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Strategic Positioning Under Agricultural Structural Change: A Critique Of Long Jump Co-Operative Ventures

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  • Goldsmith, Peter D.
  • Gow, Hamish R.

Abstract

Structural change in US agriculture has disrupted the traditional organization of the supply chain. Not only does the scale increase of firms common during the industrial period (1970-1995) continue, but also with the rise of a knowledge-based economy, new organizational forms and supply chain linkages are proliferating. Examples are the radical transformation of the relationship between input suppliers and producers in the biotech arena, the dominance of the swine industry by the integrated model, the rise of marketing and production contracting, and the arrival of multi-member closed producer organizations such as the new generation cooperatives and limited liability companies. The focus of this research is these new integrated producer organizations. Much of the activity and subsequent analysis of new producer organizations has focused on value-added opportunities through integration (i.e., Merrett et al, 1999). There are numerous examples from pasta plants and egg breaking, to cattle feeding, hog slaughter, and alcohol production. These value-added opportunities we define as long jump ventures. That is, they lie outside the core competencies of the principles in the firm, the producers. Strategic management theory (Prahalad, 1986,1990,1993; Quinn, 1977,1990; Mintzberg, 1987,1994,1996,1998,2000) suggests that there may be other opportunities available to producer organizations that better leverage their core competencies, short jump ventures. Short jump ventures are value-creating opportunities that involve a minimum R&D, less capital, less risk, and less direct specialized knowledge. While the economy at large is producing vast quantifies of long jump innovations in the fields of biotechnology and information, there is another revolution occurring in business involving short jump innovation in the area of service. This new field, known as; one-to-one marketing (Pepper, 1993, 1999), relationship management (Hansen, 1983), relationship marketing (Curry, 2000), and strategic partnering (Rackam, 1996), focuses on the supplier-client interface. Value is created by significant coordination between supplier and client. The boundary between firms is blurred, knowledge is actively shared, and partners are dedicated to mutual profitability. By understanding the needs of the client, the supplying firm is able to adapt its products and more importantly services. This creates a unique and more valuable business for the supplier insulating it from competitive forces and allowing greater value capture. This not only creates greater supply chain efficiency, but intra-firm and inter-firm product innovation result as well. The objective of this paper is to study strategic options for production agriculture dealing with the failure of the commodity business model. From this analysis of strategic positioning the paper introduces relationship management as a viable strategic alternative for commodity producers. Finally, a case study of the Wairarapa Lamb Cooperative, a New Zealand based firm doing business in the United States, is introduced. The case serves not only as an example of relationship management in agriculture but also demonstrates how producers can work within their own core competencies, leverage knowledge assets, and avoid highly specific fixed assets. The methodology will be: 1) Review the literature as to the types of activities in which integrated producer organizations are engaged. 2) Present a theoretical model of strategy analyzing short jump versus long jump ventures. 3) Introduce Relationship Management. 4) Employ a case study example of the theory in practice. This paper theoretically analyzes producers'’ vertical integration through “"brick and mortar"” investments, such as hog slaughter and ethanol production. A theoretical model using strategic management theory and a case study are used to critique the long jump strategy and suggest relationship management as a more viable alternative.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2001 Annual meeting, August 5-8, Chicago, IL with number 20645.

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Date of creation: 2001
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Handle: RePEc:ags:aaea01:20645

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Keywords: Agribusiness;

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References

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  1. John W. Siebert & Robert Jones & Thomas L. Sporleder, 1997. "The VEST model: An alternative approach to value added," Agribusiness, John Wiley & Sons, Ltd., vol. 13(6), pages 561-567.
  2. Bruynis, Chris L. & Goldsmith, Peter D. & Hahn, David E. & Taylor, William J., 2001. "Key Success Factors for Emerging Agricultural Marketing Cooperatives," Journal of Cooperatives, NCERA-210, vol. 16.
  3. Goldsmith, Peter D. & Ramos, Gabriel & Steiger, Carlos, 2001. "Intellectual Property Protection And The International Marketing Of Agricultural Biotechnology: Firm And Host Country Impacts," 2001 Annual meeting, August 5-8, Chicago, IL 20672, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Carlberg, Jared G. & Ward, Clement E. & Holcomb, Rodney B., 2006. "Success Factors for New Generation Cooperatives," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 9(01).
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Cited by:
  1. Nikos Kalogeras & Joost M.E. Pennings & Ivo. A. van der Lans & Philip Garcia & Gert van Dijk, 2009. "Understanding heterogeneous preferences of cooperative members," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 90-111.
  2. Goldsmith, Peter D. & Kane, Samuel, 2002. "The Farm Business Environment and New Generation Cooperatives as an Innovation Strategy," 2002 Annual Meeting, November 13 31826, NCERA-194 Research on Cooperatives.
  3. Goldsmith, Peter D. & Bender, Karen, 2003. "Ten Conversations about Identity Preservation: Implications for Cooperatives," 2003 Annual Meeting, October 29 31803, NCERA-194 Research on Cooperatives.
  4. Whitacre, Rick C. & Winter, J. Randy, 2004. "Agguild Of Illinois: A New Generation Cooperative Without The Bricks And Mortar," 2004 Annual meeting, August 1-4, Denver, CO 20321, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Oyewumi, Olubukola Ayodeju & Jooste, Andre, 2006. "Measuring the determinants of pork consumption in Bloemfontein, Central South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 45(2), June.
  6. Brenes, Esteban R. & Montoya, Daniel & Ciravegna, Luciano, 2014. "Differentiation strategies in emerging markets: The case of Latin American agribusinesses," Journal of Business Research, Elsevier, vol. 67(5), pages 847-855.

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