Competing on attributes other than price
Goal
The objectives of this research are to:
- understand the degree to which the various components of non-price competition faced by New Zealand exporters on international markets is already occurring;
- determine which non-price attributes should be measured and monitored; and
- determine a method for measuring or monitoring non-price attributes in a way that is meaningful.
Context of project
MAF needs baseline indicators to measure its performance on one of its target outcomes - “Policies and interventions to foster innovation and growth in the sectors.” Volume-driven sector growth (e.g. intensification) is under increasing pressure from environmental issues. Value increase, the other source of sector growth, requires greater differentiation and perception of value added which in turn may require innovation and greater product sophistication. Moving down this route has long been an objective of policy, but progress to date has been constrained by many factors. Once a greater understanding is obtained on non-price competition, targeted policy intervention on these attributes may be helpful to exporters and the New Zealand economy as a whole.
Approach
The research has three phases. Based on an international literature review, Phase 1 developed an analytical framework for the food and beverage and forestry value chains that highlighted the generic drivers of non-price competition and the strategic responses of industry. Phase 2 used four case studies (kiwifruit, medium density fibreboard, lamb and whole milk powder) to validate the analytical framework. The case study approach involved developing key questions from the analytical framework, reviewing published material such as annual reports, undertaking a gap analysis and conducting semi-structured interviews with key industry participants to address the gaps. Phase 3 looked at the results of the application of the global food value chain analytical framework and the four case studies and drew on the results of these case studies to refine the model. To monitor performance in non-price competition, a filtering process of indicators resulted in the identification of ten key indicators broadly classified as lagging and leading indicators.
Outcomes
The conclusions from this research on non-price competition are:
- The Global Food and Forestry Value Chain analytical framework can be used as a tool for understanding competing on attributes other than price. It highlights generic drivers and strategic responses where policy intervention (government or industry) can play a role in increasing the capacity of New Zealand to compete on attributes other than price. The broadly similar result achieved from the use of the analytical framework in the four case studies confirms its general application across the food and forestry sectors.
- The filtering process of indicators has resulted in the identification of lagging and leading indicators. Attempts to quantify the five lagging indicators for the case study products generated mixed results. The paucity of data at the level of detail required for the key indicators explains the challenge in quantifying the lagging indicators. Leading indicators measure strategic responses that have a role in influencing successful outcomes of non-price competition. The quantification of leading indicators requires primary or proprietary data. However, certain organisations already conduct surveys that may provide data on some leading indicators. MAF’s access to the more reliable World Trade Atlas could potentially address the challenge of quantifying lagging indicators (but this was not attempted in this research) and MAF could work out an arrangement with survey sponsors to access information on leading indicators.
- Further research should look at the usefulness of leading indicators as predictors of good outcomes in non-price competition. This could be done by using multivariate analysis on leading indicators over a period of time.
The lessons generated from the case studies have themes with policy implications such as:
- Industry coordination can be important in achieving locus of power (and profits) in the value chain.
- A robust platform in global sourcing of product may be important in satisfying customer requirements.
- Constant innovation is necessary to compete in a dynamic marketplace.
- Strategy execution is as important as strategic choice.
Summary
The goal of this research is to understand the dynamics of non-price competition faced by New Zealand exporters in the food and forestry sectors and to determine and measure relevant non-price attributes. Once a greater understanding is obtained on non-price competition, targeted policy intervention on these attributes may be helpful to exporters and the New Zealand economy as a whole.
The three phases of this research involved the development of an analytical framework, undertaking case studies on four disparate products (kiwifruit, medium density fibreboard, lamb and whole milk powder) to test the framework and enhancing the analytical framework into a generic framework with lagging and leading indicators.
The Global Food and Forestry Value Chain analytical framework highlighted generic drivers and strategic responses where policy intervention (government or industry) can play a role in increasing the capacity of New Zealand to compete on attributes other than price. Through the case studies, lagging and leading indicators have been identified. Attempts to quantify the five lagging indicators for the case study products generated mixed results. The paucity of data at the level of detail required for the key indicators explains the challenge in quantifying the lagging indicators. On the other hand, the quantification of leading indicators requires primary or proprietary data that could be sourced from surveys conducted by other organisations. The case studies generated lessons with policy implications in the areas of industry coordination, global sourcing, innovation and strategy execution.
Publications
None to-date but this research has been put forward as a contributed paper to the 51st Annual Conference 2007 of the Australian Agricultural and Resource Economics Society.
Contact for Enquiries
Manager, Innovation Policy
Ministry of Agriculture and Forestry
MAF Policy
PO Box 2526
Wellington
New Zealand
Tel:+64 4 894 0618
Fax:+64 4 894 0741
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