I. Executive Summary

Equal Exchange is a for-profit Fair-trade worker-owned. concerted company. Founded in 1986. it is the oldest and largest Fair Trade java company in the United States. Equal Exchange began with $ 100. 000 as started up financess and a 2. 000-quare-foot room in Boston’s South End. It purchased java beans from small-scale husbandmans at above-market monetary value in Latin America. Initially. EE relied on other roasters and baggers to fix the premium java beans. It sold to natural nutrient grocers. epicure stores. eating houses. and non-profit organisations. The company’s laminitiss wanted to assist famers acquire a better. more stable monetary value and. at the same clip. take advantage of the turning consumer demand for higher-quality “specialty” java. However. after 25 old ages in concern. and 10 of which were spent as the lone just trade company in the java industry. Equal Exchange’s enormous success seemed to hold come to a screeching arrest. If the impact of monetary value additions is excluded. for a 2nd twelvemonth in a row. its grosss have grown merely 2 per centum.

This is barely acceptable comparing with the double-digit growing it had been through for the old 15 old ages. Additionally. over the past few old ages. consumers have begun to demo a strong desire to buy merchandises from local concerns. therefore increased competition from local roasters. Furthermore. there is a major push by companies to offer a broad assortment of green. organic. and wholesome nutrient merchandises. There are so many new enterprises developing and it may be possible that just trade merchandises will non stand out so much any longer. As a consequence. Equal Exchange is likely traveling to neglect into the ruddy zone in following few old ages. if nil is changed. Since EE has become a celebrated trade name. I extremely recommend EE’s staff to go on spread out its possible in bring forthing new merchandises and get downing to offer service. in order to work out listed jobs.

More specifically. in concern scheme. EE need to maintain following its wide distinction scheme. However. it needs to make more merchandises in order to be able to vie with many rivals. EE has been taking customers’ trust in its merchandises. so that bring forthing new 1s would convey its clients into sing them no affair what. There were still assorted reasonably traded goods that EE did non offer. and they might go preferable merchandises. In corporate scheme. if EE choose to get down offering service. this would be consistent with the company’s mission such as ecotourism to java or cacao turning zones to back up those communities.

II. Introduction

In 1983. Rink Dickinson. Jonathan Rosenthal. and Michael Rozyne were all recent college alumnuss and working for a nutrient cooperative warehouse in the Boston country. They began to oppugn the system such as. “What if nutrient could be traded in a manner that is honorable and just. a manner that empowers both husbandmans and consumers? What if trade supported household farms usage of organic methods instead than methods that harm the environment? ” Almost at the same time they started to hear about groups in Europe who were making Fair Trade. The advocators of Fair Trade wanted to guarantee that the manufacturers of merchandises such as java. teas and cocoa would acquire a better monetary value for their harvests while back uping betterment in their environmental. societal and political conditions. Rink. Jonathan and Michael liked the thought. Harmonizing to Rink. they “were fundamentally nutrient co-op people. interested in linking little. local husbandmans with consumers to alter the market place. ” It was non their purpose to establish a company at that clip. They took the thought to the Board of Directors of the co-op warehouse.

One-half of the board supported the thought and half voted against it. It became evident to them that if they were traveling to prosecute their vision. they were traveling to hold to develop an organisation. Over the following three old ages they met one time a month to develop the programs and raise the capital for establishing their ain organisation. During that clip Rink said they used their occupations to larn about co-ops. little husbandmans. entrepreneurship. selling and “making errors. right and left. ” The nutrient cooperative gave them “a great environment to larn some skills” . In 1986. Rink. Jonathan and Michael decided to establish Equal Exchange ( EE ) . By that clip. their aspiration was “…to alteration the manner nutrient is grown. bought. and sold around the universe. ” The laminitiss decided to run into one time a hebdomad – and did so for three old ages — to discourse how best to alter the manner nutrient is grown. bought. and sold around the universe.

At the terminal of this clip they had a program for a new organisation called Equal Exchange that would be: A societal alteration organisation that would assist husbandmans and their households gain more control over their economic hereafters. A group that would educate consumers about trade issues impacting husbandmans. A supplier of high-quality nutrients that would nurture the organic structure and the psyche. A company that would be controlled by the people who did the existent work. A community of dedicated persons who believed that honestness. regard. and common benefit are built-in to any worthwhile enterprise.

