Trading Fairly and Making a Profit

Student’s Name

Institution

Equal Exchange: Trading Fairly and Making a Profit.

Beverage and products industry is a field of business in which many investors have ventured into across the world. Due to the congestion of industries in the field of production, there is a cut throat competition that every company faces. On the other hand, fare trade must be practiced to ensure that all the persons involved in trading get what they deserve. That would include farmers to manufacturers and to consumers as well. The competitive pressures facing the fare trade food and beverage products industry are enormous and quite a number of them are discussed in this paper. Globally, most countries that are still developing have in the past had influenced systems of agricultural marketing via policy of macro-economic that entails overvaluation of exchange rates that are all-encompassing. In addition, such countries exercise subsidies allocation, tax collection, marketing services provision and regulation of administration. State involvement level in trade has always been emphasized in major commodities that are exported as this has always been viewed as the main source of revenue collection (Lyon & morgan, 2010). It also ensures that input supply and credit to small producers prevails as well as provision of stabilization of market prices. Some nations have dismantled cooperatives that were independent thus state monopoly systems arose as key marketing functions were disrupted.

A five force analyses vary in different industries since not all industries produce similar products. The competitive force that is strongest determines the amount of profit an organization would yield and thus it becomes the most vital force in the formulation of strategies. However, the most significant force is always not noticeable. As a result, Equal exchange in the market chain is not guaranteed due to competition arising from the upcoming industries. Bargaining power of suppliers can enable some industries purchase raw materials at low prices hence being able to sell their products at affordable rates to consumers. Also, bargaining power of buyers can result in a company selling its products cheaply thereby making low or no profit at all. Entrance of a new industry into the market or production of substitute products of a company’s would result in low level of sales thus reduced profits. Rivalry among competitors that already exist is equally unhealthy to equal exchange as some companies would prefer doing business without making any profits so as to push their rivals from the market. On the other hand, industries are forced to raise their innovation standards. The weak force might be as a result of the location of the industry but specifically there is none that can be pinned down as being weak.

An importer of farm produce with developed interest in building trade partnerships that are long term and mutual relations with all dealers is what makes up Equal Exchange. Since investors worldwide have ventured into food production business, there exists a stiff competition offered by the rivals that puts Equal Exchange on toss. Equal Exchange’s competitive resources and capabilities include tangible and intangible resources. Tangible resources entail resources of finance. Equal exchange developed to earn profit to cooperatives of workers has had outside and inside shareholders. The most preferred financing source has been shares of Class B to outside investors. Shares of Class A formed part of smaller capital flow of stock which were sold only to employees of Equal Exchange. Additionally, Equal Exchange and Eastern Bank partnered and provided Equal Exchange Deposit Certificate which became alternative to conventional Deposit Certificates. There were also resources of the organization in which Equal Exchange formed 100% of cooperative owned by workers whereby the cooperatives made their own decisions.

Intangible resources include reputation and image of the company as well as direct farmer’s association with the company. Equal Exchange gives information about the product’s origin and how money is spent. They also import products directly from the cooperatives of farmers. Equal Exchange has partnerships with organizations of fair trades that create awareness to the public on their brands (Fridell, 2007). Competitive important capability of Equal Exchange includes the provision of foods that are organic with communal commitments. The supply chain of Equal Exchange is shorter as compared to competitors that are conventional and the supply chain is effectively managed. Quality of products is controlled by contracts signed with farmers in which there are agreements to produce products of high quality at fare prices. Through the stated discussions, it is discovered that the competitive power that is greatest is provision of organic food and commitments to the community. Equal Exchange purchases directly from cooperative representing small scale producers thus the cooperatives activities are internalized. Moreover, profits that were taken by middlemen end up in the pockets of the farmers.

There are no capabilities or resources that can pass all the four tests VRIN for merits that are competitive. The most considered power that is competitive is the ability to provide communal commitments and foods that are organic.

Recommendation

I would recommend to the board of directors to establish a system of policy based governance for the company. The board as a group would define rules and how it will be implemented. The rules and regulations established by the board of directors should be based on policies that would help raise the standard of performance and increase productivity. As a matter of fact, such rules would aid in guiding the actions of the board of directors, managers and the rest of the employees. The rules should not be defined rigidly but should cover a wide range of perspectives as this would give the managers and employees a leeway to achieve the company’s objectives and goals.

The already established partnerships that the Equal Exchange has with the Eastern Bank should be continued to offer the certificates of deposits that are sources of finance to the company. Provisions of organic foods and management of supply chains also enhances smooth running of business and thus the board of directors should ensure that the policy never dies. The purchase of products from small farmers’ cooperatives should always be encouraged by board of directors to reduce the middlemen that reduce the profits the farmers. This would help encourage farmers work even harder.

References

Fridell, G. (2007). Fair trade coffee: The prospects and pitfalls of market-driven social justice. Toronto: University of Toronto Press.

Lyon, S., & Moberg, M. (2010). Fair trade and social justice: Global ethnographies. New York: New York University Press.