Friday, February 22, 2019
Equal Exchange: Trading Fairly and Making a Profit Essay
I, Executive offline compare supervene upon is a for- loot Fair- sight worker-owned, cooperative keep confederation. Founded in 1986, it is the oldest and largest Fair workmanship coffee company in the United States. Equal Ex transfer began with $100,000 as surfaceed up silver and a 2,000-qu be-foot room in Bostons South End. It purchased coffee beans from small-scale farthestmers at above- securities industry price in Latin America. Initially, EE relied on an some other(prenominal) roasters and packers to prep atomic number 18 the premium coffee beans.It sell to natural prov sacker grocers, gourmet shops, restaurants, and non-profit compositions. The companys founders precious to military service famers get a mend, a good deal st commensurate price and, at the selfsame(prenominal) time, take usefulness of the ripening consumer demand for luxuriouslyer-quality supernumeraryty coffee. However, after 25 days in business, and 10 of which were spent as the only m iddling occupation company in the coffee assiduity, Equal qualifys tremendous success seemed to get down come to a screeching halt. If the usurpation of price increases is excluded, for a second class in a row, its taxs grant grown only 2 pct.This is unvoicedly acceptable comparing with the double-digit return it had been through for the previous 15 years. Additionally, over the past few years, consumers have begun to show a unassailable desire to purchase harvest-festivals from local businesses, thusly increased competition from local roasters. Moreover, on that point is a major encourage by companies to offer a wide variety of green, essential, and whole whatever nutriment products. There are so many another(prenominal) new initiatives explaining and it whitethorn be possible that bonnie passel products will not radix out so very much anymore. As a result, Equal counterchange is deally going to fail into the red z bingle in adjoining few years, if nothing is changed. Since EE has become a famous brand, I highly recommend EEs staff to continue continue its potential in producing new products and starting to offer service, in coordinate to solve listed problems.More specifically, in business strategy, EE need to obligate deciphering its broad differentiation strategy. However, it needs to effect more products in order to be able to compete with many competitors. EE has been fetching customers trust in its products, so that producing new ones would bring its customers into experiencing them no point what. There were still various sensibly championshipd goods that EE did not offer, and they capacity become preferred products. In corporate strategy, if EE choose to start go service, this would be consistent with the companys mission much(prenominal) as ecotourism to coffee or cacao growing zones to domiciliate those communities.II, openingIn 1983, Rink Dickinson, Jonathan Rosenthal, and Michael Rozyne were all recent colle ge graduates and operative for a intellectual nourishment co-op warehouse in the Boston area. They began to question the formation such as, What if regimen could be traded in a way that is honest and ordinary, a way that empowers both farmers and consumers? What if trade supported family farms use of organic methods alternatively than methods that harm the environment? Almost simultaneously they started to hear somewhat groups in Europe who were doing Fair Trade. The advocates of Fair Trade lossed to ensure that the producers of products such as coffee, tea leafs and chocolate would get a better price for their crops date supporting improvement in their environmental, hearty and political conditions. Rink, Jonathan and Michael liked the supposition. fit in to Rink, they were basically food co-op spate, interested in connecting small, local farmers with consumers to change the marketplace. It was not their intention to found a company at that time. They excessivelyk the idea to the Board of Directors of the co-op warehouse.Half of the board supported the idea and one-half voted against it. It became apparent to them that if they were going to pursue their vision, they were going to have to develop an face. everyplace the next three years they met one time a month to develop the plans and raise the capital for founding their own organization. During that time Rink verbalise they used their credit lines to learn rough cooperatives, small farmers, entrepreneurship, marketing and making mistakes, correctly and left. The food co-op gave them a great environment to learn some skills. In 1986, Rink, Jonathan and Michael decided to cast Equal step in (EE). By that time, their aspiration was to change the way food is grown, bought, and sold around the foundation. The founders decided to insure once a week and did so for three years to hold forth how best to change the way food is grown, bought, and sold around the world.At the end of this time they had a plan for a new organization called Equal Exchange that would be A social change organization that would help farmers and their families gain more control over their economic futures. A group that would educate consumers about trade issues affecting farmers. A supplier of high-quality foods that would nourish the body and the soul. A company that would be controlled by the people who did the actual work. A community of dedicated individuals who believed that honesty, respect, and mutual benefit are integral to any worth objet dart endeavor.Around 1991, Equal Exchange establish itself as a Fair Trade specialty coffee company, offering loyal food co-op customers a store bin system with a full line of beans, decaf coffee, different roasts, and flavored coffees. By the end of the year what had once been the pipe dream of reaching $1 cardinal in gross sales had become a reality. By 1994, Equal Exchange was a worker-owned cooperative with 20 memberswith departments, ma nagers, and a growing number of after-school(prenominal) investors.A pivotal early investment by the Adrian Domini give the axe Sisters helped to natty others that this undertaking, however risky, might be worthy of outside financial support. some other exciting chapter in our history started in 1996, when Equal Exchange join with Lutheran World Relief in a path-breaking collaboration to launch what has now become our Interfaith Program. This major initiative helped Equal Exchange create partnerships with communities of faith throughout the U.S. Over the next seven years more than 10,000 congregations across the U.S. began using our Fair Trade coffee.III, Assignment dubiousness1. Question 1What are the strategically applicable components of Equal Exchanges macro-environment? are socio-cultural, environmental, economic, and other components of the macro-environment favorable to the sellers of fair trade food and drink products? Does the industry offer attractive opportunities for branch? a) Strategically relevant components of Equal Exchanges macro-environment Political factors There were no laws in the U.S restricting the use of the term Fair Trade on a product labels. This makes it is a little difficult for EE to prove themselves overtake their competitors. Economic conditions In 2010, Fair Trade the States reported that in that location were over 9,500 fair trade-certified consumer products being offered by 700 industry partners in more than 600,000 retail locations.Paul Rice, the president and CEO of fair Trade USA, state that in 2010 the fair trade retail sales market was $1.4 one million million million in the U.S and $3 billion in Europe. Socio-cultural forces EE developed advertisements, implement macrocosm education campaigns, partnered with religious organization, and created a school fund-raising program. EE in addition offered a wide variety of fair trade product. Technological factors EE was effective in creating messages about the o rigins of products and where consumer dollars went.For example, it used logo and labels that suggested consumers could have a great cup of coffee or bar of chocolate while feeling good about them. It withal created a website as a place for consumers to connect to the farmers who grew the products they bought. Legal and regulatory factors Fair Trade USA hascertain guidelines for participating business to follow, including EE. Fair trade certifiers agreed on eight basic principles, which are+ Long-term direct trading family relationships+ speedy payment of fair prices and wages+ No child, forced or other than exploited labor+ Workplace non-discrimination, gender equity, and freedom of association+ serious working conditions and reasonable work hours+ Investment in community exploitation projects+ Environmental sustainability+ Traceability and transparencyb) Are these factors favorable to the sellers of fair trade food and beverage products? This depends on the product itself, tho ugh these factors do make products are increasingly imported over more than a decade from 1998 to 2010. well-nigh products have great festering rate, such as tea (38%), starting line (60%), cocoa (67%), and vanilla (97%). On the other hand, some products are not favorable to consumers, such as produce (2%), flower (0%), and wine (-63%).c) Opportunities for growthThe far trade movement caught on in 2000 when many companies began to follow the same path as EE more specifically, into the business of fair trade coffee. Basically, the industry still offer very attractive opportunities for growth delinquent to its growth rate, but it is quite difficult to reach those opportunities due to arguing.2. Question 2Explain the matched bosoms facing the fair trade food and beverage products industry. What does a five-spot-force analytic thinking reveal about the temperament and strength of the competitive pressures facing Equal Exchange? Which of the five forces is the strongest? Which of the five forces is weakest?a) The competitive pressure facing the fair trade food and beverage product industry. Fair trade coffee was EEs primitive product, accounting for 80 percent of sales in 2010. At that point, there were over 300 companies in the U.S that provided fair trade coffee. EE managers look up to the social mission of some of these companies and even considered those who were truly committed to far trade to be friends. However, they were also competitors.There were two groups of competitors to EE. One syllabus