Around 1991. Equal Exchange established itself as a Fair Trade forte java company. offering loyal nutrient cooperative clients a shop bin system with a full line of beans. decaf java. different joints. and flavored javas. By the terminal of the twelvemonth what had one time been the “pipe dream” of making $ 1 million in gross revenues had become a world. By 1994. Equal Exchange was a worker-owned co-op with 20 members—with sections. directors. and a turning figure of outside investors.

A polar early investing by the Adrian Dominican Sisters helped to alarm others that this project. nevertheless hazardous. might be worthy of outside fiscal support. Another exciting chapter in our history started in 1996. when Equal Exchange joined with Lutheran World Relief in a path-breaking coaction to establish what has now become our Interfaith Program. This major enterprise helped Equal Exchange create partnerships with communities of religion throughout the U. S. Over the following seven old ages more than 10. 000 folds across the U. S. began utilizing our Fair Trade java.

III. Assignment Question

1. Question 1

What are the strategically relevant constituents of Equal Exchange’s macro-environment? Are socio-cultural. environmental. economic. and other constituents of the macro-environment favourable to the Sellerss of just trade nutrient and drink merchandises? Does the industry offer attractive chances for growing? a ) Strategically relevant constituents of Equal Exchange’s macro-environment Political factors: There were no Torahs in the U. S curtailing the usage of the term “Fair Trade” on a merchandise labels. This makes it is a small hard for EE to turn out themselves overpowering their rivals. Economic conditions: In 2010. Fair Trade USA reported that there were over 9. 500 just trade-certified consumer merchandises being offered by 700 industry spouses in more than 600. 000 retail locations.

Paul Rice. the president and CEO of just Trade USA. said that in 2010 the just trade retail gross revenues market was $ 1. 4 billion in the U. S and $ 3 billion in Europe. Socio-cultural forces: EE developed advertizements. implemented public instruction runs. partnered with spiritual organisation. and created a school fund-raising plan. EE besides offered a broad assortment of just trade merchandise. Technological factors: EE was effectual in making messages about the beginnings of merchandises and where consumer dollars went.

For illustration. it used logo and labels that suggested consumers could hold a great cup of java or saloon of cocoa while experiencing good about them. It besides created a web site as a topographic point for consumers to link to the husbandmans who grew the merchandises they bought. Legal and regulative factors: Fair Trade USA has certain guidelines for take parting concern to follow. including EE. Fair trade certifiers agreed on eight basic rules. which are:

+ Long-term direct trading relationships
+ Prompt payment of just monetary values and rewards
+ No kid. forced or otherwise exploited labour
+ Workplace non-discrimination. gender equity. and freedom of association
+ Safe working conditions and sensible work hours
+ Investment in community development undertakings
+ Environmental sustainability
+ Traceability and transparence

B ) Are these factors favorable to the Sellerss of just trade nutrient and drink merchandises? This depends on the merchandise itself. though these factors do do merchandises are progressively imported over more than a decennary from 1998 to 2010. Some merchandises have great growing rate. such as tea ( 38 % ) . sugar ( 60 % ) . chocolate ( 67 % ) . and vanilla ( 97 % ) . On the other manus. some merchandises are non favourable to consumers. such as green goods ( 2 % ) . flower ( 0 % ) . and vino ( -63 % ) .

degree Celsius ) Opportunities for growing

The far trade motion caught on in 2000 when many companies began to follow the same way as EE – more specifically. into the concern of just trade java. Basically. the industry still offer really attractive chances for growing due to its growing rate. but it is rather hard to make those chances due to rivalry.

2. Question 2

Explain the competitory force per unit areas confronting the just trade nutrient and drink merchandises industry. What does a five-force analysis reveal about the nature and strength of the competitory force per unit areas confronting Equal Exchange? Which of the five forces is the strongest? Which of the five forces is weakest?

a ) The competitory force per unit area confronting the just trade nutrient and drink merchandise industry. Fair trade java was EE’s primary merchandise. accounting for 80 per centum of gross revenues in 2010. At that point. there were over 300 companies in the U. S that provided just trade java. EE directors admired the societal mission of some of these companies and even considered those who were genuinely committed to far merchandise to be friends. However. they were besides rivals.

There were two groups of rivals to EE. One category consisted of larger companies that competed in the high-end. organic java market. but besides got involved in just trade java. The other one were little. local. and regional rivals runing in different countries off the U. S. There are a batch of name can be pointed out. such as Starbuck. Green Mountain Coffee. Deans Beans. and Thanksgiving Coffee. With this much competition. EE certain had a great force per unit area in the industry.

