Monday, May 7, 2012

Enhancing Organic Food Strategy

This week's readings provided foundational definitions of strategies and how they play out in organizations. Porter suggests three main facets of strategy: position, trade-offs, and fit.  According to Porter (1996), “Strategy is the creation of a unique and valuable position, involving a different set of activities”, “Strategy is making trade-offs in competing” and “Strategy is creating fit among a company’s activities.” From the article I found the differences across positioning methods to be the most helpful in understanding how leaders shape strategies and why strategies change across time. Product positioning relates to forming a particular product image in the mind of the consumer. In traditional marketing terms, positioning consists of highlighting some characteristics of the product in order to achieve differentiations against competitors/substitutes and enhance competitive advantages. A good and sustainable strategic position is one that includes trade-offs with other positions.

Carrying Porters ideas into the world of organic food products allows us to see how these ideas are played out. According to the Organics Trades Association, the organic food industry generated $31 billion and grew by 9% in 2011. Organic food products are differentiated as regulated products defined by special labels. As a consumer of a variety of organic food products, it’s difficult for me to recall one specific go-to organic brand or product slogan. This is partly because as a graduate student I tend to be my price sensitive in my selection of organic foods. Organic foods use the “health” marketing angle to reach a variety of consumers, but not many consumers know the health differences between organic and non-organic. It’s easy for consumers to assume that chains like Whole Foods or Trader Joes only carry organic products, but this is not the case. Entry into the industry is difficult without sufficient capital, the ability to meet regulations, and a desirable product. Nevertheless, organic food products face constant competition from local food substitutes and bigger name brands that are misleadingly stealing organic food slogans without meeting organic certifications. As we see more strategies deployed related to health and well being (even in fast food restaurants) how long can organic foods solely focus their strategy on health? Using Porters advice how can the organic food industry continue differentiating itself in a way that is memorable for consumers? Given the growth of this industry even during the economic downturn, there is tremendous opportunity to increase organic food segmentation by pushing existing boundaries.

What Is Strategy? (Porter, Harvard Business Review, November-December 1996)
The Five Competitive Forces That Shape Strategy (Porter, Harvard Business)

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