Influences of Economics and Marketing on Relationships in the Global Good Supply Chain - Essay Example

? Influences of economics and marketing on relationships in the global food supply chain Table of Contents Introduction 3 Critical review of key literature 4 Illustrative examples  6 Implications for practice 7 References 10 Introduction The global food supply chain is an important area of consideration looking at the growing rates of human population all over the globe. The rising population has increased the demand of the food. In order to provide sufficient foods to the people, the governments of different countries have undertaken appropriate economic policies to cater to the increasing demand of food. The rise in demand of food against the prevailing supply levels have led to the rise in the prices of food in the markets (Behnassi, Draggan and Yaya, 2011, p.48). The economic policies of the government have opened the economy to foreign direct investment with favorable regulatory structures being laid down for the investors. The government also aimed at integrating the agricultural sector in the global food supply chain with an initiative to support domestic markets. At the same time it encourages the productivity in a buyer driven market. The economic policies developed by the governments provide opportunities for the business houses and supermarkets to increase the supply of food by taking the benefits of the incentives offered by the favorable economic policies. Appropriate marketing strategies were also adopted in order to fight the obstacles of the pressure groups and the roadblocks due to negative publicity. The transition of global food supply chain has occurred as an effect of the increased demand and the economic policies of the government and the marketing strategies of the business houses in order to tap the emerging demand (Lindgreen, Hingley and Vanhamme, 2009, p.38). These factors have led to the change of food habits and change in lifestyle of the consumers. Thus the relationships of the global food supply chain have been influenced by the economic role and marketing role of the government and the business houses respectively. Critical review of key literature The relationship of the food supply chain has become an important area of discussion. The underlying forces of economics and marketing have been playing a key role in influencing the relationships between the government, business houses and the consumers or the people. The agricultural sector is the core of food production in any country. The farmers harvest their land to cultivate the crops that are sold in the market. This cultivation of the crops and the marketing distribution channels supply the food required by the consumers. The process of demand and supply of food is now spread all over the world with the rapid functioning of retail supermarket chains that cater to customers all over the globe (Clapp, 2013, p.59). In the age of liberalization, the food supply chain has become a global phenomenon and it is not confined to the domestic market. The change in economic policies and economic reforms adopted by the economies towards an open market economy has allowed foreign direct investments in the global food supply chain industry. Thus the agricultural sector and the domestic markets have been exposed to foreign competition which has raised the benchmark of food quality. The consumers or the people have transformed the standards and quality of food demand at par with the standard of exports. Several factors like the rise in population, change in diet and food habits, increase in market competition, rise of prices in the local markets and improvement in food quality have raised the aggregate demand of global food supply chain. The human population is estimated to grow by 35% from 6.85 billion in 2010 to 9.15 billion in 2050. The spiraling rate of increase in human population and the increase in average income level of the middle class and lower middle class society have led to the increase in global demand of food. In order to contain inflation as a result of the increased global demand of food, the governments across the globe adopted suitable economic policies in order to create situations of global food supply for catering to the demand of the people. It is estimated researchers that the global food demand from the global food supply chain would be more than 2 times the growth of population. The economic policies of the government overcome the influence of the pressure groups who try to influence the economic policies for crave of political power. The economic policies are so framed in order to provide favorable condition for investments by the foreign food chains and supermarkets (Vorley and Fox, 2004, p.2). The integration of the large supermarket and grocery shops with the agricultural industry is also essential for developing healthy relationships in the global food supply chain. The negative publicities of the operations of the business like use of genetically modified crops and its adverse effects on the consumers, use of genetically engineered food are hurdles for the relationships in the global food supply chain. The business have adopted appropriate marketing strategies in order to overcome the obstacles and focused on increasing their productivity and profitability. The marketing of the global food chain starting from wholesale to retail markets have led to the change of life style and also a change of food habits of the consumers (Aoki, Kuran and Roland, 2012, p.36). The food habits of the consumers have changed from crops to meat, dairy, fish, milk, beverages, etc. While the governments have adopted economic reforms for sustenance of the global food supply chain, the business have concentrated to use the incentives offered from the economic policies and the regulatory structure to increase their production of food. The supermarket food chains have focused on the buyer driven sales approach to increase their supply of foods to the market. Thus the economic policies of the government and the marketing strategies of the business houses influence the demand and supply of the markets that forms the basis of the relationships in the global food supply chain (Blank, 2008, p.49). The governments have started to promote the use of bio-fuels in order to tap the available opportunities in the agriculture sector. The companies or suppliers in the global food supply chain have started to focus on acquitting more land in order to increase their capacity for supply of food. The consumers continue to ride on the changes of globalization with their lifestyles and food habits that are undergoing with a radical change. Illustrative examples  The increase in demand of food on a global platform and the influence of economics and marketing on the relationships of global food supply chain can be explained with the help of illustrative examples. The growth of population is comparatively higher in emerging economies like China, India, etc as compared to the developed economies of USA, UK, etc. China, for example, has been forecasted to observe a growth in the demand of food which would be twice as the growth of its population by 2050 (Smith, 2013, p.1). The calorie requirement for the consumers is expected to rise to 3050 kilo calories per person which is an estimated 10% increase over the figures of 2004-05. In order to achieve this