Enrico Vidale with M.Cai , D.Maso and D. Pettenella Dept . Landuse and Agro-forestry Systems University of Padua

1. Suceava INNO-NATURE project 04-May-2010 RURAL NETWORK MARKETING AS INNOVATIVE WAY TO ACHIEVE RURAL GOALS Enrico Vidale withM.Cai, D.Maso and D. Pettenella Dept. Landuse and Agro-forestrySystems UniversityofPadua - Italy

2. Outline • 0. Before starting: some base concepts • NetWork in business: definition • A field survey: a comparative analysis of 2 case studies • Borgotaro Consortium • Dalla Valle Oy • Indicators • Networks of NTFPs producers as a tool to support PES systems • Conclusions

3. 0. Before starting…some basic concepts! • Public goods  scarce public goods  problems to share the outputs • Lack of organization(land fragmentation, scattered tourist supply, scale dimension, ect.) • Needs to redistribute the welfare in rural areas • Stimulate wider willingness to pay (WTP) Social Willingness to pay • The cluster of all the incorporated resources within the net of people relationship Social Capital

4. NetWork in business: definition(Human and Provan, 1997 mod.) “An intentionally formed group of small- and medium-sized enterprises (SME) in which the firms: • are geographically proximate, • share some inputs and outputs, and • undertake direct interactions with each other for specific business outcomes. (The interactions may include joint production, new product development, collective marketing and employee training)

5. Proximate Share Direct interactions Have you ever been in Bucharest?

6. 1.1 Two basic questions At micro level: • For SME supplying rough material, is it better to be linked to a large, internationally competitive, trustful buyer of specialized nature-based products, or on a network of small-scale companies operating at local scale? • Vertical integration vs. horizontal integration? • At macro (i.e. regional) level: • In rural development policies, it is better to support local economies based on a specialized single innovative value-chain, or on a cluster of small-scale, multi-sectoral, interconnected activities?

7. Tightest cooperation Joint unit Joint venture Project group Loose co-operative circle Development circle Loosest cooperation • 1.2 Main types of network • Social links/trust • Entrepreneurial culture • Development of consumers’ • demand • Financial support • Regulations • Advisory services • Competitors’ strategy • … (Source: Varamäki and Vesalainen 2003)

8. Formalisation Strategic intensity • 1.3 Network development paths

9. 1.3 Possible outcomes from networks • inter-organizational exchanges: direct transactions or exchanges among network firms, such as buying and selling, jointly producing and marketing a product and exchanging friendship and information among each other; • organizational credibility: firms perceive that their external legitimacy can be enhanced through association with the network. Thus, participation can increase the visibility and credibility of member firms; • access to resources: network participation can play an instrumental role in accessing new markets, new product ideas, and other valued resources for their companies; • financial performances: economic benefits could occur within a short time after joining the network, but also in a long-term perspective. (Source: Human and Provan, 1997)

10. 2. A field survey: a comparative analysis of 2 case studies • 2 organizational models: • Dalla Valle Oy in Finland (North Karelia - FIN) • Borgovalditaro Consortium (Emilia-Tuscany Regions - I) • The same product: • Boletus mushrooms • Quite similar socio-economic context (rural environment, forest as predominating land use, nature-based tourism)

11. 2.1 Locations

12. 2.2 Case study outline www.dallavalle.fi www.fungodiborgotaro.com

13. Formalisation Strategic intensity Do you remember this graph? Dalla Valle Oy Borgotaro Consortium Pickers for Dalla Valle Oy

14. 2.3.1 Finnish case study Service suppliers Marketing manager Marketing manager Company needs Company needs Market trends Market requests Customer requests Market requests Customer requests Newspapers, web, sms, telephone Dalla Valle Oy owner Mushroom Pickers (North Karelia suppliers) Mushroom Pickers (North Karelia suppliers) Mushroom Pickers (North Karelia suppliers) Customer requests Final Customers (Catering, small-large companies, resturants in South Europe and Italian Market) Final Customers (Catering, small-large companies, resturants in South Europe and Italian Market) Company strategy Customers’ orders Prices Lines and Collectiong Points (Emplyees) Shipment Quality Production manager Production manager Quality Species Work tasks Info Mushrooms Employees Check up Place Time Products

15. Final customers ≈ 20-40 €/Kg Italian customers (small distribution or retail) Italian customers (large distribution) [€/Kg] 2.3.2 Finnish case study Some hundreds 18.20-39.20 Return 2-15 €/Kg 16.20-24.20 no. 70 Return 6-13 €/Kg Mushroom Pickers (North Karelia suppliers) Mr Dalla Valle Company operatingincome 0-0,10-0,23-1 €/Kg 10.20-11.20 Marketing manager 7.45-9.45 Costs 0,15 €/kg Company target 12 €/Kg Production manager Costs 0,15 €/kg Price survey for the season 2008 7.30-9.30 Costs 0,80 €/kg Rejects and water loss ~2 €/kg!! Workers on food process Costs 0,23 €/kg 6.61-8.61 Lines and Collecting Points (CompanyEmplyees) Costs 0,28 €/kg 6.38-8.38 6-8 no. 3000 Costs 6-8 €/Kg

