Sustainability of Business Relationships in EU Agri-food Chains and Opportunities for Improvement...
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parlons graphiques Christian Fischer, Monika Hartmann, Philip Leat, Cesar Revoredo-Giha, Nikolai Reynolds, Maeve Henchion, Luis Miguel Albisu and Azucena Gracia Sustainability of Business Relationships in EU Agri-food Chains and Opportunities for Improvement Pe ´ rennite ´ des relations commerciales dans les filie ` res agro-alimentaires de l’Union europe ´ enne et ame ´ liorations possibles Nachhaltigkeit von Gescha ¨ ftsbeziehungen in den Agri-Food Chains der EU und Mo ¨ glichkeiten zu deren Verbesserung In an increasingly liberal and globally competitive environment for agri-food markets we are witnessing greater price instability in product and factor markets, technological advances that enable the tracing and tracking of goods and increasing consumer concerns about quality, safety and variety of products. In such an environment, effective business relationships in vertical supply chains are thought to: (a) reduce uncertainty e.g. by securing a more stable inflow of orders and increasing quality and safety assurances associated with inputs; (b) improve access to crucial resources e.g. capital, specialised skills or innovations; and ⁄ or (c) raise business productivity e.g. through improved decision-making or enhanced employee loyalty. Thus effective inter-enterprise business relationships can potentially boost competitiveness. Evidence is presented here regarding the perceived sustainability of business relationships and their main determinants along European agri-food chains – mainly composed of SME enterprises. It is based on an extensive survey in late 2006 and early 2007 (1,442 respondents) of the supply chain activities of farmers, food processors and retailers in three agri-food chains and six countries: pig meat (Finland, Germany, Ireland, Poland, Spain); beef (Ireland, Poland, UK ⁄ Scotland); and cereals (Germany, Finland, Spain, UK ⁄ Scotland) (FOODCOMM Consortium, 2008). The survey used a questionnaire developed after a series of expert interviews in each country. The sample of respondents was found to reflect the existing populations of agri-food chain businesses in terms of scale and regional distribution. Relationship sustainability can be defined as longer-term, stable and mutually beneficial interactions and transactions between chain participants. Sustainable business relationships are based on joint economic interests, such as price stability, security of supply and profitability of interactions. Key qualitative characteristics of such relationships are inter-personal factors, especially commitment, satisfaction and trust with a business partner. Stability aspects, as reflected by a positive collaboration history with a business partner also need to be considered (Figure 1). Based on the dimensions in Figure 1, relationship sustainability was measured for European meat and cereals chains. Figure 2 shows that relationships were considered as ‘somewhat good’ to ‘good’. The results also reveal that relationship sustainability is generally higher at the processor–retailer level (5.6) than at the farmer–processor level (5.4). Figure 1: Components of business to business (B2B) relationship sustainability Figure 2: Relationship sustainability scores* by agri-food chain type and country 20 ƒ EuroChoices 8(3) ª 2009 The Authors Journal compilation ª The Agricultural Economics Society and the European Association of Agricultural Economists 2009
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Transcript of Sustainability of Business Relationships in EU Agri-food Chains and Opportunities for Improvement...
parlonsgraphiquesChristian Fischer, Monika Hartmann, Philip Leat, Cesar Revoredo-Giha, Nikolai Reynolds, Maeve Henchion,Luis Miguel Albisu and Azucena Gracia
Sustainability of Business Relationships in EU Agri-food Chains and Opportunities forImprovementPerennite des relations commerciales dans les filieres agro-alimentaires de l’Unioneuropeenne et ameliorations possiblesNachhaltigkeit von Geschaftsbeziehungen in den Agri-Food Chains der EU undMoglichkeiten zu deren Verbesserung
In an increasingly liberal and globallycompetitive environment for agri-foodmarkets we are witnessing greater priceinstability in product and factormarkets, technological advances thatenable the tracing and tracking ofgoods and increasing consumerconcerns about quality, safety andvariety of products. In such anenvironment, effective businessrelationships in vertical supply chainsare thought to: (a) reduce uncertaintye.g. by securing a more stable inflow oforders and increasing quality and safetyassurances associated with inputs; (b)improve access to crucial resources e.g.capital, specialised skills or innovations;and ⁄ or (c) raise business productivitye.g. through improved decision-makingor enhanced employee loyalty. Thuseffective inter-enterprise businessrelationships can potentially boostcompetitiveness.
