Fair Trade Is The Business Model Changing Commerce Essay

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The concept of Fair Trade was born after the Second World War in Western Europe when charities started to buy handcrafts from Eastern European producers in order to support their economic recovery (Nicholls and Opal, 2004). Now, "Fair Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers - especially in the South" (EFTA - Fair Trade definition, 2008). The Fair trade Foundation is the independent non-profit organisation that licenses use of the FAIRTRADE mark on products in the UK. The Foundation was established in 1992 and since then it has continuously grown (FAIRTRADE History, 2008). Nowadays, the sales value of Fair Trade market products have an estimated retail value of £493 million, increasing from the 2006 figure of £290 million. This means a 127% increase by volume and 72% by estimated retail value (Fact and figures on FAIRTRADE, 2008). This huge rise is due to different influences such as political, academic, cultural and informational within the market. According to Strong (1997), the main aspect for this development has been the growth of ethical consumerism over the last thirty years. Moreover, as argued by Nicholls and Opal (2004), Fair Trade addresses its objectives through a market-driven commercial model that could drive a change in its commercial supply in order to meet the growing demand over the last years. Understanding and explaining it is fundamental for this research because it permits understanding of how Fair Trade has changed the market but also, if

and how the market has changed Fair Trade.

FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

In the recent past, many studies have been conducted about Fair Trade and how it is

helping producers in developing countries. This research has a different aim, trying to understand if these developments are changing the business model adopted by Fair Trade.

Furthermore, during the past semester, my interests have developed in trying to ascertain how a company can introduce its products into a new market, the strategies behind the growth of a firm and how an organisation can manage the distribution and supply channels in order to success.

AIMS AND OBJECTIVES

The aim of this research is to study the business model of the Fair Trade Organisation and its development in the last years, analysing the strategies and the policies adopted by the foundation in order to achieve its sales and revenues. Moreover, the study intends to look at the future suggesting developments for the next years.

The objectives are:

- to investigate the role of Fair Trade organisations in the marketplace;

- to analyse the development of the distribution policy of the foundation;

- to study the marketing strategies adopted by the organisations;

-to evaluate how Fair Trade products are framed and marketed to attract consumers;

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

- to assess the impact of ethical consumption on the business model of the Fair Trade

Foundation.

REVIEW OF KEY LITERATURE

The research is based on the analysis of the FAIR TRADE foundation, its policies, strategies and the possible change in the business model due its recent dramatic growth.

In order to study and analyse the concepts behind Fair Trade, a range of books are helpful. In particular, the ones by Nicholls and Opal (2004), Stiglitz and Charlton (2005), Litvinoff and Madeley (2007) and Ransom (2004) provide a good understanding and different points of views about the situation, what and how it is happening and what is going to happen in the future. In addition, a key source of information is the Fair Trade Foundation web site and the EFTA (European Fair Trade Association) web site which publish data and figures about the organisation and official papers that inform the research. Furthermore, many articles and papers have been written about this topic, creating a base from whichto understand the fair trade market, particularly the Fair Trade foundation.

In the literature about Fair Trade it is possible to conceptualise two different visions of it (Renard, 2003; Moore, 2005; Goodman & Goodman, 2001). The first sees Fair Trade as a way to improve the standard of living of some producers in the developing countries through fair trade relations while, the second, sees Fair Trade as a tool to change the current economic model, trying to modify the whole economy from a free trade into a Fair

Trade. Moreover, Taylor (2005) argues that Fair Trade promotes social change while

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

Brown (1993) suggests that it operates "in and against" the same global capitalist market

that it wants to change.

The aim of this research is not only to critically analyse the organisation but, also, to understand its marketing strategies and the reasons behind the determined policies. Moreover, the importance of the matter has been highlighted by Nicholls (2004) when he argues that Fair Trade addresses its objectives through a market-driven commercial model. Remarking on the essential nature of marketing analysis on this topic, the books written by Kotler and Keller (2006) and Doole and Lowe (2004) become very important because they allow us to understand the strategies, the service management and also the price strategy adopted by the organisation. Furthermore, in these books it is also possible to comprehend the basic role of customer satisfaction, customer value and loyalty in the success of each company.

In conclusion, the area of study is well covered by an ample literature on the subject matter. This helps in understanding the topic, in gaining a widerr view and a deeper comprehension about the strategies adopted by the organisation in its recent history.