16. 2.4 Italian case study Comunalia (Forest owners) “FungodiBorgotaro” Consortium Local public authorities Institutional border Forest owners Local professional harvesters Local suppliers Available local mushroom production (free of own consumption) Local restaurants, tourism farms Tourists Retailers (family shops, laboratory-shop) Buyers End users Tourism agencies Processors(local enterprises) Other local producers and services suppliers Importers Marketing and intermediaries Mushroom from abroad or other Italian sourcing areas Foreign suppliers

17. Production areas Type of permit Growing rate EC Mark of origin

18. Daily permit: 15 Euro (for 3 kg max)

20. 3.1 Indicators • Significant • Meaningful • Appropriated • Realistic • Time-based A useful tool to measure a given dimension

21. 3.2 Indicators

22. 3.3 Indicators Seasonal income from mushroom collection relative to labor income (selected occupational groups)

23. Mushroom Pickers (North Karelia suppliers) Two case-studies: “Borgotaro System” (IT) and “Traditional System” of Dalla Valle Company (FI) Comunalia (Forest owners) “FungodiBorgotaro” Consortium Local public authorities Flow-chart Institutional border NetWork System Traditional structure Forest owners Local professional harvesters Local suppliers [€/Kg] Available local mushroom production (free of own consumption) 6-8 between company and rural areas Local restaurants, tourism farms Lines and Collectiong Points (CompanyEmplyees) Tourists 6.38-8.38 Mass-media Retailers (family shops, laboratory-shop) Buyers End users External companies Local markets Workers on food process 6.61-8.61 Tourism agencies Dalla Valle Oy Production manager Marketing manager 7.30-9.30 Dalla Valle owner Final customers 7.45-9.45 Processors(local enterprises) Other local producers and services suppliers Importers Wholesalers-Large distribution-processor 10.20-11.20 Small distribution or retail Marketing and intermediaries between Finland an South Europe Mushroom from abroad or other Italian sourcing areas 16.20-24.20 Foreign suppliers 18.20-39.20 Local scale market and business Cumulated costs for fresh boletes …are there any method to describe these systems?

24. …nodes and arc…another way to show a system NetWork System Traditional structure The Social Network Analysis (SNA) may help us to get some findings… …for instance, who hold the power of scarcity?

25. Spring-Embedding algorithm graph distribution …we may see the centrality of the Dalla Valle company within the chain supply… …or the real player hierarchy of the chain… OutDegree: layer distribution

26. “Fruchterman” algorithm graph distribution The centrality of “tourists” within the network. The “Out”&“InDegree” evidences a clear repartition of power. OutDegree: layer distribution InDegree: layer distribution

27. 4. Networks of NTFPs producers as a tool of “territorial marketing” Mushroom in Borgotaro: much more than a commodity or recreational service: a component of a larger network based on the concept of “territory”: a consistent portfolio of products and services coordinated marketing efforts for their promotion

28. A NTFP as imago product for presenting a territory • Traditional local products • “Green” products • “Slow food” culture

29. The “road concept” A linkage is needed among the imago product (or the main product) and the associated products and services of the same area The “road concept” (i.e. trails, roads, itineraries or pathways) is a very common tool for linking various products and services across a territory Cultural link physical, organizational link

30. Imago product: PGI Borgotaro Boletus Enterprises: 62 (in 2008) 15 Agritourisms/ Farm businesses 12 Hotels/Guest quarters 8 Bed&Breakfasts/Inns/Hostels 9 Cheese, sausage and wine growing and producing factories 2 Didactic farms 3 Museums/Private collections 30 Restaurants/Porterhouses 26 Typical products sellers

31. 5.1 Conclusions • Income generation: the well organized, specialized company is creating more directAV and employment opportunities • … but: • this activity is more exposed to risk and instability (seasonality, at least) • the indirect effects of a network system are much more relevant

32. 5.2 Conclusions Networks are also dynamic: network growth can bring problems, conflicts and new risks, also because outcomes can have an asymmetric distribution among firms composing the network (Gulati, 1998) • Two components of the most advanced form of networks: • A (contractual) coordination of economic agents for the supply of products and services to increase profit and/or stability (a market share) • A mutual trust: •  input =social capital •  output = not only market products are supplied • but also “relational goods”

33. Erinomaista!