Fair trade company that specialises in coffee and tea - Assignment Example

A Fair Trade Company That Specializes In Coffee and Tea The fourth largest coffee producing country in the entire globe is Indonesia. The start of coffee production in the country dates back to the colonial times. The economic activity has greatly contributed to the growth and development of the country. The country’s location makes it suitable for the production of coffee. The country flourishes in an ideal geography of coffee plantations. The geographical coordinate system contributes to the ideal climate for the growth and production. The latitude and longitude contribute to the prevalent environmental degradation and the destruction of forests that offer a conducive place for the growth of endemic tree species in the entire world. In 2007, the country produced a total of 420,000 metric tons in the volume of coffee. The country exported 271,000 metric tons of the total amount and allowed 148,000 metric tons for local consumption (Indonesia Investments, 2015). On the exports, 25 percent encompasses Arabica coffee, with the remaining being Robusta coffee. The country’s Arabica Coffee is strong-bodied with a low acidic nature. These qualities make them suitable for blending purposes with the higher acidic brands from the Central part of America. The governor from Dutch in Malabar, India sent a ship of Coffee Arabica seedlings to the governor in Batavia in 1699. Currently, Jakarta is the new name for Batavia. The planting activity was successful. Hence, the exportation venture commenced in 1711. The first coffee exports were from Java to Europe. A Dutch East India Company established in 1602 facilitated the exportation process. In a span of 10 years, the volume of coffee exports rose to 60 metric tons every year. The station dedicated for the shipping of coffee products for export was the port of Batavia. The storage of coffee species was in a warehouse that harbors Bahari Museum. In Amsterdam, the transaction process for the exported coffee from Batavia based on 3 guilders per kilogram. At the time, the average annual income for Netherlands ranged from 200 Guilders to 400 Guilders. This amount corresponds to several hundreds of dollars per Kilogram in the modern world. The price however declined to 0.6 Guilders per kilogram at the end of the 18th century. At this time, the consumption of coffee spread from the elite to the entire populace. The coffee farming activity was highly profitable for the Dutch East India Company. However, the Indonesian farmers who forcefully maintained the coffee plantations did not benefit from the produce. The colonial government had developed a cultivation system that encompassed the growth of different species of cash crops in the tropic. Nevertheless, the government had set low prices for the produce. They even reduced the number of laborers in the rice production sect, thus, inflicting many hardships to the Indonesian farmers. In 1870, The Dutch East Indies increased the areas of Arabica Coffee production to include Bali, Timor, Sulawesi, and Sumatra. Production of coffee in Sulawesi began in 1850. Coffee production extended to North Sumatra highlands near Lake Toba in 1888 and Gayo Highland adjacent to Lake Taut Tawar in mid-1924. The exposure of the oppression over the Indonesian people by the corrupt officials in a book written by a Dutch Colonial Official led to a change in the perception of the cultivation system in 1860. Lately, the country encourages the adoption of Fair Trade Organizations in their system of cultivation. Max Havelaar was the first Fair Trade Organization to establish itself in the history of Indonesia (Lyon & Moberg 2010, p. 133). The colonialist government initiated the growth of Arabica coffee in East Java in the year 1900 as a replacement to large coffee plantations that faded because of coffee rust disease in 1876. In 1920, the locals in Indonesia adopted coffee farming as a cash crop produce. The nationalization and revitalization of the plantations in Java with diverse varieties of coffee Arabica took effect at Independence in the 1950s. Smallholders implemented the growth of the new varieties of Coffee Arabica through governmental support in the following years. Developmental programs encouraged the growth of new varieties of the coffee plants amongst Smallholder farmers. In the modern times, Indonesia exports coffee as a mixture of roasted beans of Robusta and Arabica. The difference into two brands of coffee arises from the taste and the content of caffeine. Arabica beans are more expensive in the global market. In 2014, statistics ranked Indonesia as the fourth largest producer in the World with 9,350,000-60kg bags of coffee beans. Indonesia appeared as the fourth largest exporter with 5,977,000-60Kg bags of coffee beans. Nowadays, coffee plantations in Indonesia have extended to roughly 1.24 million hectares. Robusta plantations grow on 933 hectares while Arabica plantations grow on 307 hectares of land. Small-scale growers do the cultivation of 90 percent Indonesia’s produce. Tracing back from the early 1960s, Indonesia has shown a drastic and stable increase in the production of coffee. Nevertheless, a decrease in the number of coffee estates in Indonesia is evident because of the drift in the concentration of farmers from Coffee to oil palm, which has equal status in the global market. The coffee producers transformed the coffee estates into plantations for other products. The following table shows the production and exportation of coffee for the past years: 2008 2009 2010 2011 2012 2013 2014 2015 National Coffee Production (Tons) 698,016 682,690 686,921 633,991 748,109 740,000 711,513 625,000 National Exportation (Tons) 491,335 518,122 440,241 353,698 