Influences of economics and marketing on relationships in the global food supply chain - Essay Example

? Influences of economics and marketing on relationships in the global food supply chain Contents Introduction 3 Economic and marketing perspectives – an overview of challenges underlying the global food supply chain 4 Implications 7 Conclusion 9 References 10 Introduction Food is one of the basic needs of the society and since ancient times a number of governance initiatives have been introduced for improving food security. Food scarcity, spoilage of food and over-abundance in certain areas have been the central theme for many a riots and social unrest within communities. Global food security and governance have become increasingly complex in the past few decades owing to a gradual shift from local to global food supplies. “The capacity of single households to ensure an adequate supply of food for its members is affected by developments from local to global. Increasingly even nation states are losing control over the factors that determine the food security of their populations” (McKeon, 2011, p1). The food supply chain begins with agriculture and ends with consumption. The processes involved in between these two phases determine the efficacy of supply systems and its accessibility to the global communities. The global food supply chain and governance policies today focus not only on how the food is produced but also on how it is being processed, supplied, and consumed across different nations. Food security and governance mechanisms are based on the concepts of availability of food, access to food and consumption patterns. Studies by World Health Organization (2013) have observed that while there is enough food for everyone’s consumption, the distribution of food is the primary issue facing the nations of tomorrow. The paper explores the marketing dimensions and economic perspectives associated with the global food supply chain. Economic and marketing perspectives – an overview of challenges underlying the global food supply chain Agriculture continues to remain the largest sector employing the majority of people in the developing countries. The liberalization of trade and globalization of economies has led to increased number of countries participating in free trade of food items and this has played a significant role in balancing the economic needs and deficit in production of food items across various nations. Exporting countries benefit from increased revenues from trading of surplus items, importing nations gain access to vital food reserves (Arda et al., 2005). Growing industrialization and profit making objectives have made a deep impact on the way food is being produced and supplied to the consumers today (Deep and Dani, 2009). The food supply chain is deeply impacted by rising prices, inflationary trends, and growing demands of increasing population have increased food prices. This has also led to multi-tiered supply chains that increase the complexity of the whole logistics process (Sowinski, 2012). The food supply chain begins with the farmer producing the supplies and the food items produced are sold by the farmers either directly to the food processor or indirectly through cooperative groups. The processed food is then sold to distributors to be distributed to various retailers and marketers and from there the food is finally sold to the consumers (FAO, 2004). The role of the farmers in the food supply chain is hence limited to the food processors and cooperative groups that are responsible for selling the farm produce to various distributing agencies, factories or processing units. This pattern limits the transparency of the whole system and farmers do not benefit much from the complex supply chains (Fearne et al., 2000). The globalization of economies has increased consumerism trends within the nations and this has led to a dramatic growth in consumption of food and related items. In context of the food supply chain this also reflects a shift in food movement from local and regional levels to global levels (Dicken, 2011). This has added to the complexity of the food supply chain with the introduction of import of raw materials such as pesticides, farm tools and machinery to reduce cost of operations and the export of finished goods to generate higher revenues. Thus, a number of large multinational corporations have now taken over the food supply chain as opposed to the smaller distributors and logistics operators earlier. The primary goal of such multinational operators is to consolidate its operations through increased diversification into various food items, large variety of processed foods and wide array of products to secure higher profit margins (Humphrey and Memedovic, 2006). The supermarkets are improving the standard of food quality aided with the flexibility and availability of products at the consumers’ convenience. On the other hand, they are causing changes in terms of food consumption habits, dietary consumption patterns and nutritional quotient of the people (Moreira, 2011). In the international economy, the firms and internationalization of markets have a strong impact on the trade patterns, trends in the global flow and foreign investments. Nearly all supermarkets have products from almost all countries. In the food chain system, the amount of available products has also increased, mostly because of the Transnational Corporations (TNC) (Senauer and Venturini, 2004). Trade policies adopted and followed by various countries also present significant challenges to the global food supply chain. While multinationals produce a large variety of food products, they are also responsible for selling these products at higher than usual prices to the consumers. A number of pre-defined standards and regulatory policies work towards the issues of consumer protection, consumer rights, and food safety concerns. The European Commission provides distinctive frameworks that ensures consumer rights and enables them to avail the benefits of a competitive food market that is both efficient and innovative. This has led to a closer integration between the food suppliers and the buyers. However, operating on a global level increases the risks of inadequate quality control measures taken at each stage of the food supply chain and production process (EC report, 2010). While the closer integration of food suppliers and buyers enable the consumers to choose from wide range of products at competitive prices, there are increased challenges faced by the global regulating agencies on monitoring the quantum of supplies, the quality of products being sold in the market and the effectiveness of the whole system in terms of ensuring adequate food supplies for the next generation (Gereffi and Lee, 2012). Exploitation of developing economies is yet another challenge facing the global food supply chain. While globalization has created new opportunities for expanded trade, business and revenue generating models for the developed countries, it has also added to the exploitation of the economic resources of these countries by the developed nations who have an upper hand in all the trade deals with the