consisted of larger companies that competed in the high-end, organic coffee market, but also got snarled in fair trade coffee. The other one were small, local, and regional competitors run in different areas off the U.S. There are a component of name can be pointed out, such as Starbuck, Green big money Coffee, Deans Beans, and Thanksgiving Coffee. With this much rivalry, EE sure had a great pressure in the industry.b) Five-forces analysisThreat of n ew entrants Since fair trade food and beverage products industry is a profitable market that yield high returns, new firms would be attracted. But this is not a problem for EE to concern, because it knows those farmers and their struggles. Nevertheless, when it came to rivalry, EEs values provided a much different anticipation than a typical business. Threat of substitute products Coffee is a special product with cloggyly substitute product, so this is not really a threat for EE. Bargaining power of customers EE partnered with fair trade protagonism organizations, such as Global Exchange, to create a nationwide earthly concern education campaign. In 1996, EE partnered with Lutheran World Relief to create something that later became known as the Interfaith Program, and it raised relief funds for farmers in Nicaragua who were hit hard by Hurricane Mitch in 1998.These partnership helped EE generate revenues, create goodwill within communities, and create awareness among consumers ab out fair trade products. Bargaining power of suppliers EEs predict to provide consumers with reasonably priced, good quality food, all while fairly paying the farmer who produced the goods was quite unlike most other companies. inspiration of competitive rivalry As mentioned before, there are many strong competitors against EE, both as small and large ones. Addition, the fair trade industry is open, so competing is unavoidable. Though EE do not mind too much having many competitors, those ones still create barrier for them to reach more customers. To be concluded, threat of substitute is the weakest force and intensity of competitive rivalry is the weakest force.3. Question 3What are the key elements of Equal Exchanges strategy? Which of the five generic strategies is the company pursuing? How has the cooperative combine corporate social responsibility into its business strategy?a)Key elements of Equal Exchanges strategyEE wanted to change handed-down purchasing habits and make consumers more aware of where products came from and who was responsible for making them. At the same time, it wanted to encourage consumers to buy more fair trade products. To do that, EE use advertising in packaging and labels, website, and public awareness. Also, it created interfaith program, applied fundraising program and outbid their competitors in terms of product variety.b) Generic strategyEE follows broad differentiation strategy.EEs promise to pride consumers with reasonably priced, good quality food. Though it attempt to keep their price lowest as possible, it still fairly salaried farmers quite a lot even if coffee prices in the worlds commodities exchanges dropped below the fair trade minimum price. It also centre on keeping their quality on products in any condition.c) conjunctive integrated corporate social responsibilityEE worked with financial institutions to kick the bucket farmers pre-harvest loans with affordable 8 to 9 percent short-term interest rates. Br okers typically offered loans at much higher rates of 25 percent. EE also guaranteed a quarter of each pre-harvest loan. It thus appointd the risks associated with misfortunes, such as hurricanes, that could destroy a cooperatives crops. EE bought the coffee beans once a year, as soon as they were harvested (even though this tied up its capital in inventory). In terms of employee, EE wanted to snip excellent working relationships with its employees. Its managers believed that a democratic work environment in which employees shared responsibility for decision making would lead to higher levels of job satisfaction, morale, and productivity.It made sure that the pay gap between the highest-paid manager and the lowest-paid employee was reasonable. Besides, EE sought to reconnect consumers with the farmers who grew their food. When consumers saw a brand-name product in the supermarket, EE wanted them to realize that there was often a person toiling by for little pay behind it. By rais ing such awareness, the company hoped to direct consumers towards products for which farmer got paid higher prices so theycould better support their ways of life.4. Question 4What are Equal Exchanges competitively important resources and capabilities? Which of its resources have the greatest competitive power? Are any of its resources and capabilities able to pass all four VRIN tests for sustainable competitive advantage? Explain. a) EEs competitively important resources and capabilities Worker co-operative sham EE believed strongly in creating better, healthier relationships with the Earth, with farmers, its workers, and with the consumer. Worker-owners enjoyed many rights and responsibilities and democratically controlled the workplace. At EE, a co-executive director, a roaster, a