The move away from traditional commodity marketing with a view to targeting specific customers using a chain based strategy is becoming more common in the Australian food and fibre sector as farmers seek to gain greater control of their businesses beyond the farm gate. This trend also reflects discontent in Australia with traditional industry-based commodity marketing arrangements which appear less responsive to the forces of change. Such chain initiatives in Australia are probably unique in being driven typically by the production end of the chain rather than the retail end, as occurs with many European examples. In the USA chain initiatives appear to be rare, with greater vertical integration and concentration of processing in the agribusiness sector. It could be related to the size and scale of operations of the agribusiness sectors in the country concerned. It seems curious that more intensive chain development research emanates from smaller population countries such as Australia, New Zealand, the Netherlands, and Denmark. For example, networking in manufacturing in the early 1990’s in the Nordic countries appeared to be a response to large competitors in neighbouring Germany.
Many horizontal networks of like-minded producers have been initiated across many sectors of Australian agribusiness, including the wool sector, to pursue marketing objectives, with mixed or temporary success. Establishing linkages through the vertical chain has been much more difficult, particularly where intermediate processing is involved, because processing margins can be very tight and economies of scale are important. This leads to early discouragement of producers. Nevertheless, numerous
opportunities for niche marketing and linking with retailers, often specialty retailers or exporters, is not uncommon, particularly in the horticulture sector.
The opportunities for targeting the needs of specific consumers are increasing and whole- of-chain initiatives involving knowledge management are necessary to meet the increasingly diverse needs of specific consumer segments. The purpose of this research is to establish a framework and practical considerations which those embarking on a value chain approach need to consider. The need for this was demonstrated in the AWI commissioned report on the application of the New Zealand Merino Company business model to Australia (TMC, undated) and as a follow-on to the research by Champion & Fearne (2001). An assessment tool along the lines used in this research and modified to specific requirements should assist chain managers to monitor their chain performance as a basis for developing their chain skills and capabilities.
7.3.1 Assessment Tool
This research was also designed to evaluate an assessment tool for use in the evaluation of chain design and development, or to guide chain learning and the development of skills and capabilities, such as enhancing the marketing skills and capabilities of wool producers. This assessment tool (Annex A) was based on the conceptual model which was developed from the research literature and business practice. It follows the model employed by Lindgreen et al (2006) detailed in Chapter 3. The conceptual model draws particularly on theories associated with consumer value, strategic alliances, networks and partnering, supply chain management, relationship marketing, social capital and organisational learning. The model identifies the key factors for successful value chain development as a consumer focus, chain capabilities, chain management and leadership, chain relationships, and the identification and management of risks and rewards.
This research makes it possible to suggest modification of the assessment tool to meet particular elements of chain performance, or as a tool for auditing performance or for designing training or communications strategies. For example, the focus at the producer level could have been limited to the following chain awareness dimensions and categories as adapted from Annex A.
Table 7.1: Suggested Dimensions and Categories to Assess Chain Awareness/ Performance of Producers in Value Chain Analysis
Chain Awareness Dimensions
Key Categories in each Dimension
Possible Indicative Factors for each Category
1. Consumer focus
Creating consumer value
Target segment, segment size, category trends, level of competition, unmet needs Customer
information
Supplier performance system, planning horizon, availability and accuracy, timeliness, analysis tools/capabilities 2. Capability
development
Capability investment
Strategic importance, corporate reputation, CEO commitment, resource commitment Partnering capability Partnering experience, partnering
reputation, patient investment 3. Chain
development
Chain value Compatibility, capabilities, re-alignment, information flow
Chain leadership and management
Chain captain, leadership, chain coordinator, chain manager
Supply management Available quantity, production risk, quality management, group cohesiveness 4. Relationships Foundation History, profit drivers, culture, social
bonds
Trust Reward sharing, consideration, predictability, opportunism
Strategic vision Articulated vision, communicated vision, buy-in, revert-to-type
Horizontal relationships
Leadership and management, time together, group uniformity, systems and processes
5. Investment risk
Chain risk Risk management, risk transfer Production risk Climate risk, quantity risk, group risk,
system risk 6. Investment
rewards
Cash flow Cost savings, revenue from existing or new customers, margin management, working capital management, fixed asset management
Customer relationships
Service levels, deeper relationships, access to information
Learning and innovation
New product development, processes and systems, human resources and culture, benefits over time
(Adapted from “Value Chains: A Project Management and Mentoring Guide”, Agri Chain Solutions, Canberra, 2000)
Similarly, elements of the interview guide could be used more intensively to analyse particular dimensions of chain awareness, such as consumer focus or relationship development. In such a context the assessment tool could contribute to ongoing academic research and for monitoring of chain performance and to assist chain learning, including organisational learning and the development of social capital. This is important to producers in WoolConnect, for example, who will inevitably continue to operate in the traditional commodity market using traditional skills and capabilities.