The Significance of Business Policy from 1997

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This is a discussion paper from 1997.


Background


The significance of Business Policy


This first section starts by examining why the late 1990's might be an important era in environmental terms, for Business Policy and Food Policy. Taking, Britain as an example, Lowe and Goyder (1983) and Peattie (1995 p.5) have identified the 1880's, the 1920's, the late 1950's, the early 1970's and the late 1980's as stages in environmental concern. Each stage represents the end of a sustained period of economic growth.  These intervals have been presented as a cycle of environmental concern (Downes 1972). Arguably, this cycle is shortening with the late 1990's as the next landmark epoch in environmental terms.  Media coverage and societal concern should increase (Peattie 1995 p.75).  It is unclear what may cause another cycle of concern to begin. Although, it could be food miles causing air pollution and asthma. Alternatively, there may be a realisation that pesticides can be linked to cancer. Finally, BSE highlights the problems with factory farming. However, it is apparent that the concern of the late 1990's contrasts with the interest of the early 1970's:'' The emphasis now is on current underlying problems rather than on future forecasts. Moreover, it is significant that a decline in economic growth may not now reduce enthusiasm for environmental issues as would have been the case in the past. Finally, more businesses are now being affected by green issues than was the case in the early 1970's. SustainAbility suggest that environmental concerns started to influence  Agriculture and The Supermarkets from the 1980's while the Meat Industry was affected in the 1990's (Peattie 1995).


It could be that the advantages of supermarkets are beginning to be outweighed by their drawbacks (Independent 10/1/95). This leads to scenario 1 of a blighted high street. Many independent retailers are sent to the wall and with this traditional competition destroyed; the supermarkets can start exploiting their monopoly power by raising prices. The customer therefore loses (Independent 27/2/93). Alternatively, there is scenario 2 whereby the big supermarkets overreach themselves. They build far too many stores as competition intensifies and so they start to lose money. The value of their assets, mainly stores and land, plunges. Consequently, their balance sheets are shot through. The shareholders and the banks lose and the countryside is littered with decaying supermarket shells (Independent 27/2/93). The recognition that the costs of business may exceed its benefits could cause the nature of Business Policy to change. Arguably, Business Policy focuses on Total Customer Satisfaction having previously emphasised shareholder, employer or employee satisfaction. However, the focus could move to Total Stakeholder Satisfaction (Covey 1995). If the basis of competition changes, towards higher quality, as envisaged by Planet Organic then the importance of Stakeholder Theory will have been demonstrated. "There is no such thing as good, cheap food and the reality that producers, retailers and the public are finally faced with is that the nation will suffer at the hands of poor quality food (Retail Week 25/4/97). There is a need to recognise the environment as a stakeholder. "When the environmental trends change, the once successful response may no longer be appropriate" (Covey 1995). Competitors are also important stakeholders. There is a need to stop seeing them as opponents which is relevant to the second scenario. The problem is that Business Policy is based partly on concepts that originate from military warfare. The word "strategy" derives from the Greek word "strategos" which roughly translates as "the art of the general". "Concepts of ... eradicating the enemy and disregarding the environmental consequences, are seen as acceptable in business, just as they are in battle. However, the business and warfare analogy is flawed" (Peattie 1995 p.142-3). For example, The Marketing Director, of one of the supermarkets, describes his main competitor as "public enemy number one" (Marketing 1/5/97). This is unsurprising but it does not specifically address the problems of the old and poor who have problems over where to buy their food (Independent 10/1/95). Increasingly households, in inner cities, are without easy access to shops selling fresh food. These areas are described as "food deserts" where local shops are struggling against supermarkets (The Times 5/11/97).


A system is needed which allows food retailers to regard fellow grocers as colleagues rather than competitors.  If a shop sold much more than another then it could damage its prospects and those of its employees.  Should the fellow grocer go out of business it would make life difficult for people who found it more convenient to shop with them (Douthwaite 1996).

 


The importance of Food Policy


 

From the above analysis it is clear that the food industry does not operate in isolation. Food retailers need to look at the broader issues, such as the environment, as these will help explain the decline in consumer confidence. It is suggested that "consumer confidence in food is at rock bottom and (that) something positive has to be done to improve confidence". Although food retailers feel that they have been doing a good job they believe that they have been let down by MAFF (Marketing Week 22/5/97). The food industry has realised that it is not in its interests to tolerate lax regulation regarding intensive agriculture (Marketing Week 22/5/97). This demonstrates the interdependent nature of the food industry and underlines the importance of the stakeholder concept.

 

Also, the progress that the food industry has made can be questioned. Since the war an attempt was made to reduce the dependence on imported supplies of food. "The wartime realisation that the country could not feed itself, food rationing and no longer being able to rely on cheap imports from the Empire all encouraged Industrial Farming" (World News No. 3). In the late 1990's the same dependence on imports is occurring again with organic food being introduced. "Nearly 70% of our organic food ... is imported (because) only 0.3% of Britain's farmland is organically certified" (World News No. 4). Consequently, Sainsbury's has encouraged more of its suppliers to convert to organic farming methods (The Food Programme 4/8/97). The problem is that food retailers have been lobbying the government for increases in organic farming when they could have contributed to funding themselves.