growing demand, the global cereal production need to grow by almost 40% from is current level to 2050. Apart from adopting economic reforms, the government of China, India, Brazil, Russia and also the governments of other emerging and developed economies are also looking to integrate their agricultural sectors with the evolving global food chain (Sims, 2007, p.68). There lies lot of arable land in the Sub-Saharan region and also in Latin America. These could be used for the purpose of agricultural production. The lack of infrastructure and access to arable lands in Russia also hampered the productivity of agricultural sector. The governments are also increasing their focus of bio-fuels in order to increase the agricultural produce. In order to meet the increasing demand of food among global consumers, the governments particularly in China, India, Europe, Latin America and several emerging and developed countries have adopted economic reforms that encouraged supermarket chains to increase the supply of global food chain (Marx, Maertens and Swinnen, 2012, p.69). The business houses have thus started to explore opportunities of increasing the holdings of land so that the supply of the global food chain could be increased. There have been instances of negative publicity for the business houses in their performance in the global food chain. Example of Mc Donald could be considered in this case. These companies have taken appropriate measures to overcome the obstacles of negative publicity due to he use of genetically modified crops and genetically engineered food products (Burch and Lawrence, 2007, p.46). The favorable economic policies of the government and the marketing strategies of the business have thus influenced the relationships of the global food supply chains. The overall development of the economy due to the rise in demand and subsequent rise in the income levels of the people have led to the change ion food habits and also brought about changes in their lifestyle. For this reason, the forecasted growth of demand of the food in the global food supply chain is even higher which has raised concerns for food security in future. Implications for practice The implications for practice are largely due to the influence of the economics and marketing on the relationships of the global food supply chain. As a result of the influences of the economic policies of the governments and exploration of alternative sources of energy and the market oriented strategies adopted by the business houses, the food habits of the consumers have undergone radical changes. The consumers have redefined the benchmark of food quality and the standards of exports have been set as benchmark (Baourakis, 2004, p.25). Due to the appearance of the supermarket food chains and their buyer driven marketing strategies, the consumer food habits have undergone a transition from the agricultural crops to meat products, dairy, milk, etc. The consumption of meat is expected to rise by 11 to 15 kg per person by 2050. The change in the lifestyle is another implication of the economic and marketing practices of the government and business houses respectively. The rise in supplies especially by the supermarket food chain and the groceries has led to the transition from agricultural occupation to non-agricultural employment (Bijman, 2006, p.60). The subsequent generations of the farmers have taken up non-agricultural employment as their means of livelihood. This has been mostly observed in Asia as well as in Latin America. As a result of this the income levels and the purchasing power of people have increased. The rise in the middle class and lower middle class societies are an evidence of the increase in income levels of the people. The poverty levels of several countries have been addressed as a result of the economic policies and market strategies of the global food chain players. The reduction in poverty in China, India, Brazil, Mexico, etc is evidence to this fact. However, due to the circular flow of money, the rise in income levels would lead to further rise in demand of food (Campbell and Ortiz, 2012, p.58). This raises the concern of food security in the global food supply chain by 2050. As a result of the benefits received from the activities in global food supply chain in different markets, the industrial countries are estimated to get access to 3600 kilo calories per person per day. On the other hand, the developing countries together may able to obtain 3000 kilo calories per person. This is deemed to create a situation of disparity between the developed and the developing economies. In order to ensure food security, the governments would first look to feed their own people ( GRID-Arendal, 2013, p.1). The various economic policies that would be adopted by the governments could include ban on the exports. By cutting down the exports, the availability of food for the indigenous people would be ensured by the governments. This would create a situation of political instability and imbalance in the global food supply chain. The global food prices would be skyrocketed and it would be reach a point from where the aspect of redefining consumer expectation would be very difficult. In order to ensure food security in near future due to the concerns of rising demand in the global food supply chain, the economic policies of the government and the marketing strategies of the retail supermarket chains should be revisited (Rama and Harvey, 2009, p.1). The economic policies for the global food supply chain should be controlled to promote the production of agricultural sector and integrate the marketing of agricultural produce with the marketing of the supermarket food chains. All these implications of economic policies of government and marketing strategies adopted by the companies establish the influence of economics and marketing on the relationships of the global food supply chain that explains the constraints of the food chain and the opportunities available to overcome those constraints. References Aoki, M., Kuran, T. and Roland, G. 2012. Institutions and Comparative Economic Development. Palgrave Macmillan; UK. Baourakis, G. 2004. Marketing Trends for Organic Food in the 21st Century. World Scientific; USA. Behnassi, M., Draggan, S. and Yaya, H. S. 2011. Global Food Insecurity: Rethinking Agricultural and Rural Development Paradigm and Policy. Springer; Germany. Bijman, J. 2006. International Agrifood Chains And Networks: Management and Organization. Wageningen Academic Pub; Netherland. Blank, S. C. 2008. The Economics of American Agriculture: Evolution and Global Development. M.E. Sharpe; USA. Burch, D. and Lawrence, G. 2007. Supermarkets and Agri-Food Supply Chains: Transformations in the Production and Consumption of Foods. Edward Elgar Publishing; UK. Campbell, W. B. and Ortiz, S. L. 2012. Integrating Agriculture, Conservation and Ecotourism: Societal Influences. Springer; Germany. Clapp, J. 2013. Food. Wiley; USA. GRID-Arendal. 2013. FROM SUPPLY TO FOOD SECURITY. [Online]. Available at: http://www.grida.no/publications/rr/food-crisis/page/3571.aspx. [Accessed on 25 June, 2013]. Lindgreen, A., Hingley, M. K. and Vanhamme, J. 2009. The Crisis of Food Brands: Sustaining Safe, Innovative and Competitive Food Supply. Gower Publishing Ltd; UK. Marx, A., Maertens, M. and Swinnen, J. F. M. 2012. 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