Case Study Description of Fair Trade USA: Innovating for Impact
Paul Rice knew that Fair Trade could do more, much more. While the model had benefited approximately 10 million people in developing countries, they were a small percentage of the 2 billion people worldwide who lived on less than $2 day. Fair Trade was not charity. It was a certification model that had started around coffee and ensured that money flowed back to the people who grew the coffee, giving them a "Fair Trade" price. As president and CEO of Fair Trade USA (FT USA), the leading third-party certifier of Fair Trade products in the United States, Rice had reason to be proud. Since its founding in 1998, the nonprofit had grown Fair Trade CertifiedTM coffee from 0 to 5 percent of the U.S. coffee market. Fair Trade coffee had made tremendous inroads with large roasters such as Starbucks and Green Mountain as well as mainstream brands like Dunkin' Donuts. Rice, however, was not satisfied with 5 percent of the U.S. coffee market. He wanted to take Fair Trade to scale-widespread adoption in terms of volume, market share, consumer awareness, and impact for farmers. And Rice was confident that he knew how to get there. This case explores FT USA's market based approach and philosophy for increasing the reach and impact of Fair Trade. It reviews the concept of Fair Trade and the three pillars of the "Fair Trade for All" strategy: expand Fair Trade to include certification for large coffee growing estates and independent smaller farmers, invest in cooperatives to make them more competitive, and increase consumer awareness. The case highlights the controversy that ensued from FT USA's 2012 split from the international certifying body and why Rice believes that this was the right decision.
Swot Analysis of "Fair Trade USA: Innovating for Impact" written by Rick Aubry, Davina Drabkin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fair Trade facing as an external strategic factors. Some of the topics covered in Fair Trade USA: Innovating for Impact case study are - Strategic Management Strategies, Communication, Leadership, Strategic thinking, Strategy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Fair Trade USA: Innovating for Impact casestudy better are - – challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, wage bills are increasing, technology disruption, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , there is backlash against globalization, etc
Introduction to SWOT Analysis of Fair Trade USA: Innovating for Impact
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Fair Trade USA: Innovating for Impact case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fair Trade, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fair Trade operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Fair Trade USA: Innovating for Impact can be done for the following purposes –
1. Strategic planning using facts provided in Fair Trade USA: Innovating for Impact case study
2. Improving business portfolio management of Fair Trade
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fair Trade
Strengths Fair Trade USA: Innovating for Impact | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fair Trade in Fair Trade USA: Innovating for Impact Harvard Business Review case study are -
Analytics focus
– Fair Trade is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Rick Aubry, Davina Drabkin can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Strategy & Execution field
– Fair Trade is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Fair Trade in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Fair Trade is present in almost all the verticals within the industry. This has provided firm in Fair Trade USA: Innovating for Impact case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Fair Trade has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Fair Trade USA: Innovating for Impact - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Fair Trade is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Fair Trade is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Fair Trade USA: Innovating for Impact Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Fair Trade has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fair Trade has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Strategy & Execution industry
– Fair Trade USA: Innovating for Impact firm has clearly differentiated products in the market place. This has enabled Fair Trade to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Fair Trade to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Fair Trade has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Fair Trade is one of the leading recruiters in the industry. Managers in the Fair Trade USA: Innovating for Impact are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Fair Trade has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Fair Trade USA: Innovating for Impact HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Fair Trade
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Fair Trade does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Fair Trade is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Fair Trade USA: Innovating for Impact | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fair Trade USA: Innovating for Impact are -
Workers concerns about automation
– As automation is fast increasing in the segment, Fair Trade needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Increasing silos among functional specialists
– The organizational structure of Fair Trade is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Fair Trade needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fair Trade to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Fair Trade USA: Innovating for Impact, in the dynamic environment Fair Trade has struggled to respond to the nimble upstart competition. Fair Trade has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Fair Trade, firm in the HBR case study Fair Trade USA: Innovating for Impact needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Fair Trade has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Fair Trade USA: Innovating for Impact should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Fair Trade USA: Innovating for Impact, it seems that the employees of Fair Trade don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Interest costs
– Compare to the competition, Fair Trade has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
No frontier risks strategy
– After analyzing the HBR case study Fair Trade USA: Innovating for Impact, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Fair Trade has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Need for greater diversity
– Fair Trade has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners
– Because of the regulatory requirements, Rick Aubry, Davina Drabkin suggests that, Fair Trade is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Opportunities Fair Trade USA: Innovating for Impact | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Fair Trade USA: Innovating for Impact are -
Buying journey improvements
– Fair Trade can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Fair Trade USA: Innovating for Impact suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Fair Trade can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fair Trade can use these opportunities to build new business models that can help the communities that Fair Trade operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fair Trade in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Fair Trade in the consumer business. Now Fair Trade can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fair Trade is facing challenges because of the dominance of functional experts in the organization. Fair Trade USA: Innovating for Impact case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fair Trade can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Fair Trade USA: Innovating for Impact, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fair Trade can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Fair Trade can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Fair Trade to increase its market reach. Fair Trade will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Fair Trade can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Building a culture of innovation
– managers at Fair Trade can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Manufacturing automation
– Fair Trade can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Fair Trade USA: Innovating for Impact External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Fair Trade USA: Innovating for Impact are -
Increasing wage structure of Fair Trade
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Fair Trade.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Fair Trade needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Fair Trade can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fair Trade can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Fair Trade USA: Innovating for Impact .
Regulatory challenges
– Fair Trade needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Technology acceleration in Forth Industrial Revolution
– Fair Trade has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Fair Trade needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fair Trade in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Stagnating economy with rate increase
– Fair Trade can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Fair Trade needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Fair Trade high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Fair Trade can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Fair Trade.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Fair Trade in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Fair Trade USA: Innovating for Impact Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Fair Trade USA: Innovating for Impact needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Fair Trade USA: Innovating for Impact is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Fair Trade USA: Innovating for Impact is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Fair Trade USA: Innovating for Impact is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Fair Trade needs to make to build a sustainable competitive advantage.
