Capabilities for Eco-Friendly Dairy Production

When firms engage in eco-friendly dairy production, there are three important domains of activity in which firms have to perform: Assessment of the business environment, stakeholder management, and issue management (Sirsly et al., 2008). A competitive advantage may arise when a given firm or set of firms is able to outperform and to stay ahead of its competitors in these domains and to accrue economic or social benefits. This advantage is based on asymmetries that exist between firms (heterogeneity). Therefore, it's a challenge for firms to identify and link those asymmetries to the initiative and make them to a high priority, to fund them, and turn them into valuable capabilities (Miller, 2003).

Assessing the business environment entails organizational tasks to gather and to interpret information from the constantly changing business environment that precedes strategic action (Porter, 1985). In the context of eco-friendly production, this assessment comprises a vast arena of social, legal, institutional, and technological factors in which firms may develop unique capabilities to stay ahead of competitors (Baron, 2008). A dairy supply chain, for example, that has developed a program for organic dairy products aiming at a particular niche market can preempt its compet itors' attempt to imitate these practices by scanning the environment for similar practices in other industries and continually improving its own program. Building an effective system for scanning the business environment and gathering information equips the firm with essential tools to stay ahead of others. This capability is particularly important for the development of competitive advantage in the light of the public nature of many eco-friendly initiatives (McWilliams et al., 2006). Business environment assessment may also be leveraged to determine the right timing or conditions for communicating information about an eco-friendly initiative. The public's increased attention for the initiative allows the company to build a reputation associated with the initiative. Developing effective communication channels and influential social networks are other examples of capabilities that may turn eco-friendly dairy initiatives into competitive advantage.

Stakeholder management refers to those activities aimed at addressing and balancing the interests of various salient stakeholders to improve performance and to attain sustainable competitive advantage over the long term (Wood 1991; Donaldson et al., 1995; Harrison et al., 1999). Developing expertise in identifying and assessing the core concerns of key stakeholders and meeting their expectations may allow for leveraging this capability to position new strategic eco-friendly initiatives. This ability provides a strategic advantage, given the often-conflicting interests of different stakeholders. In a network where all stakeholders are connected and exchange information with each other, firms may reap the benefits of building coalitions of stakeholders to coordinate and promote the benefits and uniqueness of their eco-friendly activities (Adler et al., 2002). The abilities of firms to develop trust and to facilitate learning with their stakeholders also provide capabilities that can be leveraged to build a sustainable competitive advantage (Powell 1996; Powell et al., 1996; Uzzi 1996). This network may also be useful to obtain critical information relevant for the ongoing effectiveness of the ecofriendly dairy initiative, such as new technological developments, new legislation, scientific research, or consumer trends. Maintaining strong relationships with some stakeholders may result in a reputational association of that relationship with the ecofriendly initiative that other firms in the same industry cannot replicate. The Dutch consortium Roundel Egg, for example, developed its eco-friendly egg concept in close association with NGOs (i.e., Animal Welfare Agency and the Consumer Agency), providing them unique reputation and information benefits that are difficult to imitate by competitors.

Issue management entails the particular, social, political, or other (non) market events and trends relevant to the initiative's strategic activities (Wood 1991; Wood 2010). Issue management requires diagnosing and interpreting issues, adjusting the implications of events for the involved firms' operations, and developing a legitimate response strategy to protect the initiative against any potentially harmful development (Dutton et al., 1987). Asymmetries in capabilities for issue management may arise in interpretive skills that give meaning to those issues (Ashforth et al., 1997). If the initiative finds itself at the center of a controversial issue and the involved firms are forced to deal with it, they may come out with valuable skills in managing similar issues in the future and may maintain a reputation for being the leading problem solver. The previous mentioned proactive recall of milk powder from New Zealand by Nutricia is an example of issue management behavior.

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