Global Primary Food Chain
Food and Agricultural Trade, especially in northern Europe, has been highly protected for the last half-century or so. This is changing rapidly such that the agrifood industry will soon be subject to the same globalisation pressures so evident in every other industrial sector (from cars to pharmaceuticals).
Therefore, it is it vital that businesses operating in the Primary Food Chain, that are planning and implementing forward strategies take full account of the competitive threats and opportunities which are likely to arise (and from/to whom) as the market frees up.
The traditional approach is to carry out comparative cost and productivity studies and, while these are important, such studies on their own are inadequate and a much broader, holistic analysis of competition is needed. We believe that the time is right for a study is aimed at understanding the International Competitive Dynamics of the Primary Food Chain in livestock products.
By focusing on the Primary Food Chain (Farm Inputs, Farming and First Level Processing), we ensure that internationally tradable livestock products are the real objective. These drive world markets and trade (unlike live animals or liquid milk).
The study is aimed at the livestock Primary Food Chain and hence tradable livestock products. A truly holistic approach to competitiveness will be taken. This means recognising not just the importance to the chain of yield, labour cost, rents, productivity etc but also factors such as infrastructure, technology, quality of management, climate.
Hence we shall use a Competitive Dynamics approach (much along the lines of the IMD's model for evaluating the competitiveness of world economies).
The purpose is to enable participating companies and organisations to plan their own future strategies based on a real understanding of the competitive strengths and weaknesses, opportunities and threats posed by the major Primary Livestock Chains around the world (e.g. US pigmeat, New Zealand dairy, Brazilian chicken and Argentinian beef).
Its results will therefore be of value not only to primary food processors but also to the supply industry and farm businesses, in formulating strategy for the new competitive environment.
We also believe that this study will be valuable to policy makers, their advisers and Trade Associations. Through this holistic approach, policy initiatives which recognise the true competitive value, say, of primary processors, should deliver far more to the whole food chain than discrete initiatives which do not take full account of the whole competitive environment.
This then is the background to the study. Let us now look at how we will conduct it.
To provide substantive quantitative and qualitative insights into the relative competitiveness of major world Primary Livestock Food Chains in order that the participants (in particular) and the UK industry can:
3. The participants
We recognised very quickly that to be successful, such a study could not be based purely on data, nor just on desk research nor even on in-country visits by consultants -- though some of all of this is likely to be needed. To gain real understanding, we felt that the expertise and knowledge of professionals working in the key producer countries would be vital. Only in this way can we hope to ensure the required holistic approach.
Therefore, in putting together our approach to this study, we considered it vital to involve multinational companies with access to such expertise, on the ground, around the globe. At the same time, there are key organisations in the UK who have both an immediate commercial interest and a wider policy interest.
Against this backdrop, the following companies and organisations have been involved in the preliminary discussions of the study and have indicated their willingness to take it to the next step of a formal proposal:
4. Holistic Rationale
It is important to explain our rationale for taking this holistic approach and why the traditional one will not be enough.
4.1 Classic Approach Flawed
The classic solution would be to obtain Farmer/Industry Costings data from around the globe and compare the "Break-Even Cost of Production" in each major sector. Figures 2 & 3 show some of the types of data that are available quite readily; for example via the Internet. As soon as one starts delving into this data in any depth, questions relating to fair comparison arise very quickly.
Therefore, as a sole solution this is seriously flawed:
Accordingly, we believe that costings data by itself will not provide insights which are sufficiently detailed or actionable to meet the objectives of this study.
4.2 Competitive Dynamics
Competitive Dynamics is the term we use to convey this holistic approach which takes into account the wider range of factors, the concept of the interdependence of the links in the Primary Food Chain and the ability of a specific chain to respond to competitive pressures.
There are a number of ways in which the Competitive Dynamics of a specific chain could be evaluated:
Finally, we could develop a Competitiveness Model along the same principles (but not the same level of detail or the same criteria) as the IMD's world competitiveness model.
We believe that the first option is rather too simplistic and would make comparison anecdotal and insufficiently rigorous. The second option would give far better comparative insights. However, in order to give maximum insight, we consider the IMD principles to be the most valuable approach.
4.2.1 After IMD
Figures 5 & 6 illustrate the IMD principles.
Scores are applied to all the individual competitiveness criteria (259 in IMD's case). Each economy is then scored and these are combined by the IMD model into an overall score for the particular economy. These principles will be used to derive the holistic evaluation of competitiveness that is the thrust of this study
4.3 Rationale Concluded
This explains our rationale for a far more holistic approach to global competitiveness of the major Primary Livestock Chains around the world.
If you'd like to view a PowerPoint Presentation which
Participants in the study can obtain further project information, resources and download files from the International Competitiveness topic in the PMS Forum.