520,275 460,000 382,774 350,000 Export Value in US Dollars 1,077.7 882.1 855.2 1,085.9 1534.1 National Consumption (bags of 60 kilograms) 3333000 3584000 4042000 4167000 Source: Indonesia Investments: Coffee. http://www.indonesia-investments.com/business/commodities/coffee/item186 Indonesia has ideal prospects for the advancement in the production of coffee. Data from the Indonesian Coffee Exporters Association (AEKI) reveal that farmers in conjunction with pertinent organizations have strategized to enlarge the coffee plantations. They have also scheduled to intensify programs that can help in revitalizing older coffee plantations. Indonesia targets to increase its coffee production levels to larger volumes ranging from 900,000 to 1.2 million tons per year in a span of 10years. They aim at facilitating this through the increase in the acreage for farming. The major aim of this move is to curb the rising international and domestic demand for coffee. Indonesia is striving to produce higher yields in spite of their lower production standards in comparison to the other states such as Vietnam. Indonesia produced 741 kilograms of Robusta coffee beans per hectare and 808 kilogram of Arabica coffee beans per hectare. In comparison, Vietnam boasts the production of 1,500-kilogram coffee beans per hectare. In 2014, there was a global shortage in the production of coffee resulting in an increment in the prices of the produce (Fridell 2007, p. 116). The shortage resulted from the huge consumption of coffee products in developing markets and the changes in the weather. Considering a region called Sumatra, their coffee are smooth with a balanced and intense body. The Dutch colonizers introduced Arabica coffee in Sumatra in 1600. The most common introduced varieties were typica and bourbon. Over the years, the smallholder farmers introduced other varieties, for instance, Linie-S, hybrids of Rue 11, catimor and catura. Farmers in Sumatra grow Robusta coffee. The interior part of Sumatra is mainly mountainous and swampy. Large rivers are visible on the Eastern side, contributing to the creation of a wide lowland. Initially, tropical rainforest covered the area but it changed over the years. The latitude, ideal soil properties, and the appropriate humidity contribute to the growing of coffee in Sumatra. Arabica coffees do well in altitude higher than 1500m and temperatures that range between 16 and 20 degree Celsius. Nowadays, Sumatra produces Madheling and Ankola coffee brands. Both of them are unique and rich flavored brands. There is potential market for Coffee in Sumatra. Some of the reasons as to why the region produces increasing amounts of coffee are to meet the demands of their consumers. The region boasts its access to Coffee processing industries, the developed home-based and middle coffee industries, and the emergent coffee shops and roasters. The cultural perception of Coffee as a product worth consumption creates a ready market for the products. The increased education on coffee has led to the construction of more coffee industries. There is a solid tradition of existent farmers’ corporations that help in boosting the knowledge about coffee farming. The corporations help farmers to collaborate with one another in striving to achieve their set goals and objectives. An existent Fair Trade organization in Sumatra protects the ecosystem and the community at large. It enables farmers to improve their lifestyles. The Gayo Organic Coffee Farmers Organization is a Fair Trade Coffee Corporation found in Gayo Islands of a province called Aceh in Sumatra. The members of this group are small-scale farmers who are devoted to the production of certified organic coffee. The cooperative exports high quality coffee to international countries. The corporation has helped in marinating peace amongst ethnically diverse groups of individuals. Small-scale farmers engage in the production of coffee in Sumatra. Furthermore, most of the coffee industries are under the ownership of prospect developers who have struggled a lot to be where they are. The main aim of most of the farmers is to produce high quality products that will match the Fair Trade certified standards. A huge population is in the rural parts of the region. Most people in Sumatra are below the poverty line. Roughly, 65 percent of the population engages in coffee farming as producers. A huge percentage of the population lacks education. Farmers struggle so much to pay fees for their children. Those who joined Trade Fair cooperatives have a head an easy journey because of the assured support from the corporations. Currently, small-scale farmers produce over 90 percent of the volumetric tons of coffee in Indonesia. Implementing a Trade Fair organization in Sumatra will benefit a huge population of the farmers’ fraternity. The smallholder farmers usually cultivate coffee on a hectare of land. Roughly, 32,700,000 farmers are susceptible to the benefits of a fair trade company. The prospect uncertainty in launching the company in Sumatra is the capability to withstand competition. Already, a solid trust exists between the producers and the existent free trade cooperatives; it will be slightly hard for the new company to adjust appropriately and get her share of customers. It is challenging to estimate a price that benefits producers, benefits the Fair Trade Company, and initiates competition between the company and the existent Fair Trade Companies. Another uncertainty is the challenge that the company experiences at both sides of the supply. It will be hard for the company to balance the business duty with the developmental objectives at the same time. The fluctuations in the produce and demand for coffee in Indonesia is an uncertainty. The availability of a Fair Trade Company