B1 - Food Chain Marketing

Basic characteristics of a market economy

Limited intervention from the government

• The motive of self-interest - the “invisible hand”

• The producer gets to decide what to produce, how much to produce, what to charge customers for those goods, and what to pay their employees.

• These decisions in a free-market economy are influenced by the pressures of competition, supply and demand

Specialization

• An organization concentrates its productive efforts on producing a limited variety of goods

• Not only the first form of exchange, but also the first step in the formation of a food chain

• The basis of an “aggregate marketing system”

• Makes markets much more specific

Aggregate marketing system

Refers to a coordinated, large-scale framework through which goods and services are marketed from producers to consumers.

Definition institutions

• The set of rules and organization that surround the chain and determine “the rules of the game”

• e.g. the government

  • by laws and regulations, courts and control institutions

Examples institutions

• Certification organizations

• NGOs, interest groups

Summary of institutional factors

Why the chain is important

For managers it is important to know

• Where the inputs come from (to assess risks, uniqueness, continuity of supply…)

• How their products reach consumers

Understanding the chain

• Select the most important service providers that add value

• Different people draw chains differently

• The underlying logic.

Mapping a chain: A chain is a mental model to simplify the messy network that an economy actually is.

Steps in analyzing the structure of chains

1. First, determine the “focal company” (e.g. Friesland Campina)

2. Determine the unit of analysis: the “business” (so a smaller part of a company, e.g. Optimel).

3. Assess the relevance (how do they contribute to the core benefits of the product, physical product or augmented producet)

4. Perspective of the focal business (upstream or downstream)