 

However, the supermarkets are constrained by financial short-termism which hinders future investment. Retailers are encouraged to stock profitable products such as vitamins which have a long shelf life, low space usage and high margins rather than organic food.  The problem may be that Business Policy has emphisised diversification and acquisition. However, acquisitions take up an inordinate amount of top management's time, which is taken away from the main business (Peters and Waterman 1982). Diversification has moved supermarkets away from their area of distinctive competence; food retailing (Ogbonna 1992). This may explain why the supermarkets have not invested in their own suppliers. This leaves them in a weak position if the consumer demands more organic food. Asda's view could leave them exposed. "At the moment, we don't think the demand for organic goods justifies the effort in sourcing. If our customers generally wanted it, then we'd source and supply it". However, in the future it may be difficult to supply the demand given the small level of organic farming being done at present (Retail Week 4/7/97). Already, Sainsbury is suggesting that the U.K. is behind in satisfying demand (SuperMarketing 1/8/97).

 

The risk is that people may suspect that they are only getting the appearance of quality and are being denied the underlying goodness of the food. This may lead to a scenario 3: Food scares encourage consumers to demand more organic food which the supermarkets are unable to provide. This results in increased imports and higher prices than if the food was grown in Britain. 

 

The Issue of Consumer Sovereignty

 

The marketing concept has been criticised for being unrealistic.  For example, if the marketing concept was widely held and effectively put into practice, consumers would not need to mount campaigns against products or companies in order to achieve satisfaction (Peattie 1995 p.99). Marketing can also be criticized from a social perspective. Tomlinson (1990) suggests that "many people on low incomes are effectively disenfranchised from the consumer society". Also "issues of marketing style have overwhelmed issues of substance so that real performance differences between products are masked". A second criticism of the marketing concept is that it is too reactive. For example, a chief executive of one of the major supermarket's has said: "our shoppers want to buy it (beef) ; the industry should stop squabbling and get on with giving customers what they want" (Independent 16/5/96). The criticism is that marketing of this kind is not being sufficiently proactive. For example, it is not investigating the provision of organic alternatives. Moreover, it assumes that business knows what the customer wants. Yet one moment the consumer sees cheaper meat as an index of progress, the next they are unhappy at the hidden impact of animal welfare (Independent 3/9/95). There is a need to challenge the assumption that businesses really care about customer needs and understand how to meet them (Peattie 1995 p. 101). The rhetoric that a marketing strategy is what the consumer wants needs to be seen in the context of the reality; that "the dream for business: is not choice but predictability of consumer behaviour". Proctor and Gamble and Unilever have influenced The Supermarkets thinking on consumer behaviour. "The most important lesson was how to change customer attitudes and behavior and what to do when customers are going in one direction and you want them to go in another" (Observer 8/12/96). Although large grocers wish to portray themselves as serving the customer ; there is also the element of wanting to lead the consumer. The problem is that The Supermarkets may want to lead people away from organic food if they are having problems satisfying demand. Thus there could be a conflict between the aims of the grocers and the framework in which they operate.  


The assumption that consumers always know their needs is another assumption which needs to be challenged. "In relation to environmental issues, consumers' lack of understanding of the problems and potential solutions makes it difficult for adequate consumer led initiatives". The inference is "that companies should make information and product alternatives available to consumers to allow them to make a choice - an informed choice. At present, food labelling often gives consumers a false impression of the fat and sugar content of foods" (Peattie 1995 p.101).


To summarise, the issue of consumer sovereignty; "marketing is concerned with the satisfaction of consumer needs for the organisations' own ends so it is blind to the well being of customers. The answer to this blind-spot is the societal marketing concept and the introduction of the concept of corporate social responsibility" (Peattie 1995). This returns the discussion back to the theme of Total Stakeholder Satisfaction (Covey 1995) which seems to be an improvement over the idealised model of consumer sovereignty. "For consumers to be sovereign, they would have to have a wide range of options, an unlimited amount of information and an unlimited amount of money. They would also have to be immune to temptation". Furthermore, the abundance of information may cause an overload which will not enhance decision making (Lang and Gabriel 1995).

 

References


Arnold, Helen, (Going back to our roots- SuperMarketing 1/8/97) p.18-20

Bentley, Stephanie, (A Grubby Business - Marketing Week 22/5/97) p. 38-41

Brown, Chris, (Out of this World News - No. 3 / September 1996) p.8

Brown, Lynda (Out of this World News - No. 4 / February 1997) p.9

Covey, Stephen, (3/95), Executive Excellence p.3-4

Douthwaite, R.(1996) , Short Circuit, Green Books, p.342

Downes (1972) in Peattie (1995) p.4-5

Elliot, Renee (Retail Week 25/4/97) p.8

Elliot, Valerie (The Times 5/11/97)

Hosking, Patrick (Store Wars: will we all be losers ? Independent 27/2/93)

Independent (16/5/96)

Lang and Raven (Cheap Food at a Huge Price - Independent 10/1/95)

Lang and Gabriel (The Unmanageable Consumer, Independent 3/9/95)

Lang and Gabriel, 1995, The Unmanageable Consumer, Sage, p.36-8

Lee, Julian (Marketing 1/5/97) p.2

Lowe and Goyder (1983) in Peatte (1995) p.4

Ogbonna, Emmanuel, (1992 in Reassessing Human Resource Management edited by Blyton &Turnbull) ch. 5

Peattie, K. , (1995), Environmental Marketing Management, Pitman

Peters T. and Waterman R., (1982), In search of Excellence, Harper Collins, p. 293 Porter, John (Retail Week 4/7/97) p.12

SustainAbility in Peattie (1995) p.74

 

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