter markets. In South America, the Oilseeds
Understanding Management, Business and Organization 6

Processing segment utilizes a network of grain elevators, port facilities and transportation assets to buy store, clean, and transport agricultural commodities and operates fertilizer blending facilities. The Companys Corn Processing segment is engaged in corn wet milling and dry milling activities, primarily in the United States, related to its production of ingredients used in the food and beverage industry including syrup, starch, glucose, dextrose, and sweeteners. Dextrose is also used by the Company as a feedstock for its bio products operations. Corn gluten feed and meal, as well as distillers grains, is produced for use as animal feed ingredients. Corn germ, a by-product of the wet milling process, is further processed as an oilseed into vegetable oil and protein meal. The Agricultural Services segment utilizes the Companys extensive grain elevator and transportation network to buy, store, clean, and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice, and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. Agricultural Services grain sourcing and transportation network provides reliable and efficient services to the Companys agricultural processing operations and customers. Agricultural Services transportation network capabilities include ground, rail, river, and ocean freight services.

Understanding Management, Business and Organization

Strategy The Company has significant competition in the markets in which it operates based principally on price, quality, products and alternative products, some of which are made from different raw materials than those utilized by the Company. Given the commodity-based nature of many of its businesses, the Company, on an ongoing basis, focuses on managing unit costs and improving efficiency through technology improvements, productivity enhancements, and regular evaluation of the Companys asset portfolio. Since ADM is highly exposed to changes in the prices of the commodities it deals with - on both sides, as a buyer and a seller, the risk is actually inherently somewhat reduced. Add to that a strict risk management policy and you get a decent protection during the recent volatile years. Additionally, in order to meet future trends and needs, ADM acts in several ways: 1. It constantly expands its product portfolio. 2. It invests in new plants around the globe, to expand future growing and processing capacities. 3. It constantly seeks ways to operate cheaper and more efficiently - in deploying new techniques to grow the raw crops, to process them and to transport them. 4. It enters joint ventures with local distributors in new and emerging markets. An example is the 16% investment in Wilmar, Asia's largest agricultural processor. The Companys research and development expenditures are focused on improving processing efficiency and developing food, feed, fuel, and industrial products from renewable agricultural crops.

Understanding Management, Business and Organization

Organizational Structure There are boundary lines that define what is inside and what is outside an organization. However, in case of ADM, they have been spinning off whole functions and business units in order to become leaner, faster, and more focussed. Increasingly, value creation is happening across company borders. At the same time ADM has gone into many Mergers & Acquisitions in order to reach an efficient cost structure and enhance their food print. As part of its continued effort to streamline the organization and restructure work to drive greater efficiencies and effectiveness, the company is consolidating responsibility for smaller business operations into larger business units. Effective immediately, management of ADMs cocoa processing business will become part of the companys Oilseeds business unit; and responsibility for ADMs wheat milling business will become part of the companys Agricultural Services business unit. Previously, cocoa processing and wheat milling had been part of ADMs reporting segment called Others. When it comes to internal lines of authority, then the Organization includes Chairman, CEO & President, Corporate Officers and Board of Directors.

Understanding Management, Business and Organization