Intensive Study Program: Challenges and Opportunities for Modern Agribusiness Firms
Bolzano, South Tyrol, Italy.
13 March (Monday) – 17 March (Friday) 2017, Academic Year 2016-2017.
General Information
The Intensive Study Programme (ISP)“Challenges and Opportunities for Modern Agribusiness Firms” (COMAF) will present a thorough overview of the different aspects characterizing the modern agribusiness sector. The topics (illustrated in detail below) will cover different aspect of quality in agribusiness, which include communicating and signaling quality to buyers and consumers, innovation to achieve quality, standards and industrial quality, and different aspects of the interactions and coordination among actors in agro-food supply chains.
The course activities encompass a mix of lectures, study visits, interactions with private sector speakers, group work, and in-class discussion and presentations.
The team of instructors is comprised of:
Francesco Bimbo: PhD student in Business Economics at Wageningen University, and Post-doctoral researcher in Agricultural Economics at University of Foggia. His expertise is in applied industrial organization, economics of food retailing, and of food, health and quality. He teaches MS level course in Corporate Finance Management.
Chenguang Li: Lecturer of agricultural economics and international food marketing at the School of Agriculture and Food Science in the University College Dublin (UCD), Ireland. Her areas of expertise are industrial organization of food markets and retail chain analysis. She teaches international food and agribusiness marketing.
Luisa Menapace: Professor of Governance in International Agribusiness at TUM. She focuses on institutional and governance issues in the agro-food sector and internationalization and teaches “Agribusiness Governance” and “Value Chain Economics” for the agro-food sector.
Cesar Revoredo-Giha: Senior Economist and Team Leader of Food Marketing Research at Scotland’s Rural College (SRUC) and lectures at the MSc on Food Security at the University of Edinburgh. His areas of expertise are in industrial organization of food industries, operation of agro-food supply chains, and agricultural economics.
Carlo Russo: Associate Professor of Agricultural Economics, Department of Economics and Law of the University of Cassino and Southern Lazio. His main interests concern the industrial organization of agro-food chain, collective action in agriculture and the regulation of imperfectly competitive agro-food market.
Course Learning Objectives
This course is designed for master students who intend to have a more in-depth background in modern agribusiness firms’ economics and have a high interest in the European agro food supply chain. It aims to provide a comprehensive overview of trends, issues and challenges, faced by the stakeholders operating in the agro-food industries. Students will apply economics principles to understand the mechanisms of coordination of agro food chain stakeholders, and will be encouraged to examine critically how agro-food policies affect stakeholders’ behavior along the food supply chain.
Students Learning Outcomes:
At the end of this course students should be able to:
Ø Explain the EU agro-food system and highlight challenges from the perspective of its stakeholders (e.g. farmers, retailers, consumers)
Ø Discuss, using economic theory and principles, challenges of the EU agro-food sector including (but not limited to) asymmetric information, environmental externality, contracts, standards, strategic pricing, innovation and evolution in food consumption trends
Ø Analyze and discuss the role of policies implemented by the EU relevant for the issues covered in the course and their effects on all stakeholders
Ø Explain the coordination mechanisms among the stakeholders
Ø Synthetize the analysis of a complex problem concerning agro-food chains by means of an oral presentation
Assessment:
· Students will be assessed by means of a group presentation and an individual report. The class presentation is planned on the last day of the ISP (Friday).
· Students will be asked to address a specific topic using: concepts and terminology acquired throughout the week and information collected during the study visit and the interaction with the speakers from the private sector.
· Students will receive a list of 4 topics. Students can order topics in order of preference. This ranking will be used to create the groups. More details on the expectations regarding the research report and the presentation are summarized in the attached file on “assessment”.
Lessons Schedule, Class Activities and Specific Lesson Objectives
Day 1 - Monday Mach 13
Morning Section – Introduction, Case study (The Linde Group) and Lectures
Introduction to the Intensive Study Programme (ISP); presentation of topics to the students and allocation of topic (Luisa Menapace). This session additionally introduces macro trends in the food supply chain.
Company presentation: The Linde Group
Firm description: In the 2015 financial year, The Linde Group generated revenue of EUR 17.944 bn, making it one of the leading gases and engineering companies in the world, with approximately 64,500 employees working in more than 100 countries worldwide. Linde industrial gases are used worldwide in virtually every branch of industry, commerce, science and research.
