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MKTG 469 Global Marketing

Published : 06-Sep,2021  |  Views : 10

Questions:

1.First, assess the extent to which the chosen industry can be characterised as: (a)‘globalised’ or ‘regionalised’ (as per Rugman) or (b) ‘core Triad’-dominated or ‘multi-polar’. Then, explore and analyse the underlying factors and forces behind the observed patterns.

2.For the chosen industry, select and investigate one prominent geographical industry cluster, account for the cluster’s international prominence (drawing on relevant theories) and explain the role it plays within wider global production networks.

Answers:

Introduction

Global shift of various industries have been observed in due course of time, as a part of evolution. Food is one of the basic needs in the lives of human beings. Though a particular type of crops and vegetables grow in a particular region, under certain soil conditions and weather, yet with time, the food productions, the food habits as well as the food productions have changed over time (Dicken, 2011). The distribution of the production, along with the food consumption has been completely transformed over the past four decades. Food production has become modernized and industrialised, with the evolution of time. However, though food is the basic need of all human beings for survival, yet with the changes in the lifestyle of the people, the pattern of food consumption has also changed (McMichael, 2016). The modern day food industries, also termed as the agro-food industry have undergone various changes, from production to the consumption patterns (Oberle, Puig & Martin, 2017).  The food production industry is much different than the other manufacturing industry. Though this industry has undergone prominent changes, yet it remains a localised process. The production of food is still much restricted to the socio-cultural conditions, soil conditions and the overall climate of a particular geographical location.  For customers who are affluent, the department stores they buy from have a permanent global summertime (Dicken, 2011). They hardly realise the changes of seasons, in terms of food consumption.

The food production in the global market calls for a good amount of investment. This power is often acquired by the transnational food manufactures as well as the large retail giants. The global food production as well as distribution unit creates immense environmental pollution as well as disturbances (Isakson, 2014). This is mainly due to the application of the pesticides and chemical fertilizers to ensure that the crops grow healthy (Oberle, Puig & Martin, 2017). Moreover, another main reason of environmental exploitation is the genetically modification of the crops, in order to enhance the amount of production and ensure a steady supply in the global food production network. Even cattle and animals are being modified genetically, in order to enhance their food values (McMichael, 2016). All these forms of exploitations make the agro-food industry a sensitive one. Thus, the global shift in the agro-food industry started, as people realised that they had taken up nature in their hands and had been exploiting it, according to their needs (Atkins & Bowler, 2016). The issues of food safety and the ethics of the genetically modified plants and animals became a major concern (Accorsi et al., 2016). Moreover, these exploitations of the natural resources also gave rise to various epidemic diseases such as avian flu, swine flu. The breakout of such fatal diseases had an immense impact on the agro-food trade (Oberle, Puig & Martin, 2017). Thus, the lives and livelihoods of the farmers, the manufacturers, the retailers as well as the distributors were affected adversely (Dicken, 2011). This resulted in a mass change and deflection in the buying pattern of the consumers, as they feared to be affected by the fatal diseases (McMichael, 2016). Moreover, a wide spread fear regarding the consumption of the genetically modified crops also increased among the buyers. This triggered the global shift in the agro-food industry. The confrontation among the producers, between the consumers and with the government have rise to a worldwide revolution. Between the years 2006-2008, food became insecure to be safely consumed.

Production circuits of the Agro-food industry  

The agro-food production circuit has varied immensely. When considering the traditional commodities such as food grains and basic vegetables, the production circuit is quite simple. However, in case of the high value food grains and vegetables, the production circuit is much complex. Considering the production circuit of the US broiler chicken, this is a complex process (Garnier et al., 2015). A large number of producers have been investing by a large number of producers. According to the perspective of the producers, the greatest advantage that is imparted by the broiler chicken industry is the facilities of the raising process of the broiler chicken (Dicken, 2011). The industry tries to replicate the biological environment of the chicken, and creates an artificial environment for raising the chicken. Thus, this industry has undergone a major change. Previously this process was not automated and the chicken would be produced in the natural process (Oberle, Puig & Martin, 2017). However, in this case, the production flow was much low and the supply could not meet the demands. However, with the just-in-time systems, the chicken production process is easily automated.     