developing or under-developed nations (WTO, 2010). The competitive landscape in the food supply chain in the 21st century is largely dominated by a few large global players who dictate the terms of trade and business. The rise in supermarkets and global retail chains like Walmart, Tesco and Sainsbury have added to the exploitive trends adopted by these retailers in order to procure goods at cheaper prices for increased profit margins (Godfray et al., 2010). This trend has also affected the supply of adequate food supplies to all sections of the society. According to a recent report by the World Economic Forum (2013) it is estimated that nearly one billion people globally do not have access to adequate food supplies. This raises further concern in context to global food supplies in future. The report also highlights that the estimated growth of population by the year 2050 will be around 9 billion and hence the demand for food supplies will also double. The food supply challenge is also aggravated by the growing concerns related to global climate changes, water scarcity and rapid depletion of natural resources (World Economic Forum, 2013). Implications Marketing of food items and related products have undergone widespread transitions over the past few decades. These changes have been marked by globalization trends, technology advances and innovative applications that have re-defined the consumer needs, expectations and shopping behaviour. The emergence of supermarkets and multinational conglomerates have played an important role in governing product prices, market competition, consumerist culture and establishing value chains that are designed around meeting the additional value needs of the consumers using the products. However, this has also led to the slow decline of the small retailers and independent sellers (Fearne et al., 2000). Developed economies seek cheaper sources of raw materials and this is abundantly available in the developing and under-developed countries. The discussion so far has highlighted the role globalization is playing in defining new trends and challenges in the global food supply chain. The key concerns are related to the issues of inflating food prices in some regions, abundance of food items in some areas, scarcity in others and ensuring adequate food supply for the future generation considering the burgeoning population and depleting resources (Gereffi and Michelle, 2009). The real problem lies with the complex supply chains that dominate and govern the global food supply. The developing and under-developed countries require increased focus on how trade policies impact various stages of food production, sales and revenues of the country and what are the measures required to safeguard their national interests while pursuing trade with the developed countries. “Policy makers from these countries must focus more than ever before on understanding the way the firms in their countries are linked with their global counterparts, not only in exchange and distribution, but throughout the overall organization of production” (Conference Board report, 2010, p1). The policies are made in accordance with profit for the sake of producers, consumers and the governmental rules but they are not in tandem with the interest of the agricultural community. The markets in almost all countries are owned or ruled by some private and public entities, importers and exporters of the state including the TNCs. Since the early 1980s, the globalization of industries across the globe and world economy has increased. But its impact in the agro-food field is still worse, which causes a negative effect in the international trade. The greater use of land increases the wildlife, quality of soil, number of trees etc., but the extensive use of pesticides increases the ill effects due to soil erosion and water degradation. Overgrazing, deforestation and inappropriate use of agricultural practices are among the causes of degradation. The fisheries are also in a crisis following harvesting in oceans. There is a need for sustainable global food system, which would cater to the increasing problems of the whole food system. Over the past decades, the food’s availability has increased and it is at a cheap, readily available term. This can be considered as a reason for the little attention given to the food sector. There is an unequal distribution of food, which is quite evident from the fact that one in seven people is not fed, while some are overfed. Activities like animal breeding and transformation of water systems to cater to the increasing domestic demands should also be adhered to. On the other hand, industrial and energy producing sectors are causing a threat to the ecology. An advanced and rational water management system is required to balance the ecology. The disparity in food supplies and price hikes affect the consumption pattern and nutrition levels of significant sections of the society. Global food supply chain thus needs further analysis on how it can be made effective in terms of ensuring adequate food supply to all sections of the population, removing any disparity in supply of food, conserving resources for future generations, and creating a efficient framework for regulating production, quality and sales of food items across different countries. Conclusion In spite of the fact that an abundant quantity of food is being produced on the planet, millions are starving. The primary reason behind this is the corporate control over the food supply. The supply, distribution and manufacturing of food products have been controlled by the corporate system. The process of globalization has contributed to the advancement of biotechnology and agribusiness, which from the business’ perspective is profitable. Most of the capital invested on the production of food and food products goes to non-farmers. With the virtue of global economy, the corporations and supermarkets are churning a huge amount of money, which contributes to the imbalance of power between the farmers, consumers and food corporations. There is a need for sustainable global food system, which would cater to the increasing problems of the whole food system. Over the past decades, the availability of food has increased and it has become more affordable and readily available in markets. This can be considered as a reason for the little attention given to the food sector. The race for transforming food to a commodity, which can be used for industrial profits, has actually worsened the condition. There is a tremendous waste of natural resources and fossil-fuel energy. Globalization can be a powerful tool to collective action, both improving environment and reducing poverty. A country’s government needs to put in place policies that will allow it to engage in fair trade without compromising the wellbeing of its citizens. References 1. Arda, M., David, B., Roy, R., Bill, V., and John W. (2005), The Global Food System: A Research Agenda, Hertfordshire, United Kingdom: Report to the Agribusiness Accountability Initiative Conference on Corporate Power in the Global Food System High Leigh Conference Centre. 2. 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