Importance of strategies for achieving
goals in near future

Respondents were asked to rank the
importance of various strategies in achieving their financial business goals in 1998 and
beyond. Here we take a polarized view (the first and/or second most important factors) of
the results from supplier category, turnover and country differences.

By supplier category

More suppliers to major outlets (39%) and
producers (34%) than wholesalers (15%) ranked closer integration with customers and
suppliers as the most important issue. Adding the number of respondents who ranked their
second most important strategy, improve product quality becomes the highest ranked issue
across all sectors (from 61% to 69%).

Wholesalers ranked product quality as much
more important than producers and suppliers to major outlets. Primary producers were less
concerned with new product innovation than wholesalers and suppliers to major outlets who
ranked this issue highly within their top two. Suppliers to major outlets ranked new
routes to market as more important than other suppliers. Primary producers are more
concerned with improving business flexibility to change than other sectors.

Overall, it is clear that the three most
important issues concerning food suppliers are partnerships, product quality and business
flexibility. Retailers in general, and the major grocery retailers in particular, are
seeking to increase their dominance of the consumer supply chain. They seek to have
closer, but fewer, trading partners. Therefore, for a supplier to survive in the long
term, it must be in partnership with its retail customers. This is not necessarily a
comfortable position to be in, as experience shows that the retailer tends to dominate the
relationship – and usually gets the larger share of the benefits.

Consumer expectations are continuing to
rise. We are all wanting more for less! We want more choice, higher quality and lower
prices. This applies to all industry sectors – not just food. But, in the food sector,
quality is exceptionally important. The food scares of the last few years show just how
sensitive consumers are to quality and health issues. The negative impact of a quality
problem can have serious consequences for the food industry. Therefore it is not
surprising – and indeed is reassuring – that the food industry considers this to be one of
the top three important issues.

Quality in the food chain is the
responsibility of all parties in the chain, because the weakest link determines the end
result. This is one of the driving forces in the development of partnerships. In order to
achieve high standards, while at the same time driving costs out of the chain, companies
are working closer together – sharing information, agreeing on standards and developing
common monitoring systems.

Working together means that each partner
has to be more flexible in the way it operates. As businesses seek to work together they
have to adapt their own processes to support integration. As the rate of change increases,
much of it driven by technology developments, each player needs to become more nimble.
Today, this is already recognized by a large percentage of companies in this survey.

By turnover

More small companies (£20-50m/$32-80m
annual sales) and large companies (£100m/$160m+ annual sales) ranked closer integration
with customers and suppliers as an important strategy issue. Medium sized companies (£50-
100m/$80-160m), however, did not rank this issue as highly. To improve product quality was
their most important issue.

Looking at the first and second most
important strategies together, closer integration is still the highest rated issue for
large companies (64%). Yet improving product quality becomes very important to smaller
companies (67%) and remains the most important issue for medium sized companies (70%).
Also, medium sized companies are much more concerned with flexibility than other
companies. Similar proportions of small, medium and large sized companies ranked new
product innovation as important.

The key issues of partnerships, quality and
flexibility are of equal concern to businesses of all sizes. Larger suppliers do have more
financial muscle, but even the global brand leaders recognize that the only way to improve
service and drive cost out of the total supply chain is to work together with their
customers and suppliers. The issue of quality applies to all members in a chain and is
independent of turnover.

Country differences for food

Comparing each country’s rankings
across issues some interesting differences are highlighted.

Fig. 1 – Strategies for achieving goals

In the UK, respondents ranked closer
integration with customers and suppliers as an extremely important issue compared to the
market average, along with Spain and Italy. UK respondents, on a par with France and
Germany, feel that business flexibility is much less important to them than it is to Italy
or the US.

There is no doubt that the concepts of
partnerships and supply chain integration are well established in the UK. Outside of the
US, the UK has the greatest experience of developing these relationships, much of which
has been led by the grocery retailers. A lot of the initiatives are still being developed,
so it is not surprising that these are at the top of most companies’ agendas.

Closer integration with customers and
suppliers was ranked very high in Spain compared to the market average. In contrast, new
product innovation ranked very low in Spain, along with those in Italy. The importance of
growth by mergers and acquisitions was not ranked by any Spanish company.

Although Spain does not have the same
amount of experience of partnerships as the UK, it has accepted the concepts with some
enthusiasm. The level of interest is high and the amount of activity is growing. It is
likely that Spain will have some of the best examples of partnerships in the near future.

Respondents in France feel that closer
integration with customers and suppliers is much less of an issue in their market compared
to the rest of Europe. However, improving product quality is much more of an issue in
France than in any other country. France, along with the UK and Germany, ranked improve
business flexibility to change below the market average. France has been much slower to
adopt the concepts of trading partnerships. Culturally, these are concepts that are not so
easy for companies to accept. The main exception is with the major grocery retailers, but
even here progress has not been very strong. However, there are signs that this is
changing. It is expected that significantly more partnership activity will take place in
the next three years or so.

When it comes to food, quality has always
been a high priority in France and the survey clearly reflects this. The lower level of
concern about business flexibility is consistent with the weaker focus on partnerships.
Again, there is an expectation that this will change over the next few years.

New product innovation is of great concern
to German respondents who ranked this issue much higher than other countries’
respondents. Germany, as well as France and the US, believe closer integration is less of
an issue than it is to other countries.

German respondents ranked improve business
flexibility to change well below the market average. It is in stark contrast to companies
in the US who ranked it very highly (while Spain is much closer to the market average).
New routes to market was ranked higher in Germany than other countries.

Similarly to France, German companies have
not embraced the concepts of partnerships and business flexibility. This has resulted in a
decline in investment in Germany by food companies and a stagnant market. It is not so
clear that Germany is about to enthusiastically take up the challenge of partnerships and
recognize the importance of flexibility. However, the survey shows that German companies
continue to focus on product quality, design and innovation that have been a strength for
many years.

Italian companies ranked closer integration
with customers and suppliers as more important than the market average showing much more
concern for this issue. Improving business flexibility to change is a major business issue
for Italy. It has been ranked significantly higher than any other issue among Italian

Looking at the top two most important
issues ranked by respondents from Italy, business flexibility (42%) remains the most
important compared to other countries. However, it is not as important to Italy alone as
improve product quality (86%) and closer integration with customers and suppliers (66%).
Compared to other countries new product innovation and new routes to market issues are of
much less concern to Italy.

Similar to Spain, Italy considers
partnerships as a critical strategy for business development. However, many of these
relationships are less formal than in the UK and US, and rely on a more flexible way of
working. Nevertheless, these are forming the basis on which firmer partnerships will
develop in the future.

With regards to closer integration with
customers and suppliers, the US is completely at odds with their UK counterparts on this
issue. Compared to other countries, the US does not see this as an important issue and
ranked it well below the market average.

In comparison, the US ranked improve
business flexibility to change as a very important issue well above the market average.
The US is slightly less concerned with new routes to market than the market average. Yet
growth by mergers and acquisitions is of much more concern to US businesses than in any of
the other countries surveyed. The US has had the greatest experience of partnerships, and
the survey confirms that these are now mature concepts.

Therefore, companies are not seeing this as
an important issue in its own right, but are now focusing more on making them work more
effectively by improving flexibility.

Partnerships take a long time to develop
and a lot of resources – both in financial and in people terms. Trust has to be built, and
with trust comes the desire and enthusiasm to work more closely together at all levels.
Therefore in the US, as partnerships have matured, the focus is moving to increasing the
flexibility between partners.