Figure 1: The chicken production circuit in US

(Source: )

Along with the chicken production industry, the industry of the fresh fruits and the vegetable production also underwent a significant change (Atkins & Bowler, 2016). The present production industry of the fruits and fresh vegetables is more focussed on the demands from the large super markets and the retail chains, rather than the producers of the crops, or the farmers (Garnier et al., 2015). The political associations as well as the governance of the market also had a key role to play. The demand and supply was more influenced by these factors, rather than the actual demand from the common people. The food production circuit in the modern day is tightly controlled along with being highly integrated (Oberle, Puig & Martin, 2017). In the recent few years, the production of the food had been dominated by the industrially based agro-food. However, with global shifts, the dominance shifted to the territorially based food production network.

The agro-food industry have been divided into two main set of essential processes. They are as follows:

  1. The first division is the standardized and specialized production process, that responds to the economic standards as well as the efficiencies and the competition in the present global market (Dicken, 2011).
  2. The second division is the specialized and localized process of production that attempts to trade, based on health qualities, environment as well as nutritional qualities.

Global shift in the industry of agro-food

The global shift has taken place in various industries such as the clothing industry, automobile industry and food industry is no exception to this. The three most essential foods that people consume have undergone the global shift (McMichael, 2016). This includes the chicken production industry, fresh fruit and vegetable industry as well as the coffee industry (Garnier et al., 2015). With the advent of the global shift, the production of chicken has become highly complex. Three countries, China, US and Brazil dominate the global chicken production industry. The total chicken production of these three countries, contribute to the half of the total chicken production in the world (Accorsi et al., 2016).  In the recent years, US became the world’s largest exporter of the chickens, until Brazil overtook the position. However, in today’s world, Brazil exports almost 36% of the total share of the world and exports to almost 127 different countries.

Along with the chicken production industry, few of the countries in the global scale also dominate the fresh fruit and vegetable industry. China produces almost 38% of the world’s total fruits and fresh vegetables and dominates the world. China is followed by India, US and Brazil. However, as compared to China, the shares of the other three countries are nominal. India contributes to 9% of the total fruits and vegetable production, with US 4.5% and Brazil 3.4% (Atkins & Bowler, 2016). However, the pattern of the food production and the consumption has changed a lot over the past two decades. The export rate of the conventional commodities such as oranges, canned mushrooms, canned pineapples, apple juices have decreased significantly (Isakson, 2014). However, the non-traditional food commodities such as the mangoes, sweet corns, garlic and avocado have seen rise in the export (Dicken, 2011). Thus, it was clearly witnessed that there had been changing pattern in the consumption, and hence in the demand as well.

The global trade in the fruits and vegetable industry is highly regionalized. In Europe, Japan as well as in North America the climatic conditions facilitate the growth of certain kinds of fruits and vegetables and hence those varieties are mostly produced in those areas (Isakson, 2014). Along with the inter-regional trade flow, the countries with highest-incomes in the world are able to import fruits and vegetables from all over the world and their food habits are less dependent on the regional growths (Dicken, 2011).  The countries in the southern hemisphere produce and export a larger variety of fruits and vegetables, than the Northern hemisphere. Thus, the countries in the southern hemisphere produce the fruits and vegetables, ate being consumed by the markets of the northern hemisphere.

Figure 2: Region-wise production of fresh fruits and vegetables around the world

(Source: Dicken, 2011)

Figure 3: Region-wise production of processed fruits and vegetables and juices around the world

(Source: Dicken, 2011)

Most of the fresh fruits and the vegetables are exported by the countries of the southern hemisphere. The temperate climates of the countries of the southern hemisphere are temperate and hence facilitate the growth of grapes, apples and pears. Most of the apples that are exported by the countries mainly New Zealand and Chile (McMichael, 2016). Moreover, the grapes that are exported from the Southern hemisphere come mainly from Argentina and Chile. Along with the supply of the fresh fruits, these countries are the suppliers of the fruit juices as well.

Along with consumption of fresh fruits and chicken, coffee is also one of the main foods (beverage) that is consumed by people all over the world. Coffee beans are majorly of two categories. These are Arabica beans and the Robusta beans. The Arabica beans are usually growth on the regions with higher altitudes, while the Robusta beans are grown on the low lands with humid climatic conditions. Four of the countries around the world are the main producers of coffee (Clapp, 2014). These countries contribute to almost 66% of the total coffee produced all around the world. Brazil contributes to 32% of the total coffee production, contribution almost 94% of the total Arabica coffee beans. Vietnam contributes 18% of the total coffee production, producing only Robusta beans. Colombia produces 10% of the total coffee production, contributing only Arabica beans. Indonesia contributes 7% and the largest producer of the 87% of the Robusta beans.  

