Fairtrade - A Competitive Imperative? : An Investigation to Understand the Role of Fair Trade in Company Strategy in the Chocolate Industry
Background: The rise in ethical consumerism has become evident through an increase in sales of fair trade products in recent years. Consumers are prepared to pay a premium for fair trade chocolate, and with a steady future growth in the fair trade movement, this is an attractive market for new entrants. Of particular focus are the Swedish and German markets for fair trade chocolate as they show promising growth rates and interest in this field.
Problem: The chocolate industry is very competitive, and the observation that consumers reward companies that act socially responsible presents an opportunity for ethical companies to compete. This is attractive for entrepreneurial firms, but there exist numerous motivations why firms choose to engage in fair trade.
Purpose: The purpose of this thesis is to understand the role of fair trade in corporate strategy (either in partial or entire assortment), its relation to entrepreneurial opportunity-seeking behaviour, and examining how the strategic resource of Fairtrade certification is used to gain competitive advantage.
Method: A qualitative interview study was applied, and ten chocolate companies active in the Swedish and German markets were included in the sample. Data was collected through semi-structured interviews (four telephone interviews and six email responses), and complemented with secondary data from company websites and press releases. The interviewees were mainly representatives of the marketing department and CEOs. Empirical findings were analysed using relevant models and theories, and organized under the two categories of ‘firm use of fair trade’ and ‘visibility of fair trade.’
Conclusion: The findings in this thesis show that there are multiple reasons why chocolate companies engage in fair trade including reputation, spreading awareness, proactive opportunity-seeking behaviour, strategic differentiation, as a means of communicating to producers and consumers, and for quality insurance of raw ingredients. Fair trade engagement is visible through its role as a social resource. This image is created by ethical and social commitment and wholeness in values, non-exploitative respectful business network relationships, consistency in firm behaviour, and through wealth creation in terms of benefiting the firm, society, and the environment. The Fairtrade label is not imperative to achieving a state of competitive advantage, but can inevitably lead to that result through the firm wholeness created by mission- and vision-driven values.
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