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Case Analysis of the Organic Perishable Goods Industry

Case Analysis of the Organic Perishable Goods Industry

Introduction

            Various consumer-based businesses outline their operation according to the fast changing development of the marketplace. Economists recognize the market competition mainly on variety, affordability and quality of products. In addition, a plus factor is making products available at all times or occasions where a particular consumer demand surf in the marketplace, as well maintaining the advertisements for product promotions.

            The consumer leverage of firms that market highly-perishable food products are specifically different from other businesses that generally engages in consumable product marketing. Like perishable goods producers and suppliers, the shelf-life technology in packaging, storing and distribution are highly critical in order to meet the demands of consumers and the prevailing market price. At this point and time, perishable goods also competes with “time and motion” in delivering to the market, in which maintaining the quality or freshness of product conforms to timing the right customers, price and schedule of delivery.

            In the emerging approach to strategic marketing, e-commerce (electronic commerce) through the Internet and mobile communication has integrated Information Technology (IT) essentially for creating market linkages in buying-selling or trade-marketing of products. The e-commerce can be also described as a cyber-marketing that link between the farm and marketplace, facilitating the business operation from the farm gates to market channels. The approach of e-commerce in trading has totally “meddled out” the literal role of middlemen in marketing of goods, specifically the perishable products that must be applied with the process of shelf-life technology.

This paper will examine and analyze the case of the organic perishable goods industry relating the business venture of Provide Commerce Incorporated (PCI) as a competing commercial enterprise in the marketing of organic perishable goods.

Methodology

            The case study of Anthony Onwugbenu et al., entitled: ‘Provide Commerce Inc: the Organic Perishable Goods Industry’ which was published by St. John’s University in 2005 will be used as the methodical review and main focus of examination, together with several data that depicts related findings will guide the overall analyses.

Literature review

Company background

            Based on its web site, Provide Commerce Inc. (PCI) was established in 1998 aiming to be a world renowned e-commerce company. PCI believes in innovating an online business environment that envisions to “find a better way to do business”, referring to link production areas, producers and suppliers to the right consumers and marketplace. To enable selective marketing of perishable farm products, PCI created specific e-commerce stores, namely (1) ProFlowers.com for flowers and plants, (2) CherryMoonFarms.com for fresh fruits and premium meats, (3) SecretSpoon.com for distributing chocolate and other gourmet foods directly from suppliers, (4) Berries.com for varieties of cake berries, and (5) RedEnvelope which was acquired in 2008 to cater for online-merchandize-cataloguing of garments, jewelries and accessories (1).

            A strategic multiple-product-marketing venture of PCI has “streamlined” the flow of supply chain by shortening the bottlenecks in distribution of goods from the farms to the market consumers. In other words, a “business model” in trading is undertaken by PCI through providing e-commerce “just in between” the suppliers and consumers, in which accordingly eliminating the “mediators” in retail marketing. Moreover, PCI has established marketing-supply contract with cooperatives that acts as a “consolidator” in the supplying of varied farm products, of which PCI directly managed the marketing. The relationship is therefore “exclusivity of distributorship” by and between the cooperatives and PCI.

Case overview

            Based on the case study of Onwugbenu et al. (2005), PCI has found the potentials of Internet technology in providing markets to farm producers. The modality of expansion that started in 1998, after which ProFlowers.com has been established, has encouraged marketing of specifically categorized organic perishable products. However, as cited, the expansion in “newly diversified marketing” has drawn PCI’s top-level management to define what would be the category of organic perishable products. In addition, the categorization must be complemented with the findings on business-policy environment effective of organic product marketing (1).

            Offering a wide variety of online shopping market aside from the four marketing divisions (CherryMoonFarms.com, SecretSpoon.com, Berries.com, and RedEnvelope), PCI positioned an “upswing momentum” to explore specialty marketing of organic product category. In which case, the children consumers are the targeted market. However, relevant to the marketing and business plan, PCI’s Chief Executive Officer (CEO) Bill Strauss has addressed to resolving the challenge on what kind of organic product category shall be expanded and how PCI’s business model can be more effective and competitive.

            Significant to the above mentioned resolution to the challenging framework of expanding PCI ventures, the case study has been presented to define the variety of organic perishable goods, and determining the “business-policy environment” of the industry, such as specifically the categories of goods, the market segmentation, supply and distribution, the status of production and market, and the competitive advantages of PCI business model (2).

Problem analysis

In ‘Provide Commerce, Inc. Annual Transition Report of 2005’ submitted to the US Securities and Exchange Commission (US-SEC), PCI stated and discloses its “business operational framework”, as follows in the bulleted list (36):

·         Manage a marketplace for e-commerce through establishment of web sites that sells perishable goods at competitive pricing of  high-quality-fresh product delivery directly to the customers from the suppliers;

·         A combination of “online storefront and proprietary supply chain management technology” is in partnership with cargo forwarders (FedEx and UPS carriers) that integrate the on-time delivery logistics and deviates the conventional “supply chain management” from the usual distribution and delivery systems of competitors in wholesale and retail distributorship;

·         Provide customer values and benefits consists of maintaining product quality and freshness, on-time delivery and shipping guarantee of refund and exchange;

·         Truthful completion of purchasing or marketing contract with suppliers, fair administration of product delivery inventories, and judicious implementation of a “business model” that displaces the intermediaries of supply chain or middlemen in trading.