In food and beverage industries, food-grade industrial gases are an effective and natural way of meeting rising consumer demands for quality, variety and freshness in the food and beverage industry. Increasingly, consumers are looking for low or zero-additive alternatives to conventional preservation techniques. In particular, gases are proving indispensable in the growing market for convenience, home-inspired foods.
With a strong team of dedicated field and in-house specialists, Linde can help to meet specific challenges. Linde state-of-the-art technologies and applications optimise processes, improve quality, increase yield, protect quality during transport and extend shelf life. Whatever section of the food & beverage industry – from dairy, meat and fish through bakery and fruit & veg to the packaged business, Linde has answers in its extensive portfolio.
This session additionally introduces the structure of the food supply chain by means of an example.
Lesson: Communicating food quality under asymmetric information (Luisa Menapace)
Content: Asymmetric information between producers and consumers is known to be an important problem for the provision of quality in agro-food markets and is a cause of market failure. Depending upon the nature of the product attributes (search, experience and credence attributes), different market tools can be used by firms to communicate quality to consumers thereby alleviating market failures. These include private and collective brands, geographical indications, quality seals, etc. Geographical indications represent as the main pillar of the EU’s quality policy on agricultural products.
Topics:
Ø Product attribute classification
Ø Market-based solutions to market failures due to asymmetric information
Ø Geographical indications: relevance in the EU agro-food sector, EU regulation framework, main features of GI protection in EU and their economic implications
Learning outcomes: after completing the lesson, students will be able to classify product attributes, explain which market-based tools can be used to prevent market failures due to asymmetric information. Students will be able to explain the concept of geographical indication and the main features of the EU system of protection of geographical indication.
References:
Akerlof, G. 1970. The markets for “lemons”: Quality Uncertainty and the Market Mechanism, The Quarterly Journal of Economics 84(3).
Cabral, L. The Economics of Trust and Reputation: A Primer. Notes 2005.
Moschini, G., Menapace L., and D. Pick. 2008. Geographical Indications and the competitive provision of quality in agricultural markets. American Journal of Agricultural Economics, 90(3):794-812.
Menapace, L., and G. Moschini. 2012. Quality certification by Geographical Indications, trademarks and firm reputation. European Review of Agricultural Economics, 39(4):539-566.
Afternoon Section - Lectures and Group work
Lesson: Standards and Industrial Quality (Cesar Revoredo-Giha)
Content: The production, processing, distribution, retail, packaging and labelling of foodstuffs are governed by a mass of laws, regulations, codes of practice and guidance. This mass of coded information regulates all transactions between buyers and sellers along the entire food supply chain and is created to obviate to market imperfections mainly generated by asymmetric information and externalities. The purpose of this lecture is to provide an overview of quality regulations, standards as well as private protocols in the EU food and drink industry.
Topics:
Ø Product quality, information asymmetries and quality standards
Ø Public and private standards
Ø Standards and compliance costs
Ø Examples of the use of standards in the food and drink chain
Learning outcomes: after attending this lesson, students will be able to explain the reasons for the need of regulations and standards, the economic incentives to implement them, how they are implemented in EU system as well as their costs. Students will be able to distinguish public and private standards and understand how standards interact with each other’s.
References:
Alvarez, G. (2010). Fair trade and beyond: Voluntary standards and sustainable supply chains. Delivering performance in food supply chains. Woodhead Publishing Limited, Cambridge, the United Kingdom of Great Britain and Northern Ireland, 478-510.
Caswell, J. A., Bredahl, M. E., and Hooker, N. H. (1998). How quality management metasystems are affecting the food industry. Review of Agricultural Economics, 20(2), 547-557.
Fulponi, L. (2006). Private voluntary standards in the food system: The perspective of major food retailers in OECD countries. Food policy, 31(1), 1-13.
Henson, S. (2008). The role of public and private standards in regulating international food markets. Journal of International Agricultural Trade and Development, 4(1), 63-81.
