Analysis of the Governance Structure used by Eksteenskull Raisin Producers: Is there a need for more Vertical Coordination?
Eksteenskuil raisin producers are a group of emerging raisin producers who are successfully participating in a sophisticated value chain. They collectively export their raisins through the fairtrade initiative. Emerging farmers typically face high levels of transaction cost. The high levels of transaction cost in combination with the changing nature of the marketing environment, suggest that the different modes with which transactions can be coordinated need to be assessed in order to identify that mode that would minimise the transaction cost. The aim of this paper is to investigate the governance structures that are employed by Eksteenskuil raisin producers in order to determine whether an alternative may not contribute to reducing transaction costs faced by Eksteenskuil producers. The mode of governance employed by Eksteenskuil producers first is compared to the alternative that is widely used by other raisin producers in the region to determine whether the existing alternative may be more efficient. Thereafter the need for more vertical coordination is assessed to determine whether or not a higher level of vertical coordination is needed to reduce transaction cost. Based on the results from this study the specifications-contracting mode of governance that is currently used by Eksteenskuil raisin producers is more efficient than the spot market that is mainly used by other raisin producers in the region. Although complete vertical integration does not prove to be viable at this stage, there still is a need for some more vertical coordination towards the level of strategic alliances.
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