Correlating the problem analysis that poses the challenge to resolve PCI’s expansion modalities, the above cited business operational framework evidently addresses the resolution.  Although the business operational framework has just apparently determined the supply chain management, but could have undisclosed the specific and varied technologies to be utilized within the supply chain, aside from the monotony of fair distributorship with the suppliers and service-delivery to customers. To illustrate more on the business operational framework, illustrated below is the business model referred as the derivative of managing the supply chain:

Source: Provide Commerce, Inc. (2008)

            As illustrated above, it can be analyzed that PCI offers a “business solution” in reaching out the producers and bringing about the market, acting like a “one-stop-shop corporative entity” that adds more product-commercial-value, gaining just a profitable margins of the industry.

            In John Cronin’s ‘Industry Report: Supermarkets’ which was published by Tiger Valuation Services in 2008, it cited that the strategies in discounted pricing is gaining a “large format” referring to consolidating the marketplace that offers or sells a variety of perishable goods, just like Wal-Mart Supercenters, Target and Costco, are restraining the small retailers and affect the retail market industry (1).  At this observation, the one-stop-shop corporative entity that deals with the supply chain, similar to marketing strategy of PCI, consolidates the retail merchandising into a wholesale marketing of goods. Of which, providing a new “twist” of marketing through e-commerce.

            Going back to PCI’s resolving the challenge on the category of perishable goods that targets children consumers as “explored” market segment, the application of Onwugbenu et al. (2005) case study were very much significant to determining the business-policy environment within an industry that caters to “specialty products and specific consumers”. As referred by the case study, the perishable goods industry has two market segments, such as the industrial agriculture and the organic production (3). With that finding, PCI must firstly understand the nature or character of organic goods production, wherein technology input must be also provided by PCI, aside from providing the “business operational framework” in the marketing aspect. Also read about Open-access Goods

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            That particular analysis may essentially relate the above discussed predicament of PCI CEO Strauss, to restate that “challenging framework of expanding PCI ventures to define the variety of organic perishable goods, and determining the business-policy environment of the industry to specify the categories of goods, market segmentation, supply and distribution, status of production and market, and the competitive advantages of PCI business model” (2). As cited from the case study, it defined that “organic” is a given term for agricultural products that are under strict commercial production and marketing under the authorization of the Federal Organic Foods Production Act of 1990 (FOFPA) that regulates the export and import distribution or supply (4).

            As quoted in verbatim from Title 7 in Chapter 94 of FOFPA 1990, otherwise known as US Federal Code 6505, the statute states that “imported agricultural products may be sold or labeled as organically produced if the Secretary of the US Department of Agriculture or its authorized entity has determined that organic products have been produced and handled under an organic certification program that provides safeguards and guidelines governing the production and handling of such products” (1). Therefore, PCI must look into the “business-policy environment” adherent to promulgating the restrictions of law in marketing of organic perishable goods.

            It may be further analyzed that the expansive modality of PCI in categorizing and identifying the product and target market consumer could have been developed or encouraged in the indicated data on organic foods consumption in the US alone. According to the 2004 Whole Foods Market data that has been indicated in the case study, 69 percent of American consumers are organic food eaters, but the industry growth in organic food production do not meet the existing consumer demand. Hence, the 69 percent of consumer market composes the group of children and senior citizens as majority consumers, in which unmistakably the PCI’s target market segment. The illustration below shows the categories of organic goods and the percentage consumers’ purchases (5):

            Source: Case Study, Onwugbenu et al. (2005)

            Indicative of the above illustration of data, the case study pointed out the market segment in which the industry players [like PCI] must look into the basic fundamentals of organic foods production. As cited, organic food production needs the relevant know-how and economic orientation of farmers in organic cultivation, wherein the traditional farming method must be advocated in order to ensure organically grown agricultural products, such as in livestock, aquaculture, flower and ornamental plants, vegetables and plantation crops of fruit bearing trees (6). Essentially, organic farming is not only the traditional farming method but coupled with technology that eliminates the use of pesticides and synthetic fertilizers.

            Indicative PCI resolution

            As previously discussed, the category of market and identified target market consumers challenges the expansion modalities of PCI. In so doing, the case study has indicated the situation wherein analyzed.  The illustration below may further determine the framing of resolution, formulate, synthesize and indicate the adaptable measures:

Source: Case Study, Onwugbenu et al. (2005)

The structure of the Organic Perishable Goods Industry indicates a vast market opportunity for PCI. However, it may be noticed that the four (4) segments of the industry, such as (1) regulation, (2) marketing, (3) advertising and promotion, and (4) technology segments, are needing due attention. Therefore PCI must redefine, reassess and reinvent its business operational framework within the confines of the above mentioned segments of industry (7).