This pattern of the coffee production includes the local, regional as well as the global production network. The emergence of the countries of the Southern hemisphere gave them advantage of controlling the market conditions of the Northern Hemisphere. This increased the flow of the long distance trade from the Southern hemisphere to the Northern hemisphere (Clapp, 2014). However, along with the global trade, the regional production of the countries such as Europe also enhanced. Thus locally an alternate food network started growing, such that the dependency on the Northern Hemisphere decreased. This created shorter movements of the agro-food products, thus reducing the overall cost of the products.

With the global shift in the production of the agro food industry, there have been changes in the choice of the customers as well as their consumption pattern. From the beginning of the history of human beings, food has always been a cause of major struggle. However, this image has changed to a considerable extent. Yet in many developing countries, people still struggle to obtain enough food, with respect to the population of the country. With the evolution of time, as the basic income has increased among the people of the various countries, the demand of food and the kinds of food have changed significantly (Dicken, 2011). A research highlighted that in the developed countries, one tenth of the income of the people are spend on food, in contrasts to the one third of the income that was previously spend on food (Narula & Wahed, 2017). This dramatic increase in the consumption of the food made the relationship between the food production and consumption even more complex (Isakson, 2014). The food that people choose to eat is dependent on the individual taste, culture, religion that the people follow, the health issues or concerns they have as well as the affordability and the lifestyle. The producers of the food try to incorporate innovation in the food items, thus attracting more customers (Isakson, 2014). The consumer market of North America and Europe are among the most affluent markets and a change in the pattern of consumption is highlighted (Clapp, 2014). The increase in the buying capacity of the food products the choice of the food products also increased. In order to fulfil the demands of the consumers, the super markets started importing the unconventional food items as well.

With the changes in the type of foods consumed, there increased consumer resistance regarding many of the food products that were being sold in the super markets. In the year 2006, one of the largest fast food chain McDonalds announced that many of its stores would be shut down as a result of the constant resistance that the company had been facing of late (Narula & Wahed, 2017). Along with this, in some of the countries, the consumers opposed the use of the genetically modified foods. However, the consumers of Europe opposed to the use of the genetically modified crops, in contrast to the consumers of US, who were much more open to the consumption of genetically modified crops. Pressure grew on the use of the localized food, such that the consumers could know if they are consuming genetically modified crops or not (Ahmed, Hamrick & Gereffi 2014). Fear over the food they people consumed, started growing and they suspected ethically unacceptable ways of food being produced. These oppositions and resistances triggered the growth of an ethical movement in the production of the agro-food industries. Almost 7 million workers as well as farmers of 60 developing countries were brought in under the policy of Fair-trade. Fair trade in the popularly consumed food items such as coffee, mangoes, bananas, chocolates were brought in under the considerations of the Fair-trade policies (Dicken, 2011).  

Prominent geographical industry cluster  

One of the most prominent industrial cluster that has a major role to play in the agro-food industry. One of the major industrial clusters with prominent contribution is US. The US department of Agriculture and its Food and Drug administration focussed primarily on the safety of the food products and ensured that the fear of consumption of food is mitigated easily (Clapp, 2014). This regulatory body also ensured that the food that the people consumed is safe enough for consumption. This also includes limiting the use of pesticides and chemical fertilizers. Along with these, the genetically modified food crops and its uses were eliminated (Isakson, 2014). Most of the countries in US imposed a ban on the genetically modified food crops, while some of the countries continued its use, in a restricted amount (Dicken, 2011). The proliferation of the national specific regulations governed the foreign food retail companies to operate effectively in US Ahmed, Hamrick & Gereffi, (2014). However, the food consumption and the agro-food industry is much more liberal than the UK agro-food market. However, the agro-food industry of Japan is much more regulated than the UK or US market.

