By: Gianluca Selva Food and Resource Economics Institute, KVL Denmark
Paper prepared for presentation at the 99th seminar of the EAAE (European Association of Agricultural Economists), “The Future of Rural Europe in the Global Agri-Food System”, Copenhagen, Denmark, August 24-27, 2005
Copyright 2005 by [Gianluca Selva]. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.
EAAE XIth CONGRESS - COPENHAGEN
Analysis of the competitiveness of the pork industry in Denmark By: Gianluca Selva
Food and Resource Economics Institute, KVL Denmark Abstract
Now days in the pig industry as well as in other agro food sectors is the competitiveness that declare the success or failure on the global market. In the case of the pig industry, to be competitive it means to be able to offer a product of higher quality than rivals, but at similar price. The Danish pig industry has reached this level of competitiveness mainly thanks to its forward vertical integrated production chain. This specific coordination, besides than to reduce the transaction costs, push toward a production of excellent quality, that can be promptly adjusted according to the consumers demand.
Keywords : Competitiveness, Danish Pork Industry, Vertical Integration
Recently, many articles have been written about the Danish pork industry, this attention was justified from the fact that such a small country could have a pig production of five times its population and at the same time could be the world biggest exporter of pork. The purpose of the previous studies carried out, was that to describe the characteristic coordination between the several stages of the production chain and through what mechanisms the vertical integration in the industry could affects the transaction costs and their consequent reduction. In this paper instead our attention will focus on other aspects, mainly the macro environment of the Danish pork industry. We also evaluate the industry’s internal aspects like resources capabilities and competitive strength vis-à-vis its rivals.
The methodology used to carry out the complete analysis of the competitive environment is derived from Porter’s five forces, while to describe the industry’s resources strength and capabilities we have used the SWOT analysis as analytical technique.
3 Porter’s five forces
To make a complete analysis of the environment where the Danish pork industry operates we need to asses those forces that work in it and see how these forces are shaping the competitive environment. The forces taken into consideration normally are: the available technology and its development, the economy at large, the competitiveness, governmental legislation, population demographics, societal values and lifestyles. Even if some of these forces can not be directly influenced from the industry is anyway important to evaluate each one of them to fully understand the forces behind the pork industry dynamics. Porter suggests competitiveness as the force that most probably has the biggest impact on the industry and it can very much affect the environment where companies move their steps. The competitiveness generates pressure on the players of the industry and this pressure is captured by Porter’s forces. Porter’s framework suggested the following five forces as components of industry competition: The competition among current industries or countries that carry out their activities in the same area The threat from new potential entrants The threat from substitute products The bargaining power stemming from suppliers The bargaining power stemming from buyers
Bargaining power of suppliers Threat from new competitors
Rivalry inside the sector among the existing industries