Firstly, with regard to regulation, PCI must determine the business-policy environment affecting the mandate of FOFPA 1990 in order to formulate organizational policy measures that complies with the existing regulatory law in production, selling or marketing, distribution of organic perishable goods. Relevant to this, the study-research conducted by Fabien Tondel and Timothy Woods entitled: ‘Supply Chain Management and the Changing Structure of US Organic Produce Markets’ which was published by the Department of Agricultural Economics at the University of Kentucky in 2006 has implied the critical role of commercial traders in examining and realigning their organizational policies in the market distribution of organic perishable goods. In which case, PCI must adopt an organizational framework that addresses its role in organic perishable goods industry.

Secondly on marketing, PCI can categorically pursue its marketing expansion [with the specialty product specified consumers] by reconsidering the fact that organic perishable goods has a potential market, although marketing of organic products finds relevance in the existing Federal statutes that may somehow restrict the overall marketing venture.

Thirdly, the advertising and promotion activities in marketing of organic perishable goods can be fundamentally acquired through corporate social responsibility, wherein PCI must engage in “socio-environmental investments”, advocating the promotion of traditional farming and judicious agricultural production of organically grown products. As an example, PCI may provide organically cultured planting materials or seeds that can be cultivated, harvested and processed in the natural process. Thus, the socio-environmental investments will develop PCI’s advertising and promotion of authentic organically produced perishable products from the farm to the market consumers.

And, finally, the promotion of technology can be complemented or provided to farmers or the cooperatives, in which a post-harvest technology that utilizes the organic process may be introduced by PCI through collaboration on scientific studies with related environmental organizations. The promotion of Research and Development (R&D) can be a potential tool to developing technologies that preserves organic production. Likewise, sustainable farming can be enhanced by such a technology that harnesses organic farming methods.

In summary, PCI will be able to resolve and face the challenges of the organic perishable goods industry by determining its vital role in promoting sustainable agriculture, not only in providing the marketing components of its “business model”, but the mechanization of farms for organic production. One of the relevance in sustainable farming, without the traditional method, can be exemplified by the continuing production of organic fertilizers, safe water for irrigation, and the preservation of various farm inputs that are nearly extinct from replacements of commercial varieties that are dependent from pesticide and synthetic fertilizers. Indeed, the corporate social responsibility of PCI is needed to continuously venture in “social marketing” and successfully expand market-value proposition within the organic perishable goods industry.

Findings and conclusion

            The relevance of social marketing is a contemporary challenge to various commercial traders that tries to develop market-value proposition with producers and achieve a competitive edge in an industry.

            In the case of Provide Commerce Incorporated (PCI), e-commerce could be a new twist in marketing of products, wherein market bottlenecks or intermediaries of trade is being eliminated. Meaning, PCI has established a business operational framework to cater by and between the producers and consumers. It may not be negated that e-commerce is a new genre in the methodical marketing of products, but perishable goods may seldom achieve its freshness from various factors of uncontrolled environment during the delivery. On the other hand, freshness may not be the bottomline of telling the consumers about the product being organically grown, because freshness is not how the product has been produced.

            With expansive modality of PCI in organic perishable goods industry, the case study depicted herein has presented the information or synergy of guidelines that must be obtained by various market consolidators and comptrollers, like PCI who wished to capture the competitive edge in perishable goods industry.

            Today’s challenge of the industry and market is to acquire a competing environment that packages all the needs of consumers, of which the globalization of supply chain is to respond to immediate demands of world market. From this point of view, e-commerce plays a significant venture in product and market developments. In conclusion, PCI may sustain its e-commerce marketing framework by developing sustainable means of production areas and establish the basis of genuinely perishable goods marketing.

Works Cited

Cronin, J. “Industry Report: Supermarkets”. 2008. Tiger Valuation Services.

06 February 2009 <http://www.tigercapitalgroup.com/industry_reports/RetailSupermarkets_2008_09.pdf>

Cornell University Law School. “US Code Collection”. 2008. 05 February 2009

< http://www.law.cornell.edu/uscode/html/uscode07/usc_sec_07_00006505—-000-html>

“Federal Organic Foods Production Act of 1990 (FOFPA)”. 2009. University of California

            Sustainable Agriculture Research and Education Program. 06 February 2009.

            < http://www.sarep.ucdavis.edu/Organic/complianceguide/national6.pdf>

Onwugbenu, A., Gartenfeld, M.E., Dologite, E. and Mockler, R.J. “Provide Commerce Inc:

            The Organic Perishable Goods Industry”. 2005. St. John’s University Press.

06 February 2009.

Provide Commerce Inc. “About Us”. 2009. Provide Commerce.Com. 06 February 2009

< http://www.prvd.com/AboutUs.aspx>

Provide Commerce Inc. “Provide Commerce, Inc. Annual Transition Report of 2005”. 2005.

06 February 2009 <http://yahoo.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHTML1?SessionID=PU8BWgAqigCaea0&ID=3908543>

Tondel, F. and Woods, T. “Supply Chain Management and the Changing Structure of

U.S. Organic Produce Markets”. 2006. Department of Agricultural Economics,

University of Kentucky. 06 February 2009

<http://www.uky.edu/Ag/NewCrops/organic.pdf>

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