Equal Exchanges Strategy Essay

Questions:

1. What are the key elements of Equal Exchange’s strategy? Which of the five generic strategies is the company pursuing? How has the cooperative integrated corporate social responsibility into its business strategy?

2. What are Equal Exchange’s competitively important resources and capabilities? Which of its resources have the greatest competitive power? Are any of its resources and capabilities able to pass all four VRIN tests for sustainable competitive advantage? Explain.

3. What does a SWOT analysis reveal about Equal Exchange’s ability to seize market opportunities and nullify external threats? Explain.

Answers:

1. The key strategy of the business strategy of Equal Exchange are-

• The company wanted to change its purchasing habits, which is from traditional to modern approach.

• It also educates its consumer about its product and the source and factor of its production.

• It focuses on encouraging its consumers to buy the fair trade products from the company.

• It adopted various marketing strategies to promote and expand its business.

The five generic strategies pursued by the company are-

• Maintain a cost leadership strategy.

• Adopt a wide differentiation strategy.

• Adopt a focused differentiation strategy.

• Maintain a differentiation strategy.

• Define the best cost provider strategy (Campbell, Edgar and Stonehouse, 2011).

Corporate social responsibility of a company means that the company should not only maintain its profitability position but also practice its business practices morally and ethically. The main aim of corporate social responsibility in Equal Exchange is to provide high quality and fine products to its customers. Some of the objectives of CSR are-

• Maintain long run trading relationships.

• Make payment of wages and fair prices.

• Prevent child labor and forced labor.

• Develop gender equality, workplace non-discrimination.

• Maintain proper working hours and safe working conditions.

• Develop transparency and traceability (Reuvid, 2011).

2. The important resources and capabilities of Equal Exchange helps the company gets an edge competitively. While comparing the financial performance of the company with its competitor Thanksgiving Coffee, the income statements and balance sheets are compared. The operations of Equal Exchange are much bigger than Thanksgiving Coffee with its sales and costs is quite high and so is the net profit. Some of the resources of Equal Exchange, which has the maximum competitive power, are its total sales revenue, net profit, stockholders’ equity and fixed assets. The resources of the company can be used to expand its business with the introduction of new products like tea and chocolate. It also expanded its business, by providing ecotourism to cacao or coffee growing zones.

As per the VRIN tests the resources and capabilities of the company are-

• Valuable- This is to provide better value in respect to sales and costs.

• Rare- The resources are not rare in sense of demand.

• Inimitable- It cannot be imitable.

• No substitutable- The resources can be substituted by other resources (Chevalier-Roignant and Trigeorgis, 2011).

3. SWOT analysis of Equal Exchange are-

• Strength- Equal Exchange is successful in earning a double-digit revenue growth in coming years.

• Weakness- The change in the economy due to recession has affected the company adversely.

• Opportunity- Equal Exchange is using the opportunity of offering new products and services in the fair trade industry. This will help the company expand its business and remain a consistent business approach, which complies with its mission to maintain its profitability and its social responsibility to its customers, suppliers and farmers.

• Threats- The three threats of Equal Exchange which the company needs to handle efficiently are-

1. Prevent farmer exploitation.

2. Develop the poor US working conditions.

3. Need to improve consumer awareness (Createadvantage.com, 2015).

References

Campbell, D., Edgar, D. and Stonehouse, G. (2011). Business strategy. Houndsmills, Basingstoke, Hampshire: Palgrave Macmillan.

Chevalier-Roignant, B. and Trigeorgis, L. (2011). Competitive strategy. Cambridge, Mass.: MIT Press.

Createadvantage.com, (2015). Create Advantage | Home. [online] Available at: [Accessed 14 Jul. 2015].

Reuvid, J. (2011). Business insights. London: Kogan Page.

How to cite this essay: