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Competition in global food markets

Brand Leadership and Product Innovation as Firm Strategies in Global Food Markets Mark J. Gehlhar Anita Regmi Spiro Stefanou Barry Zoumas International Food and Agribusiness Management Association 15 th Annual World Food and Agribusiness Forum, Symposium and Case Studies June 25-28, 2005.

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Competition in global food markets

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  1. Brand Leadership and Product Innovation as Firm Strategies in Global Food MarketsMark J. GehlharAnita RegmiSpiro StefanouBarry ZoumasInternational Food and Agribusiness Management Association15th Annual World Food and Agribusiness Forum, Symposium and Case StudiesJune 25-28, 2005

  2. Competition in global food markets • Competitiveness: re-emerging issue of national interest in the United States • U.S. is now a net importer of processed food • Is innovation taking place and what are the motivations?

  3. New Drivers of Change • The consumer:-Aging, educated, affluent consumers in developed markets-Greater urbanization in developing countries • Product design: merging of food science and health awareness into products • The retailers: growing concentration in developed markets with global retailers now reaching developing countries

  4. Shift in balance of power • Retailers pressuring manufacturers (quality and reliability) • Margins on branded products under greater pressure more with private labels (store brands) • Food products more difficult to differentiate with “imitator” manufacturers increasingly supplying retailers • Branded manufacturers undergoing an identity crisis?

  5. New Food Products Introduced Globally Number of products Source: Productscan

  6. Dairy products as share of all new food products is rising Dairy share of food products Number of new dairy products (thousands) Source:Productscan,2005

  7. New Food Products Introduced Globally by the H.J. Heinz Company A period of divestments but “focused” growth Number of new products Source: Productscan, 2005

  8. New Food Products by Snyder’s of Hanover: A medium sized U.S. private company “America’s Pretzel Bakery” Number of new products Source: Productscan, 2005

  9. How does the branded manufacturer compete in the changing environment? • Marketing • Quality • Productivity

  10. Basic Orientations of Firm

  11. Types of firms and motivationfor innovation • Previous study using case series approach Trail and Meulenberg 2002, Agribusiness • Hypotheses:-Every successful firm has a single dominant orientation either in product, process, or market -Successful branded manufacturers are predominantly product or market oriented-Privately owned companies are more likely to be product oriented than public companies-Cooperatives are less product innovative and expected to be more process innovative

  12. Firm orientations and competitive forces Market orientation (produce what current market wants) Non-branded manufacturer Branded food manufacturer Process orientation (adopt efficient production and distribution technology) Product orientation (innovate products with quality focus) Traditional cooperative

  13. Our Approach • Interview leading firms of different ownership types and sizes supplying in different product markets • Discover their identity (or who they think they are) What makes them different ? • What are they doing about securing growth and leadership? • Who they are is revealed by their actions

  14. Leading Companies in Global Dairy Sales, 2003

  15. Case profiles of large public, medium private, and international cooperative

  16. Case profiles of large public, medium private, and international cooperative: Company statements

  17. Leaders recognize strategic resources and use innovation to influence market for sustaining profits and growth Market orientation Influence what market wants Direction for sustaining superior profits H.J. Heinz Make existing product under Heinz brand healthier with convenient packaging Process orientation adopt processes using strategic resources more effectively Snyder’s of Hanover Specialize in baking tradition using product extensions of pretzels Product orientation Innovate to differentiate products using strategic resources Fonterra Use R&D extensively and promote wholesome “green pasture” image to promote milk products and ingredients Resource base Leaders recognize strategic resources

  18. Summary • A dominant orientation is not revealed in cases here, rather there is a balanced orientation • A “focused growth” strategy using improved processes to enhance product innovation • Leaders have clearer identity when recognizing their strategic resources • Leaders try to steer the market with new products and consumer education

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