RESEARCH DESIGN

For every research project, the methods adopted influence the reliability of the results achieved. For this reason, it is important, if not fundamental, to choose methods that suit the topic under investigation. Analysing the Fair Trade Organisation and its development

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

means adopting an explanatory approach in order to provide insights and understanding

into a particular area of business (Farquharson and Kilgore, 2007). The research is based on a single organisation and, the most common approach of this kind of analysis is a case study. Yin (1994) defines the case study as an empirical inquiry that investigates a current phenomenon within its real-life context while, according to Stake (1995), a case study is concerned with the complexity and the particular nature of the case in question. It is normally focused on a particular organisation, evaluating its development, culture and interaction with the external players.

The case study is usually adopted with a qualitative approach, which relies on the explanations concerning the business issues. Farquharson and Kilgore (2007) state that if a case study adopts qualitative methods, then the research should take an inductive approach. On the other hand, Snow and Anderson (cited in Feagin, Orum, & Sjoberg (1991)) argue that triangulation can occur with data, investigators, theories, and even methodologies. Yin (1994) asserts that triangulation can be needed in order to confirm the validity of the processes and, in case studies, this could be done by using multiple sources of data. According to Stake (1995), triangulations are defined as procedures that are used to ensure alternative explanations.

The legitimacy of the project is due to the capacity of the research to achieve both internal and external validity. For the case study, this methodology shows a high internal validity but the external validity could be considered restricted.

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

As previously mentioned, this case study will consider the Fair Trade organisation and its

business model. In order to do this, it is necessary also to study the customers, how they feel about the products and why they buy Fair Trade goods. Therefore, the research should also comprehend a quantitative approach by using some questionnaires that will provide the understanding of customers' feelings and behaviours.

Thus, in terms of its objectives, this research will adopt a multi-method approach with both qualitative and quantitative methods. Accordingly, it will try to exploit the advantages of each method and limit the disadvantages. Qualitative approaches often provide more depth into business research but it may have some limitations about the external environment. On the other hand, quantitative studies are much more objective but they tend to analyse the behaviour rather than the meanings (Farquharson and Kilgore, 2007).

Data Collection methods

In 2007, a TNS public survey commissioned by the Fair Trade Foundation revealed that, in

the UK, awareness of the FAIRTRADE Mark has risen to 57% of the adult population. It is not possible to study the whole population that uses these goods but, a simple random sample could be representative analysing all the different kinds of customers. Moreover, questionnaires are valuable tools for gaining quantitative information from the sample (McMillan and Weyers, 2007) dependent on how large the sample is. According to Robson

(2007), the most appropriate method for primary research is the questionnaire. In this

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

case, the tool could utilise multiple-choice questions, multiple response questions and also

Likert-scale questions1 (McMillan and Weyers, 2007).

In addition to the primary research, secondary data can be used from previous studies about the topic and also in the form of reports published from the foundation. Secondary research can present some problems because, as argued by Farquharson and Kilgore, could have been collected for other purposes and this can generate differences of interpretation.

Ethical Issues

The word "ethics" in the research context refers to rules, principles and standard of

conduct that apply to the analysis (McMillan and Weyers, 2007). Being a research that involves human beings, it should be characterised by three fundamental points: do no harm, participation is voluntary and confidentiality should be always respected. Confidentiality means granting always the anonymity to the people involved in the questionnaire. Furthermore, another important issue is plagiarism. Any previous work that will help in the development of the research will be mentioned in the text and also in the

references.

1 Likert scale is a psychometric scale commonly used in questionnaires. When responding to a Likert questionnaire item, respondents specify their level of agreement to a statement.

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

RESEARCH PLAN

Planning the research is a very important matter that can affect the results of the research and its full completion. The Gantt chart helps in planning the management of the research

highlighting each step and the period in which it has to be accomplished.

November

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Considering the areaof research

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Preliminary

literature review

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Christmas holidays

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Identify

business problem

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Refine research topic

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Carrying out literature review

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preparing questionnaire

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designing

research and settingup strategy

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collecting information (questionnaires)

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analysing

questionnaires data

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link data with

literature

review

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writing up dissertation

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Weeks

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There are four main steps that have to be taken into consideration because they are

critical in accomplishing the research project.

The formulation of the research question involves all the steps until the identification of the business problem. This part should be accomplished before the end of January 2009.

The completion of the literature review should be finished before the 15th of February. Literature study will be done throughout all the period analysing secondary and tertiary data in order to create a solid background about the topic.

Primary research through questionnaires. This phase links to the collection and analysis of the data. It should be accomplished within the third week of March. To make this possible, the preparation of the questionnaires should begin at the end of January, in order to consider any possible delay in the collection of the responses and in the analysis of the data acquired.

Finally, the writing up of the research is the final stage of the process. It needs time in order prepare a well structured project. It will explain and highlight all the relevant results acquired in each previous phases. This will commence in March and it will go on for the

last two months.

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FAIR TRADE - IS THE BUSINESS MODEL CHANGING?

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