will have a number of negative insinuations to the coffee growers and their families. The coffee growers will lack proper information about commodity prices on the global market. Most of the farmers in the rural areas do not have phones. This restricts them from retrieving appropriate market information. Most of the farmers get the information from intermediaries. The replacement of intermediaries with fair Trade Companies locks the small-scale farmers out of the global market information. For a successful Fair Trade business, there is the necessity for long-term trading contracts. These contracts help in, improving the relationship between the producers and importers, overcoming problems related to supply and quality, and encouraging constant development and predictability. This move however, suppresses the growth of coffee producers. It encourages them to thrive and find solace in primary sectors and deters them from diversifying their crop production process. The move also encourages coffee producers to over-depend on unpredictable products in the market. Action Plan Goal: Alleviate the probable negative impacts of the Fair Trade Venture to the coffee farmers and their families Standard(s), This Goal Relates to: Strategic Management and Personal Relations Current Situation/Rating: With the current perception in most peoples’ mindset regarding the operation of a Trade Fair Corporation, it might be hard to lure coffee production farmers into the system, in spite of the fact that the organization aspires to benefit all farmers in Sumatra. Target Date of Reaching the Goal: 3 Months from Now Steps to Take Who is Responsible? Due Date Review the proposed strategic Implementations and make the necessary amendments Chief Strategy Officer First Month Liaise with the Chief Market Policy Officer to ascertain a constant flow of global market information to the Coffee Production Farmers Chief Market Policy Officer/Programs Coordinator First Month Liaise with the financial department to ensure that long-term contract farmers receive a sustainable annual income to sustain their families irrespective of the global market fluctuations Head of Market Operations/Human Resource Manager First Month Focus more on building a solid trust between coffee producers and the company Chief Strategy Officer/Programs Coordinator/ Public Relations Coordinator Second Month Adopt a flexible pricing and earning strategy as a tool for competition in the region Huma Resource Manager/Chief Market Policy Officer Second Month Research and establish new technological methods that can improve the rates of coffee production in the region, and then teach the farmers. This will create a constant supply chain of coffee to the company. Programs coordinator/Chief Strategy Officer Third Month The Fair Trade Company should venture into the institution of the Company in Sumatra. The explanation of the best recommendations can based on the following three major strategic intentions of a Fair Trade Company: a) Focus on working with producers in marginalized areas to improve their economic status from the vulnerability state to a security status for economic sufficiency at a personal level. b) Striving to provide empowerment to the crop production team as stakeholders within their capacity in their fields c) To help in active participation in the global market field in achieving thinkable equity in world trade. Based on the first strategic point, Sumatra is the best place to initiate a Fair Trade Company. The locality of the region is a rural environment with a huge number of people relying on farming as a primary source of income. A huge number of people can benefit from the company in its efforts to improve the economic status of residents. Similarly, a huge population will benefit from the strategic point number 2. Empowering farmers in their crop production field will be an ideal step in Sumatra to help increase the coffee production yields. This will further stimulate a faster rate of achievement of the community’s yield expectations. Owing to the farmers aspirations to increase threefold the amounts of coffee production, the presence of a Fair Trade Company will help in increasing the rate at which the produce will flow to the into the global market. This will not only advance the status of Sumatra in the Global Market but also Indonesia at large. These are the major pillars of any given operational Trade Fair Organization in any given region. These goals are attainable in Sumatra. The provision of sustainable earnings to the small-scale farmers can help improve the standards of living in the region. Launching a Trade Fair Company in the region will also help in supporting the gaining of knowledge and skills that the smallholder farmers need in order to operate in the global market. Because Sumatra experiences challenging weather, conditions that at times degrade the status of the soil; the Trade Fair can help in facilitating the implementation of environmentally suitable methods of farming. It would be great too to invest in the local community programs that can help in boosting the economic status of the region. The Trade Fair can also help in improving the working conditions of the farmers in the region. Launching of the Trade Fair Organization in the region will help in boosting the livelihoods of the majority of the coffee production farmers. List of References Fridell, D 2007, Fair Trade Coffee: The Prospects and Pitfalls of Market-driven Social Justice, University of Toronto Press, Toronto. Indonesia Investments 2015, Coffee. Retrieved November 11, 2015 from http://www.indonesia-investments.com/business/commodities/coffee/item186 Lyon, S & Moberg, M 2010, Fair Trade and Social Justice: Global Ethnographies, NYU Press, New York. Read More