Name: Natalee Everett

ID #: 1200403
Module: Strategic Management
Equal Exchange: Company Overview

Equal exchange started with three men Jonathon Rosenthal, Michael Rozyne and Rick
Dickinson. These three founders had an interest to transform the relationship between the public
and food producers. They decided to discuss how best to change the way food is grown bought
and sold around the world. They created a plan for a new establishment called Equal Exchange
that would be to help farmers and their relatives gain more control of their economic futures, to
educate consumers about trade issues affecting farmers, to provide high quality foods, to be
controlled by the individuals who did the actual work and to have a community of assigned
individuals who believe that honesty, respect and mutual benefit are crucial to any worthwhile
endeavour. The three founders invested their own money along with help from family and
friends. The firm was now established but struggled for the first three years and then began to
break even after. They sell coffee, cocoa, tea, banana, chocolate, etc. The company has been
quite a success with billions in profits and is now thirty years old and still going strong.
A major significant change over the last couple of years for EE would be their
profitability and sales trends. In 2002, their sales totalled to just a mere $10,000,000 and by 2011
the sales figure increased to over 40 million dollars. Currently, they are conducting action forums
for building a democratic brand that connects small farmers in the south to citizens-consumers in
the north. The goal of this is to share the successes experienced in building supply chains for
small farmers and to build a vibrant community of citizen-consumers. In 2015, they conducted a

gender equity workshop, as a Sustaining Partner. The workshops aim to promote gender equity in
the male-dominated coffee industry by bringing men and women together to work through
difficult questions about gender roles and the division of labour on the farm and in the home.
Additionally, it is pertinent to inform that EE has added to their product line and expanded their
products. Today they are also producing snacks from roasted almonds and new flavours of teas,
sugar, etc.

Core competencies
The core competencies of any organization, is what the company is best at. It is that
feature of the company that has the most strength and if properly used, can yield the most profit/
above average returns or market share. In this case, Equal Exchange core competencies are
community empowerment, quality products, equal level of management and responsible work
environment for all employees, environmental preservation and flavour. The environmental
preservation aspect of it is that, they support sustainable agriculture by preserving sensitive areas
and reforestation of degraded land. In regards to flavour, they seek sweet beans with a unique
flavour characteristic which makes their products differentiated. Over the years EE has exploited
these competencies to be where they are today, by means of gaining market share and achieving
competitive advantage.

Mission statement
To build long term trade partnerships that are economically just and environmentally sound, to
foster mutually beneficial relationships between farmers and consumers and to demonstrate,
through our success, the contribution of worker co-operatives and fair trade to a more equitable,
democratic and sustainable world.

Vision statement
Fairness to farmers; a closer connection between people and the farmers we all rely on.

The General, Industry and Competitor Environment

The external and internal environment will affect how a company is structured, the
strategies it employs as well as the way it operates. The environment consists of the general
environment, industry environment and the competitor environment.
The general environment consists of seven environmental segments. These environmental
segments are:

Demographic

Economic

Political/legal

Sociocultural

Technological

Physical/ Environmental

Global

To successfully deal with uncertainty in the external environment and achieve strategic
competitiveness, firms must be aware of and understand these seven segments (Hitt, Ireland &
Hoskisson, 2011). The firm has no direct control over the general environment and as such must
employ actions to best fit in with the general environment.
Demographic- looks at where the company operates. This segment is taken on a either a
global or local basis. Global in the sense that large corporation operate in different
markets and boarders across the world. Demographics look at the population size, age
structure, geography, ethnic mix and income distribution. The forces in the demographic
environment has an impact on Equal Exchange operations as they are must understand
the demographic characteristics of the people and farmers in order to build the connection
with both.
Economic conditions: since importing its first coffee in 1986, Equal Exchange had
become the leading fair trade brand of food and beverages in the US. However, the

recession that struck the US changed the outlook for business. The economic downturn of
Equal Exchange started affecting from fiscal year 2008 until fiscal year 2010.

Legal conditions: In the first year of operation, the US government imposed an embargo
on all products imported from Nicaragua, one of the original sources of Equal Exchanges
coffee. Therefore, Equal Exchange could not import coffee directly but through an
intermediary is a Dutch trade organization.