packer, and a customer service spokesperson were competent, with one share and one vote per person. This makes every employee of EE want to contribute their best to the company.Marketing strategies EE wanted to change tralatitious purchasing habits and make consumers more aware of where products came from and who was responsible for making them. This leads to many well-crafting strategies, such as interfaith program and fundraising. Supplier Unlike other companies, EE wanted its suppliers, farmers specifically, to be paid more, not less. So, it sought out fair trade-registered co-operatives that enabled small-scale farmers to pool their resources, increase their power in the market-place and share the costs of upgrading their operations. These farmers were trained in how to acquire information on market trends and in how to cultivate high-quality crops. b) Unique resources and capabilitiesThe only resource or capabilities that is able to pass all four VRIN test for sustainable competitive advantage is worker co-operative model. Value It is difficult to find good employees, but it is much harder to keep good employees to work for the company. That is the reason wherefore buildi ng relationship between employees is very important, and critical. EEs worker co-operative model is covering its precious value for this part. Rare Treating everyone the same is really rare. Normally, the higher-ups receive much more respect than lower staffs do, but EE deals nothing like that. This hardly can be found in any other company, which makes it a unique component. Inimitable Human relevant is the only one that is inimitable. EEs worker co-operative model makes its workers feel comfortable, as everyone is equal.Therefore, employee inscription is guaranteed and untouchable from external conditions. Non-substitutable EE built up its image with equal employees, and no other capability can replace this. EE liable(predicate) is said to stick with its worker co-operative model at anytime, and the way around. It is hard to find another company which can apply this model better than EE. 5.Question 5What does a SWOT analysis reveal about Equal Exchanges ability to claim market opportunities and stave off external threats?StrengthExperienced in the marketHigh social awarenessTechnology up-to-dateUnique work model correct financial performanceWeaknessLack of consumer awarenessUnsatisfactory working conditionFarmer exploitationOpportunitiesExpanding businessOffering new productsThreats many another(prenominal) wealthy competitorsUnstable marketTable 1 SWOT analysis of Equal ExchangeEE can use its strength to seize opportunities and nullify threats. More specifically, due to high social awareness and with technology up-to-date, EE can easily expanding its business into other activity, such as services. Otherwise, it can produce new products that have not been offered in fair trade market. On the other hand, with experience in the market, EE can find a way to compete with competitors in the fair trade market using its good financial performance. 6.Question 6What is your estimate of Equal Exchanges financial performance and condition? Is the company in good financial shape? Why or why not. Use financial ratios in Table 4.1 to help support your assessment. cast 1 Equal exchange sales growthSince importing its low gear coffee container in 1986, EE had become the leading fair trade brand of food and beverages in the U.S. This helped the co-operative achieve a trend of double-digit revenue growth. However, the recession that struck the U.S changed the outlook for business. The financial data for the fiscal year of 2006 through 2010 demonstrated EEs growth and showed whether the co-operative was able to brave out the economic downturn. Figure 1 demonstrates EEs growth of sales from fiscal year 2006 to fiscal year 2010. In 2006, success in many areas defined much of EEs 14 percent increase in revenues, which translated into an additional $2.86 million in annual sales.In particular, sales were exceptionally strong in the West Coast region. some other key contributor to sales was EEs chocolate products, which were a hit in 2006 because the quality chocolate market was seeing growing demand, or a renaissance, as EE called it, similar to what occurred with specialty coffee 20 years prior. While this was occurring, EE simultaneously grow its chocolate line to products such as organic dark chocolate, organic mint chocolate, and organic chocolate syrup. This expansion allowed the company to ride the growing demand for quality chocolate. EE also introduced three new tea bagged products, which helped increase tea sales 35 percent.Till 2010, it is a hard time as coffee and chocolate prices continued to rise. EE was face up with a difficult challenge of helping farmers during this time, providing customers with stable prices, and maintaining a profit margin consistent with the co-operatives goals. Sales totaled $36,525,856. This growth of some 2 percent was relatively flat for the second year in a row. The growth experienced was due in part to the far-famed increase in EEs direct sales to food co-operatives. This is someth ing the co-operative did to avoid the use of distributors.