Conceptual Virtual Organisation - Strategies - Case Study Example

A Business Proposal for a Conceptual Virtual Organisation Student’s Name Course Tutor’s Name Date Introduction Farming in the EU is largely perceived as an activity of the older generation, and rarely do young people engage in the same. According to Ridge (2012) however, there is an increasing interest in farming among young people (i.e. those aged between 18 and 35 years), mainly because of rising farm commodity prices and an increasing demand for farm products in markets such as China. This paper is a proposal that advocates the need to set up a virtual organisation (VO) that will provide information to youthful farmers in the larger European Union (EU) region with important information about farming and the marketing of their products. The VO will be formed in accordance with Davidow and Malone’s (1992, p. 4) definition of a VO where they refer to it as an association of various constituencies, who come together to harness a market opportunity. The proposed name of the VO will be The European Union (EU) Youth Farmer – a name that is meant to indicate the specific stakeholders that the VO will undertake to engage and help. Mission statement To be effective, a mission statement for any VO needs to indicate: the VO’s core purpose; its distinct characteristics; its targeted accomplishments; its products and/or services, its basic beliefs, aspirations and values; and the principal stakeholders (Mackey, 2012). In line with the foregoing, The EU Youth Farmer mission statement will be: to be an information resource that will provide authentic, relevant, informative, and culturally-appropriate information that will be crafted in a manner that will be of relevance and help to youthful farmers across the EU. The VO will strive to bring together diverse stakeholders in the agricultural sector to provide expert guidance and advice to youthful farmers. Such stakeholders will include agricultural experts, market analysts, and relevant government agencies. In the long-term, the VO organisation hopes to be a leading and preferred information resource for young farmers in the EU. Online value propositions Getting information and advice via physical networks can be a cumbersome undertaking for youths, especially those who are used to using search engines to find whatever they need on the Internet. The proposed VO aspires to: i. Help youthful farmers in the EU to get all the farming advice they need from one online platform ii. Help young farmers to access suppliers of farm inputs and provide access to the markets on a single online platform iii. Help youthful farmers to evaluate the different offers by suppliers and different offers by the market, hence ensuring they select/get the best offers on both sides of the supply chain iv. Help young farmers across the EU to share experiences, hence helping each other on issues such as farm management and accessing the right markets. E-business model Figure 1: As shown in figure one above, the proposed virtual organisation will provide a link between suppliers, the young farmers and the market. To be sustainable, the VO will need to establish several things, which include: identifying the target market, positioning itself in the marketplace, representation in the virtual world, and identifying a viable online revenue model. Target market Farmers in Europe are ageing, and consequently, they will have to be replaced by young farmers (Matthews, 2013). As this happens, it is important for all stakeholders to understand that technological innovations have made the information searching methods of younger people completely different from those of their older counterparts. The proposed VO therefore targets young farmers, currently aged between 18 and 40 years, residing in the EU, and who have an interest in farming. In the next ten years, Marini (2012) notes that at least 4.5 million aged farmers will retire, and naturally they will be replaced (through succession or otherwise) by younger generations. A secondary target group is the manufacturers and marketers of agricultural inputs, providers of farming-related services, and buyers of farming produce grown in the EU. Marketplace positioning of the VO The proposed organisation comes at a time when the need to support young farmers in Europe has been established, especially due to the need to counter the effects of an ageing farming population. According to Marini (2012), only 14% of the farming population in the EU are below 40 years of age. As noted by Welborn-Nichols and Arbor (1993), the primary elements of market positioning are pricing, quality, service, distribution, and packaging. Seeing that the VO is an intangible organisation whose products are equally intangible, its positioning will mainly depend on the services it will offer, the quality of the services, and the pricing. Services rendered by the VO will be free (see explanation in the revenue structure below). The services however will strive to be high-end and beneficial in order to attract return customers and referrals by existing customers. To enhance quality, the proposed VO will put controls in place to ensure consistency in information provision, and ensure that all stakeholders utilising the VO platform have been verified for authenticity. Representation in the virtual world The representation of the proposed VO will be based on its operations “within geographically distributed networks” as suggested by Radiou (2008, p. 139). Additionally, the proposed VO will use information and communication technology to facilitate, maintain and sustain relationships with its stakeholders. The ultimate representation will however seek to position the proposed VO as a platform where different stakeholders can create and obtain value through the available exchange opportunities and the ensuing social and economic exchanges. Online revenue model To generate income, the proposed VO will seek to generate revenue from CPM (cost per thousand mille) display advertising on its website. The CPM revenue model assumes that direct response (e.g. through click through) is not a fair manner of judging whether visitors to a website have seen an advertisement (Ross & Fridgeirsdottir, 2011). This revenue model will further assume that just because some people opt not to interact with an advertisement does not mean that displaying the ad generated zero value. The proposed VO will charge a fixed rate card price (e.g. 60 Euros CPM), and the charges to each advertiser will depend on the number of advertisement exposures to website visitors. The VO will engage Google AdSense as a third-party advertising network to serve the advertisement to website visitors. Industry and competitor analysis a. Industry analysis The following industry analysis will be carried out using Porter’s (2001) five forces: i. Supplier power Considering that the proposed VO will depend on suppliers of products and services to make one end of its engagements with the young farmers successful, it can be