Fair Trade USA Harvard Case Solution & Analysis

Fair Trade USA Case Study Solution

Strengths and Weaknesses of Fair Trade USA

Strengths

Fair Trade USA’s major strength lied in its mission, as its business model was primarily based on community empowerment by providing opportunities and benefits to underprivileged people in the society.

The company had a history of providing certification servicing along with auditing, consulting, training etc. Which had helped company in making its credible image in the market, because of which farmers are getting margin on sale of their harvest to the companies. Which result in decreasing poverty in farmers and worker. Such practice made the label of the company trustworthy and reliable.

Weaknesses

While focusing more on generating its own revenue from certification services and lack of focus on grants and donations, FT USA lacked the capital that was required for growth purpose. As to fulfil its goal of impacting more and more people around the globe, FT USA need funds and grants which is becoming difficult with the time.

The company is charging very high price as compare to its competitors, which has decreased the requirement of donations and grants but make it unattractive for the brands and manufacturers seeking certification for their products and ingredients.

Direction of Production Diversification Strategy in Terms of Alternatives

As the company had two alternatives, first is to focus of coffee market and increase the market share from 5% to 20%, which would help the company in attaining the credibility or the other alternative was to diversify its product by focusing on other sectors to increase the overall market share in the long-run. Fair Trade USA diversified its current operations, which are majorly limited just to coffee. The company entered in to the market of Apparels by signing a deal with Patagonia. Then in 2014, the company partnered with West Elm to provide certification services to home made goods i.e. rugs made in India. Further it entered in to furniture and manufacturing industries. The rationale behind diversifying in to various categories is to aware major proportion of public with the name of FT USA certification, which would then help the company is increasing its share in each category.

The company is trying to diversify its business in the other sectors and at the same time is also trying to increase its market share in coffee.

Alternatives

In order to maintain the leadership of Fair Trade USA in the market, Mr Rice would following alternative strategies.

  1. Firstly, Mr Rice should continue with its focus on diversifying its operations and should focus on making partnerships with the bands.
  2. Mr Rice can also focus just on one sector to form a credible image and then start to switch to other sectors using that already established strong and credible image.

Advantages and disadvantages of alternatives

The major advantage of continuing the diversifications would increase the scope of the company and more people would come to know about the FT USA. This would also help the FT USA collecting more in donations and grants to invest in various sectors to improve the lives of the underprivileged people by providing training, consultant and certification service to larger proportion of the population. But the drawback of this strategy option is that, it will become difficult for the company to focus on each sector and provide each the quality and reliable certifications service.

In contrast, the advantage of the company to focus on just one sector i.e. coffee is that, FT USA will be able to increase its market share in the specific sector and when major brands will use its label, its credibility will grow. This would then make the company able to diversity in the long-run. On contrary, such a strategy of focusing on just sector would limit the company’s scope and its overall impact on the underprivileged population of the society.

Recommendation

Finally, after analysing the operations of the company in detail and evaluating the alternative strategies, we would recommend the FT USA to focus on diversifying its productions due to following reasons.

  1. This would increase the scope and reach of the company and help it increasing its impact on major proportion of the society.
  2. Moreover, this would increase the likelihood of getting more donations and grants and help in doing investment to grow the company’s impact, because being a non-profit organization, it’s not logical to remain limited to just one sector.
  • If the company remained limited to one sectors, other competitors will grab the market share and later it will become more difficult for the company to enter an already saturated market........

 

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