Evidence is presented here regardingthe perceived sustainability of businessrelationships and their maindeterminants along European agri-foodchains – mainly composed of SMEenterprises. It is based on an extensivesurvey in late 2006 and early 2007(1,442 respondents) of the supply chainactivities of farmers, food processorsand retailers in three agri-food chainsand six countries: pig meat (Finland,Germany, Ireland, Poland, Spain); beef(Ireland, Poland, UK ⁄ Scotland); andcereals (Germany, Finland, Spain,UK ⁄ Scotland) (FOODCOMMConsortium, 2008). The survey used aquestionnaire developed after a seriesof expert interviews in each country.The sample of respondents was foundto reflect the existing populations ofagri-food chain businesses in terms ofscale and regional distribution.
Relationship sustainability can bedefined as longer-term, stable andmutually beneficial interactions andtransactions between chain participants.Sustainable business relationships arebased on joint economic interests, suchas price stability, security of supply andprofitability of interactions. Keyqualitative characteristics of suchrelationships are inter-personal factors,especially commitment, satisfaction andtrust with a business partner. Stabilityaspects, as reflected by a positive
collaboration history with a businesspartner also need to be considered(Figure 1).
Based on the dimensions in Figure 1,relationship sustainability was measuredfor European meat and cereals chains.Figure 2 shows that relationships wereconsidered as ‘somewhat good’ to‘good’. The results also reveal thatrelationship sustainability is generallyhigher at the processor–retailer level (5.6)than at the farmer–processor level (5.4).
Figure 1: Components of business to business (B2B) relationship sustainability
Figure 2: Relationship sustainability scores* by agri-food chain type and country
20ƒ EuroChoices 8(3) ª 2009 The Authors
Journal compilation ª The Agricultural Economics Society and the European Association of Agricultural Economists 2009
A technique known as StructuralEquation Modelling was used toestimate the connection betweenrelationship sustainability and possibleinfluences (Figure 3). The keycontributor was found to be effectivecommunication, defined by twocomponents, adequate communicationfrequency and high information quality.This was followed by existence ofpersonal bonds and equal powerdistribution between buyers andsuppliers. An important negative impactwas key people leaving.
Figure 4 shows that the relativeimportance of these determinantsdiffers: across the countries studied;between the two stages of the agri-foodchain, upstream – between farmers andprocessors; and downstream – betweenprocessors and retailers; as well asbetween the commodities investigated.It shows the importance of effectivecommunication for relationshipsustainability for all of the countries,chain stages and commodities analysed.
However, effective communicationseems slightly more importantdownstream than upstream, and in themeat chain relative to the cereals chain.Personal bonds are also of widespreadrelevance, although apparently not inSpain. Equal power distribution isinfluential for sustainable relationshipsin all countries except apparently inIreland and Poland. Key people leavingis seen to have a negative impact onchain relationships in Finland, Germanyand Ireland, particularly in the upstreampart of the chain, and in the meat chainrather than the cereals chain.
The results of the FOODCOMMproject indicate that to achievesustainable relationships in Europeanagri-food chains, mainly composed ofSME enterprises – farmers, processorsand retailers are well advised to:
• maintain and regularly seek toimprove communication withtheir core business partners;
• acknowledge that businessrelationships have a personaldimension that is potentiallysignificant and that investingin personal relationships withsuppliers and customers maywell be rewarding;
• be aware of the harmful effectof key staff leaving and thus toimplement measures aimed atmitigating this risk;
• recognise that equal powerdistribution is likely to have apositive impact on businessrelationships.
Acknowledgement
This publication derives from theEuropean Commission 6th FrameworkProgramme research project, KeyFactors Influencing EconomicRelationships and Communication inEuropean Food Chains (FOODCOMM,SSPE-CT-2005-006458).
Further Reading
n FOODCOMM Consortium (2008).Key factors influencing economicrelationships and communication inEuropean food chains. Websiteproject available at http://www.foodcomm.eu.
Christian Fischer (MasseyUniversity, New Zealand).E-mail: [email protected]
Monika Hartmann (University ofBonn, Germany).E-mail: [email protected]
Philip Leat and Cesar Revoredo-Giha (SAC, UK).E-mail: [email protected],[email protected]
Nikolai Reynolds (Synovate,Germany).E-mail: [email protected]
Maeve Henchion (AFRC - Teagasc,Ireland).E-mail: [email protected]
Luis Miguel Albisu and AzucenaGracia (CITA, Spain).E-mail: [email protected],[email protected]
Figure 3: Determinants of relationship sustainability
Figure 4: The impact of each determinant (standardised regression weights) bycountry, chain stage and commodity
ª 2009 The Authors EuroChoices 8(3)ƒ 21
Journal compilation ª The Agricultural Economics Society and the European Association of Agricultural Economists 2009