B ) Five-forces analysis

Menace of new entrants: Since just trade nutrient and drink merchandises industry is a profitable market that output high returns. new houses would be attracted. But this is non a job for EE to concern. because it knows those husbandmans and their battles. However. when it came to rivalry. EE’s values provided a much different mentality than a typical concern. Menace of replacement merchandises: Coffee is a particular merchandise with hardly utility merchandise. so this is non truly a menace for EE. Bargaining power of clients: EE partnered with just trade protagonism organisations. such as Global Exchange. to make a countrywide public instruction run. In 1996. EE partnered with Lutheran World Relief to make something that ulterior became known as the Interfaith Program. and it raised alleviation financess for husbandmans in Nicaragua who were hit hard by Hurricane Mitch in 1998.

These partnership helped EE generate grosss. create good will within communities. and create consciousness among consumers about just trade merchandises. Dickering power of providers: EE’s promise to supply consumers with moderately priced. good quality nutrient. all while reasonably paying the husbandman who produced the goods was rather unlike most other companies. Intensity of competitory competition: As mentioned before. there are many strong rivals against EE. both as little and big 1s. Addition. the just trade industry is unfastened. so viing is ineluctable. Though EE do non mind excessively much holding many rivals. those 1s still create barrier for them to make more clients. To be concluded. menace of replacement is the weakest force and strength of competitory competition is the weakest force.

3. Question 3

What are the cardinal elements of Equal Exchange’s scheme? Which of the five generic schemes is the company prosecuting? How has the concerted incorporate corporate societal duty into its concern scheme?

a ) Key elements of Equal Exchange’s scheme

EE wanted to alter traditional buying wonts and do consumers more aware of where merchandises came from and who was responsible for doing them. At the same clip. it wanted to promote consumers to purchase more just trade merchandises. To make that. EE usage advertisement in packaging and labels. web site. and public consciousness. Besides. it created interfaith plan. applied fund-raising plan and outbid their rivals in footings of merchandise assortment.

B ) Generic scheme

EE follows wide distinction scheme. EE’s promise to plume consumers with moderately priced. good quality nutrient. Though it tried to maintain their monetary value lowest as possible. it still reasonably paid husbandmans rather a batch even if java monetary values in the world’s trade goods exchanges dropped below the just trade minimal monetary value. It besides focused on maintaining their quality on merchandises in any status.

degree Celsius ) Cooperative incorporate corporate societal duty

EE worked with fiscal establishments to give husbandmans pre-harvest loans with low-cost 8 to 9 per centum short-run involvement rates. Brokers typically offered loans at much higher rates of 25 per centum. EE besides guaranteed a one-fourth of each pre-harvest loan. It therefore shared the hazards associated with bad lucks. such as hurricanes. that could destruct a cooperative’s harvests. EE bought the java beans one time a twelvemonth. every bit shortly as they were harvested ( even though this tied up its capital in stock list ) . In footings of employee. EE wanted to cultivate first-class working relationships with its employees. Its directors believed that a democratic work environment in which employees shared duty for determination devising would take to higher degrees of occupation satisfaction. morale. and productiveness.

It made certain that the wage spread between the highest-paid director and the lowest-paid employee was sensible. Besides. EE sought to reconnect consumers with the husbandmans who grew their nutrient. When consumers saw a brand-name merchandise in the supermarket. EE wanted them to recognize that there was frequently a individual laboring off for small wage behind it. By raising such consciousness. the company hoped to direct consumers towards merchandises for which husbandman got paid higher monetary values so they could break back up their ways of life.

4. Question 4

What are Equal Exchange’s competitively of import resources and capablenesss? Which of its resources have the greatest competitory power? Are any of its resources and capablenesss able to go through all four VRIN trials for sustainable competitory advantage? Explain. a ) EE’s competitively of import resources and capablenesss Worker co-operative theoretical account: EE believed strongly in making better. healthier relationships with the Earth. with husbandmans. its workers. and with the consumer. Worker-owners enjoyed many rights and duties and democratically controlled the workplace. At EE. a co-executive manager. a roaster. a bagger. and a client service representative were equal. with one portion and one ballot per individual. This makes every employee of EE want to lend their best to the company.