argued that suppliers will have relatively high bargaining powers. However, the fact that the proposed VO will bring in different suppliers to offer the same services and/or products to young farmers may inspire competition hence reducing some of the bargaining powers that suppliers might have. In other words, it is envisaged that supplier concentration may become diluted as the proposed VO becomes popular among young farmers and suppliers. ii. Barriers to market entry Considering the absence of government policy restricting the setting up of virtual organisations in the agricultural sector and the relatively low capital requirements, entry into this sector is relatively easy. The difficult part however would be in setting up a strategy that would work, especially in mobilising the numbers needed to make a VO of the proposed nature successful. iii. Degree of rivalry Industry concentration is minimal at the time of writing this proposal, and to the best of this writer’s knowledge, there is no other virtual organisation in the agricultural sector, in the EU with a similar concept. As such, the proposed VO may find it relatively easy to establish and popularise a brand identity. As similar organisations come up in future, the proposed VO could diversify in order to gain first mover advantage over its future competitors. iv. Threat of substitute Arguably, substitutes for the proposed VO would be physical networking. Notably, switching costs especially for young people who are accustomed to finding information on online platforms and even conducting online purchases may be relatively high. The trade of the proposed VO for physical networking (especially considering that some aspects like marketing may take place in far-flung markets e.g. in Asia) may also be too costly a consideration. Therefore, the threat of substitutes for the proposed VO is considered low. v. Buyer power Buyer power is described as the impact that consumers have on the producing industry (Porter 2001). In the case of proposed VO, the buyers would be the users of the VO service (i.e. suppliers of products/services to young farmers, the young farmers and the markets targeted by the young farmers). Arguably, and based on the multiple stakeholders represented in the foregoing scenario, buyers of the services provided by the proposed VO will be multiple, hence diluting buyer concentration. Additionally, and considering the low threat of substitute products, the threat of backward integration would be minimal. Combined, the foregoing aspects could mean that buyer power is relatively low. b. Competitor analysis Like all other start-ups, the proposed VO is likely to face three kinds of competitors identified as: direct competitors (i.e. similar organisations offering similar/identical products/services); indirect competitors (organisations offering substitute product/services); and future competitors (i.e. businesses that pose a competitive threat in the future) (Porter 2001). As indicated elsewhere, this writer is not aware of a similar organisation in the EU market presently. As such, direct competition does not pose much of a threat at the moment. However, there are multiple websites that offer some information regarding young farmers in the EU region. An example is the Youth & Young Farmers Gateway (2014), hosted by European Network for Rural Development and the European Evaluation Network for Rural Development. Fortunately, none of the existing websites offers the complete information, marketing, and interaction solutions as envisaged in the proposed VO. In future however, there is a possibility that VOs with a similar concept would come up, in which case the proposed VO would have to re-strategise in order to stay ahead of the competition. Management and maintenance of the VO Admittedly, setting up and maintenance costs may pose a major hurdle in the establishment of the VO. As indicated by Cascio (2000), equipping a physical office from where to run a virtual organisation can be a costly affair. Additionally, a person would need online material and resources accessible from remote locations by users. There are also bound to be incremental costs (Bradley et al. 2002). The proposed VO can however use the owner’s seed capital, and can get more from investors and/or sponsors. The VO may also have to contend with cultural issues in the supplier-young farmer market relationship. To avoid the alliance suggested in the foregoing relationship from being undermined, the organisation can invest in technology that enables collaboration. Lack of trust and feelings of isolation are other issues that the management of the VO should acknowledge as potential threats to the success of the VO. Building trust virtually would require the proposed VO to be consistent, reliable, and responsive. Additionally, it would need to encourage similar traits among its different stakeholders. Constant communication, encouraging different stakeholders to interact with the VO and/or within themselves has also been identified by Bradley et al. (2002) as a potent way of managing and overcoming feelings of isolation. Conclusion The indicated VO is envisaged to be a resource where youthful farmers in the larger European Union (EU) region can obtain important information about farming and the marketing of their products. Ideally, the VO would be a resource that will address a niche market that is yet to receive any attention from different stakeholders. To succeed however, and as indicated herein, the VO would need to overcome management and maintenance hurdles. Additionally, it would need not only to build audience among its target population, but would also need to be reliable, consistent and responsive. References Bradley, K, Benson, R, Cristina, G et al. 2002, ‘Five challenges to virtual team success: lessons from Sabre, Inc.,’ Academy of Management Executive, vol. 16, no. 3, pp. 67-79. Cascio, W F 2000, ‘Managing a virtual workplace,’ Academy of Management Executive, vol. 14, no. 3, pp. 81-90. Davidow, W.H & Malone, M S 1992, The virtual corporation, Harper, New York. Marini, A 2012, ‘Europe is looking for a young farmer,’ EU Inside, viewed 21 April 2014, Matthews, A 2013, ‘Wasting money on young farmers?’ CAP Reform, viewed 21 April 2014, Porter, M 2001, ‘Strategy and the internet,’ Harvard Business Review, pp. 1-20. Radoiu, D 2008, ‘Virtual organizations in emerging virtual 3D worlds,’ Studia Univ. Babes-Bolyai, Informatica, Vol. LIII, no. 2, pp. 137-146. Ridge, M 2012, ‘British youth seek farmland, as beef prices rise,’ The Christian Science Monitor, viewed 21 April 2014, Ross, K & Fridgeirsdottir, K 2011, ‘Cost-per-impression and cost-per-action pricing in display advertising with risk preferences,’ Manufacturing & Service Operations Management, vol. 01, pp. 1-23. Welborn-Nichols, J & Arbor, A 1993, ‘Market positioning,’ viewed 21 April 2013, . Youth & Young Farmers Gateway 2014, ‘Welcome to the youth and young farmers gateway!’ European Network for Rural Development (ENRD), viewed 21 April 2014, . Read More