Malorgio, G., and Solaroli, L. (2012). Policies and regulations in the Mediterranean: complementarity and coherence. MediTERRA 2012, Chapter 21. Available online: https://www.academia.edu/5397538/chapter_21._ policies_and_regulations_in_the_mediterranean_complementarity_and_coherence
Smith, G. (2009), Interaction of Public and Private Standards in the Food Chain, OECD Food, Agriculture and Fisheries Papers, No. 15, OECD Publishing. Available online at: http://dx.doi.org/10.1787/221282527214
Young, L. M., and Hobbs, J. E. (2002). Vertical linkages in agri-food supply chains: changing roles for producers, commodity groups, and government policy. Review of Agricultural Economics, 24(2), 428-441.
Lesson: Innovation and food quality (Francesco Bimbo)
Content: Innovation is widely viewed as a major competitive parameter in the agri-food sector and it is mainly targeted to increase the quality of products and/or the efficiency of the processes by creating new ones or modifying existing ones. The minimum requirement for an innovation is that the “innovative” improvement must be new to the firm. Innovation process involves multiple actors whose joint efforts are aimed to increase the market performances of the firm. Sectorial and regional expects also influence innovation outcomes.
Topics:
Ø Economics of Innovation
Ø Innovation Process Models
Ø Innovation in the EU agro-food sector
Learning outcomes: after completing the lesson, students will be able to define innovation and explain the difference with related terms, understand and recognize the main types of innovations. Further, students will be able to identify the drivers of the innovations in the EU food sector; how innovations are developed and how sectorial and regional factors affect innovative outcomes.
References:
OECD, 2005. Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data, 3rd Edition.
Muscio, A., Nardone, G., and Dottore, A. (2010).Understanding demand for innovation in the food industry. Measuring Business Excellence. 14(4) 35-48.
Group work session:
With professor: Students revisit with professor the information collected during the company visit.
Day 2 - Tuesday Mach 14
Morning Section - Lectures
Lesson: Coordination, contracts and incentives (Carlo Russo)
Content: Quality in the agro-food supply chains is a complex achievement, often requiring the joint effort of several independent firms and individuals. Coordination is required to produce complex food products, meeting industry standards and consumers’ expectations. Yet, bringing together heterogeneous agents for a common goal is a non-trivial task because each individual has specific and potentially incompatible objectives. Producing quality implies that all agents comply with a stated (or implicit) production plan regardless of private incentives. The design of a coordination mechanism such that all agents can agree on a production plan based on individual profit (or utility) maximization is a complex task. Economists refer to this issue as the incentive alignment problem (cfr. Salanié).
Topics:
Ø The coordination continuum: vertical integration, spot market, contracts, other hybrids
Ø Basic notions of contract theory
Ø Setting incentives and using contracts as coordination devices
Learning outcomes: students will be able understand and explain the multiple ways to organize transactions as well as indicate the optimal choice according objectives and specific conditions. Further, students will be able to explain the incentives that may influence the outcome of the transaction as well as the role of a contract to set and manipulate incentives.
References:
Stiglitz (1974): Incentives and Risk Sharing in Sharecropping. The Review of Economic Studies, Vol. 41, No. 2 (Apr., 1974), pp. 219-255 [Advanced]
Bogetoft, P., & Olesen, H. B. (2002). Ten rules of thumb in contract design: lessons from Danish agriculture. European Review of Agricultural Economics, 29(2), 185-204. [Basic]
Company presentation: BayWa AG
Firm description: In the 1920s, a revolution in the agricultural industry was just starting. Until the beginning of the 1900, the work in the fields was carried out mostly by hand or with the aid of animals. During these years the mechanisation of the agricultural sector increased. In was in this context that BayWa was founded in Munich in the 1923. Based in Munich (head office), BayWa AG is a German company which operates in the agriculture, building materials and energy sectors. It provides trading, strategic and other miscellaneous services in these sectors. The BayWa Group is spread across 14 countries. Agricultural products, building and construction-related products and the energy industry are its core business areas where it operates in both the retail and wholesale segments. It has a turnover of approximately € 8 billion and about 2,700 sales locations. The major portion of the group’s profits comes from its Agriculture division.
Afternoon Section – Group work and industry visit
Lesson: Food quality: a consumer perspective (Chenguang Li)
Content: Agricultural products are long from being recognized as homogeneous goods, branding is used widely for product differentiation and quality representation. The brand development starts with identifying target customer segmentations and characteristics based on knowledge of consumer demands, and evaluation of the company’s own strengths and limitations compared to his competition. However, sustainable brand management requires continuous and effective communication with the consumer.
Topics
Ø Product differentiation and positioning