competitive advantage derives from the value a company offers to its
buyers, on the one hand (marketing management), and from the costs
incurred in delivering this value, on the other hand (production man-
agement).
The impact of consumer valuesand preferencesis the single greatest
driving force changing the structure of the vegetable chain from pro-
ducer to consumer:
- An increasing health-conscious public has placed far greater im-
portance on food quality, which makes health-related characteris-
tics a strategic issue in building a competitive position in the
market place. - The increasing sensitivity of consumers to the safety and environ-
mental aspects of agricultural products results in huge invest-
ments to build identity, brand recognition and public trust. Food
companies attempt to build differential advantage upon the
unique qualities of their products. However, the consumer is also
used to an industry structure that boosts production efficiency and
lowers food costs. Chains are challenged to design a framework
that balances both consumer interests.
It is vital for the processing vegetable chain to transmit these con-
sumer preferences throughout all stages of the vertical system. There-
fore, it is necessary to gain insights into the way costs and benefits along
the various stages of the chain are influenced and distributed. These in-
sights may help to develop effective transfer pricing instruments. It is
clear that in an economic environment prices are the efficacious incen-
tives in affecting economic decisions to realize the transmission process
(Viaene and Truyen, 1995).
Second, food and agricultural policycontinue to play a major role in
the development of the food and agribusiness chain. The reduction of
agricultural support programs in the EU continues to place greater pres-
sure for efficiency on the production sector. Moreover, the generally ac-
cepted scenario of EU enlargement and the coming World Trade
Organization (WTO) negotiations are major turning points for the EU
Common Agricultural Policy (CAP). This evolution will take place
against a background of world markets becoming more volatile and com-
petitive and will result in structural changes in food supply throughout
the EU. The traditional family-oriented farms continue to be important,
but the critical decisions about variety, price, production period and qual-
ity are part of a more sophisticated business approach. The policy as-
Drivers of Competitive Advantage 251