Sociocultural forces: typical consumers were unaware of the realities of the farmers who
grew their food, because food marketing was focused just on price, brand image and
qualities which are attribute the consumers care about the most. Therefore, consumers are
not aware of the differences between the fair trade and the unfair trade. The competition
also increased from the local businesses because of the buy local ethic in which
customer prefer supporting local firms rather than those shipping their goods from other
regions.

Environmental factors: Equal Exchange guaranteed a quarter of each pre-harvest loan. It

thus shared the risks associated with misfortunes, such as hurricanes, that could destroy a
cooperatives crops.
Global Environment: As it relates to the Global Environment Equal Exchange should
consider expanding into new markets outside the USA.

Technological Environment; Equal Exchange must condider adapting to the latest and
most efficient technology systems in order to serve customers to the best of their ability.
If they do not adapt to technological changes competitors may who adapt to such changes
may be able to serve the market more efficiently.

Competitor analysis
Though Equal exchange has been quite a success and is deemed profitable, they face
competitions in their industry and had was to create strategies to keep their customers. As
highlighted earlier, EE products include coffee, chocolate, tea, snacks (roasted almonds),
bananas, etc. EE has many competitors such as USA coffee company, Lone Oak Coffee
company, Temple coffee and tea, among others. For the purpose of this analysis we will focus on
the two major competitors that EE faces, which are Starbucks and Dunkin Donuts. Starbucks

was founded in year 1971 (15yrs before EE), they have a whopping 23,768 locations with a
revenue stream of 14.89 billion USD in 2013. Their current stock price is USD52.78 and they a
number of subsidiaries including Teavana, Seattle best coffee and others. Therefore, Starbucks
would have had the market years before EE and thus gaining loyal customers and market share
by time EE was to be established (Wikipedia.org). Dunkin Donuts were found in 1950, long
before both Starbucks and EE thus having an edge before both companies. Their coffee house
chain has a revenue stream of 10.1 billion USD in 2015 and they have over 12,000 locations in
36 countries (Wikipedia.org). However, EE overcame these challenges with their unique fair
trade products because consumers still value change and healthy products. EE differentiated their
products and this brought quality to the consumers. Additionally, they use their core
competencies that were highlighted earlier to become competitive and earn a space in the market.
As it relates to Porters five forces, is a simple but powerful tool for understanding where
power lies in a business situation. This is useful, because it helps you understand both the
strength of your current competitive position, and the strength of a position you're considering
moving into (mind tools 2016). The five forces are power of supplier, power of buyer, threat to
new entrants, threat of substitution and competitive rivalry. See illustration below for
clarification:

(Hitt, et al)

Threat of new entrants- There are lots of companies that joined this industry and
succeeded, there still many new entrants who want to access this profitable industry.
Moreover the barriers to entry in this industry is low which makes the threat of new
entrants high.

Threat of supplier- The threat of suppliers were very low as EE has a variety of
Farmers from which they could choose. This choice allows them the opportunity to
choose unique farmers to supply them

Power of buyer- Buyers are powerful when buyers have many choices due to the
similarity of products in a particular industry. EE customers has some amount of

buyer power as their switching costs were low and they had many choices.
Product substitute- As it relates to threat of substitution, this is affected by the ability
of customers to find a different way of doing what EE does. For example, if we
supply a unique software product that automates an important process, people may
substitute by doing the process manually or by outsourcing it. If substitution is easy
and substitution is viable, then this weakens power. Therefore, it is safe to say that

EE overcame this force by, as mentioned before, using the differentiation method
Threat of competitors- competitive rivalry is the number and capability of
competitors. As it relates to EE, the food and beverage industry is very popular
therefore competition will be somewhat intense. In addition, the commodities in the
food and beverage industry are similar therefore EE might lose out on sales if they
try to differentiate too much and charge a cost above an amount customers are
willing to pay. Finally, there are numerous competitors of roughly equal size and
strength present in this industry therefore EE should continually assess these forces
in an effort to stay on top.