Marketing schemes: EE wanted to alter traditional buying wonts and do consumers more aware of where merchandises came from and who was responsible for doing them. This leads to many well-crafting schemes. such as interfaith plan and fundraising. Supplier: Unlike other companies. EE wanted its providers. husbandmans specifically. to be paid more. non less. So. it sought out just trade-registered co-operatives that enabled small-scale husbandmans to pool their resources. increase their power in the market-place and portion the costs of upgrading their operations. These husbandmans were trained in how to get information on market tendencies and in how to cultivate high-quality harvests

. B ) Unique resources and capablenesss

The lone resource or capablenesss that is able to go through all four VRIN trial for sustainable competitory advantage is worker co-operative theoretical account. Value: It is hard to happen good employees. but it is much harder to maintain good employees to work for the company. That is the ground why edifice relationship between employees is really of import. and critical. EE’s worker co-operative theoretical account is demoing its cherished value for this portion. Rare: Treating everyone the same is truly rare. Normally. the higher-ups receive much more respect than lower staffs do. but EE deals nil like that. This barely can be found in any other company. which makes it a alone constituent. Inimitable: Human relevant is the lone 1 that is inimitable. EE’s worker co-operative theoretical account makes its workers feel comfy. as everyone is equal.

Therefore. employee trueness is guaranteed and untouchable from external conditions. Non-substitutable: Electrical engineering built up its image with equal employees. and no other capableness can replace this. EE likely is said to lodge with its worker co-operative theoretical account at anytime. and the manner around. It is difficult to happen another company which can use this theoretical account better than EE. 5.

Question 5

What does a SWOT analysis reveal about Equal Exchange’s ability to prehend market chances and nullify external menaces?
Strength
Experienced in the market
High societal consciousness
Technology up-to-date
Unique work theoretical account
Good fiscal public presentation
Failing
Lack of consumer consciousness
Unsatisfactory working status
Farmer development
Opportunities
Expanding concern
Offering new merchandises
Menaces
Many affluent rivals
Unstable market
Table 1: SWOT analysis of Equal Exchange

Electrical engineerings can utilize its strength to prehend chances and nullify menaces. More specifically. due to high societal consciousness and with engineering up-to-date. EE can easy spread outing its concern into other activity. such as services. Otherwise. it can bring forth new merchandises that have non been offered in just trade market. On the other manus. with experience in the market. EE can happen a manner to vie with rivals in the just trade market utilizing its good fiscal public presentation. 6.

Question 6

What is your appraisal of Equal Exchange’s fiscal public presentation and status? Is the company in good fiscal form? Why or why non. Use fiscal ratios in Table 4. 1 to assist back up your appraisal.

Figure 1: Equal exchange gross revenues growing

Since importing its first java container in 1986. EE had become the taking just trade trade name of nutrient and drinks in the U. S. This helped the co-operative achieve a tendency of double-digit gross growing. However. the recession that struck the U. S changed the mentality for concern. The fiscal information for the financial twelvemonth of 2006 through 2010 demonstrated EE’s growing and showed whether the co-operative was able to endure the economic downswing. Figure 1 demonstrates EE’s growing of gross revenues from financial twelvemonth 2006 to financial twelvemonth 2010. In 2006. success in many countries defined much of EE’s 14 per centum addition in grosss. which translated into an extra $ 2. 86 million in one-year gross revenues.

In peculiar. gross revenues were exceptionally strong in the West Coast part. Another cardinal subscriber to gross revenues was EE’s cocoa merchandises. which were a hit in 2006 because the quality cocoa market was seeing turning demand. or a “renaissance” . as EE called it. similar to what occurred with forte java 20 old ages prior. While this was happening. EE at the same time expanded its cocoa line to merchandises such as organic dark cocoa. organic batch cocoa. and organic cocoa sirup. This enlargement allowed the company to sit the turning demand for choice cocoa. EE besides introduced three new tea bagged merchandises. which helped increase tea gross revenues 35 per centum.

Till 2010. it is a difficult clip as java and cocoa monetary values continued to lift. EE was faced with a hard challenge of assisting husbandmans during this clip. supplying clients with stable monetary values. and keeping a net income border consistent with the co-operative’s ends. Gross saless totaled $ 36. 525. 856. This growing of approximately 2 per centum was comparatively level for the 2nd twelvemonth in a row. The growing experienced was due in portion to the noteworthy addition in EE’s direct gross revenues to nutrient co-operatives. This is something the co-operative did to avoid the usage of distributers.