Japan as well as Korea have adopted polices to protect their  rice production industry. The rice industries for these countries have a deep cultural sense, as well as dietary significance (Staricco & Ponte, 2015). The European Union’s Common Agricultural Policy (CAP) has the largest single share of the total budget of European Union. The compliance with the food safety policies and the environmental safety is given much importance. The issues that arose from the agricultural subsidies became one of the major concerns and topic of discussion for the WTO negotiations (Dicken, 2011). The fear over the future of food and the shortage of the food for the future have led to a new phenomenon known as “Land grabbing”. This refers to the acquisition of the lands in the foreign countries, for the purpose of agriculture (Sobal, 2017). A report in the year 2009 highlighted the facts that some of the major portions of the farmland of Europe were acquired by countries such as China and the Gulf states, in order to cultivate their crops (Ahmed, Hamrick & Gereffi, 2014). This new phenomenon targeted not only the fertile countries, but also the countries with less fertility such as Ethiopia and Zambia.

The mass transformation in the agro-food industry occurred in the past few decades. This transformation occurred due to the dominance of the large retail giants (Oberle, Puig & Martin, 2017). This transformation has been seen in all stages of the agro-food industry such as cultivation of the seeds, the process of growing as well as retailing. The agro-food observers have observed the following:

  1. Two-third of the seeds of the world are controlled by the 10 leading companies of the world (Dicken, 2011).
  2. 90% of the pesticides that are used by the farmers all around the world is controlled by the top ten leading firms of the world (Sobal, 2017).
  3. Almost 26% of the packaged food of the world is controlled by the leading 10 firms of the world.
  4. The top 100 retailers of the food industry contribute 35% of the total grocery of the world.

Conclusion

Thus, the increase in the concentration of the agro food industries is obtained as a result of merger and acquisition. Among the most famous companies of food and beverages, Unilever also grew through the process of merger and acquisition. It acquired the world’s leading tea company Brooke Bond. In the year 2000, Unilever acquired one of the food companies of US, Bestfoods and then Ben & Jerry’s ice-cream, thus growing as a uncontested competitor. The global shift in the agro-food industry is a major change all over the world. This changed the way of food production as well as food consumption patterns. The changes in production and its shift from the Southern Hemisphere countries to the Northern Hemisphere itself is a major change, thus bringing in a revolutionary change all over the world.   

References

Accorsi, R., Cholette, S., Manzini, R., Pini, C., & Penazzi, S. (2016). The land-network problem: ecosystem carbon balance in planning sustainable agro-food supply chains. Journal of Cleaner Production, 112, 158-171.

Ahmed, G., Hamrick, D., & Gereffi, G. (2014). Shifting governance structures in the wheat value chain: Implications for food security in the Middle East and North Africa. Center on Globalization, Governance & Competitiveness, Durham: Duke University.

Atkins, P., & Bowler, I. (2016). Food in society: economy, culture, geography. Routledge.

Clapp, J. (2014). Financialization, distance and global food politics. Journal of Peasant Studies, 41(5), 797-814.

Dicken, P. (2011). Global shift: Mapping the changing contours of the world economy. SAGE Publications Ltd.

Garnier, J., Lassaletta, L., Billen, G., Romero, E., Grizzetti, B., Némery, J., ... & Vilmin, L. (2015). Phosphorus budget in the water?agro?food system at nested scales in two contrasted regions of the world (ASEAN?8 and EU?27). Global Biogeochemical Cycles, 29(9), 1348-1368.

Isakson, S. R. (2014). Food and finance: The financial transformation of agro-food supply chains. Journal of Peasant Studies, 41(5), 749-775.

McMichael, P. (2016). Commentary: Food regime for thought. The Journal of Peasant Studies, 43(3), 648-670.

Narula, R., & Wahed, M. S. (2017). The Dominant Presence of MNES in Agro-Food GVCs: Implications for the Developing Countries. In Food Security and Sustainability (pp. 71-88). Springer International Publishing.

Oberle, F. K., Puig, P., & Martin, J. (2017). Continental shelf sediment dynamics in the Anthropocene: A global shift. In EGU General Assembly Conference Abstracts (Vol. 19, p. 10393).

Sobal, J. (2017). Food System Channels, Health, and Illness. In Food Systems and Health (pp. 3-25). Emerald Publishing Limited.

Staricco, J. I., & Ponte, S. (2015). Quality regimes in agro-food industries: A regulation theory reading of Fair Trade wine in Argentina. Journal of Rural Studies, 38, 65-76.

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