Strategic Attributes of Eco-Friendly Dairy Initiatives

An important question to address is whether eco-friendly dairy production can be considered as a beneficial strategic activity. There are arguments that are in favor of this question. A strategic activity is not limited to the market, but also has to include nonmarket forces, social issues, and corporate social responsibility as important topics (Wood 1991; Freeman 1999; Sirsly et al., 2008; Wood 2010). Advocates of this view assert that it is possible for firm strategies to be aligned with societal objectives and to generate benefits for the firm in absence of a regulatory force (Burke et al., 1996; Sirsly et al., 2008). The strategic activity (i.e., eco-friendly dairy production), should be central to the firm's strategic mission (centrality), provide firm-specific benefits (Specificity), and should be visible (visibility) to stakeholders. It should result in a behavioral commitment (Pfeffer et al., 1978) to ensure ongoing resource contribution (Burke et al., 1996; Sirsly et al., 2008) enabling the creation of a lasting benefit to the firms involved—that is, the firms within the supply chain that initiate the eco-friendly initiative. Thus, it is contended that the production of eco-friendly dairy products is in line with this view and that centrality, specificity, and visibility are key factors for its success.

Centrality is an intuitive measure of whether any firm initiative is strategic in the proximity of that initiative to the core mission or strategic objectives (Burke et al., 1996). For example, a firm's food safety goal is less central when it is only of focal concern to the food quality department and unlikely to get corporate attention, whereas the same goal might be highly central to the mission of a food safety agency that monitors the firm's food production. Initiatives that are central will have a first claim for firm-specific resources, which is justified by expectations that fulfilling this activity (i.e., in line with the strategic objectives) will maximize the revenues gained from the invested resources (Burke et al., 1996; Peteraf et al., 2003). In the context of eco-friendly dairy production, a farmer producing organic milk but a processor processing both conventional and organic milk would constitute a lower centrality than if both were exclusively organic. The point here is that any gain (i.e., financial, reputational, or moral) originates from a link between the eco-friendly activity and the strategic mission of the firms involved due to the existing interdependencies. When outside that core strategy, only moral legitimacy may be gained (Sirsly et al., 2008).

The specificity of an eco-friendly initiative is whether it has the ability to provide value that deviates from collective goods (Burke et al., 1996). The strategic value is at its largest when some of the benefits are exclusive for the participating firms, as opposed to an activity that just provides goods for the masses. When it has this ability, it will strengthen the firms' commitment (McAdam et al., 2003) to eco-friendly practices and capacity to make a compelling business case (Epstein 2008; Bryson et al., 2009). This is even more important when one takes the underlying motivation into account, which is to gain a competitive position that is distinct from collective goods.

Various eco-friendly initiatives (i.e., waste reduction, less fertilizer, efficient packaging) may provide societal benefits that do not have to trade-off against firm-specific benefits, because they simply provide significant cost savings (Porter et al., 1995). Other eco-friendly initiatives may serve the general community and may not necessarily produce any monetary or tangible advantage for firms but may provide other benefits such as enhanced legitimacy or reputation. Therefore, it may be important to carefully assess the wider implications of these initiatives, when determining the specificity of benefits (Bryson et al., 2009). If an animal welfare NGO, for example, praises the initiative of a supply chain to keep the cows in the pastures, its reputation in the eyes of both market and nonmarket stakeholders will be reinforced in comparison with the reputation of direct competitors, although it may not generate firm-specific economic benefit (Sirsly et al., 2008)

The visibility of an eco-friendly initiative implies that stakeholders recognize its value (Burke et al., 1996). It is the underpinning for the collaborating firms' initiative legitimacy and reputation (Lewellyn 2002). Cost-saving and waste-reducing initiatives may have little impact on competitive or social outcomes if information about it is not communicated to influence the industry's interpretative environment (Rindova et al., 1999). While positive visibility is largely controlled or promoted by those initiating the initiative, negative visibility is for the most part beyond their control (e.g., dioxin food scandal) and often hard to repair. Especially in an era where social media allow information to rapidly reach the public domain, making stakeholder mobilization easy (Dawkins et al., 2003). Any initiative highly valued by stakeholders risks major repercussions should there be any breach of its claims. On the other hand, it is possible to capture positive visibility in response to an adverse situation. The proactive recall of milk powder products by Nutricia from New Zealand after the announcement that Fronterra's milk powder was contaminated with botulism is an example to capture positive visibility in response to an adverse situation.

The fact that legitimacy and reputation benefits rest in the eye of the beholder has important implications for visibility, because stakeholders vary in their perceptions, biases, and expectations (Lewellyn 2002). Therefore, there is a need to attract stakeholders' attention preferably reputable, independent sources. Their endorsement of the initiative provides the highest quality of visibility and is truly priceless. It does not guarantee a common interpretation across varies stakeholders, but will enhance the likelihood of a broader visibility as the information may be repeated and reach a wider stakeholder audience.

An eco-friendly dairy initiative that is meeting the criteria of centrality, specificity, and visibility is likely to be supported by the participating firms because its compatibility with the firms' core mission and its distinct benefits provide a compelling logic to justify continuation (Pfeffer, 1981). The extent that such an initiative is providing a sustainable competitive advantage is based on the likelihood that other firms cannot readily imitate the initiative to obtain the same economic and social benefits. This advantage stems from heterogeneity among firms or competing supply chains regarding skills, resources, structure, assets, knowledge, or other organizational process or state (Miller, 2003).

 
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