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Equal Exchange: Trading Fairly And Making A Profit Add in library

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Questions:

1. Explain the competitive pressures facing the fair trade food and beverage products industry. What does a five-forces analysis reveal about the nature and strength of the competitive pressures facing Equal Exchange? Which of the five forces is the strongest? Why? Which of the five forces is weakest? Why?

2. What is your ASSESSMENT of Equal Exchange’s financial performance and condition? Is the company in good financial shape? Why or why not?

3. What specific actions would you recommend to Equal Exchange’s executive directors, workerowners, and board of directors concerning the company’s future direction?

 

Answers:

1. In case of fair trade food and beverage product industry, the companies provide wide range of green, organic and wholesome food products. Though there exist free trade policies, the small firms face a huge competition from the large suppliers of food and beverage product industries.

The five forces are-

a. Rivalry among the competing sellers: -

There are great rivalries among the competing sellers and there are bigger numbers of companies, which are involved in the industry.

b.  New entrants:-

There is strong brand recognition and the customer loyalty, which is build by the industry incumbents. The existence of the little restrictive government policies and effective distribution channel encourage the new entrants the market.

c. Substitutes: -

The large number of available substitutes that are available in the U.S. market at reasonable prices, which create the new preferences for the customers.

d. Buyers:-

There is rising awareness for the free trade policies among the buyers and the buyers have the bargaining policy.

e. Suppliers: -

As, the fair trade companies are the best customers of farmers, the bargaining power of small suppliers is not strong. Therefore, they face high level of competition.

Among them the competition and the exploitation of the farmers is the most strongest among the progress, as in U.S. market despite of free trade policy, there is exploitation of the small farmers by the large farmers. However, among them the weakest is the buyers i.e. the lack of awareness among the buyers about the products ('Envirogen Moves Into North American Food And Beverage Processor Market' 2015).

2. In this case, the equal exchange has done a good job to nullify the external threats and has prepared well for capturing the opportunities with fair trade and worker’s co-operative model. As in seen in the table- 4.1, according to the equal exchange’s income statement 2006-2010, it can be seen that the total cost has declined from 2006 to 2008, whereas the total revenue has increased from 2006-2008(Lovett, Eckes and Brinkman 2015).

3. The following actions may be recommended:-

  • The industry should offer attractive opportunity for growth.
     
  • To aware the customers more about the fair trade policies the company should take initiatives.
     
  • The current franchising policy in dispersed locations should be improved.
     
  • Strategic alliances with fellow competitors should be formed.
     
  • Marketing communication channel should be strengthen.
 

References

'Envirogen Moves Into North American Food And Beverage Processor Market'. 2015. Filtration Industry Analyst 2015 (6): 3-4. doi:10.1016/s1365-6937(15)30171-4.

Lovett, William A, Jr Eckes, and Richard L Brinkman. 2015. U.S. Trade Policy. Hoboken: Taylor and Francis.

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