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14. Marketing Principles

Scott Champion

Lecture 1: The application of marketing principles to the wool industry

Learning objectivesOn completion of Lecture 1 you should have developed an understanding of:

Basic marketing concepts The definitions of products and commodities and the way in which our understanding of these

should guide marketing system choice The basic structure and function of the apparel wool supply chain.

Key terms and concepts Product, commodity, marketing systems, raw wool marketing, wool supply chain

Introduction to lecture 1This lecture provides an introduction to marketing, both general principles and their application to the wool industry. It examines the definition of product and commodity and considers the implication of these for marketing system choice and development. The wool supply chain is also introduced.

14.1 Background and context Few topics have generated more interest in the Australian wool industry in recent times than marketing systems and marketing system reform. In his keynote address to a wool science and technology conference in 2002, John O’Connor of the National Council of Wool Selling Brokers commented (O’Connor 2002):

In periods of low prices in the wool industry, one of the first areas to come under scrutiny is the wool-selling system. This is where prices are determined, so many consider that, if prices are unsatisfactory, the explanation may reside in inefficiency or corruption in greasy wool markets. This was certainly the case in the 1990’s. As a result, many individuals and groups of growers devised methods of selling direct to mills, in some cases maintaining ownership until the wool is in a semi-processed state. Many, perhaps the majority, had their fingers burnt; and the proportion of wool being sold through the auction system is a little different from what it was 10 years ago and even, despite the Reserve Price Scheme, 15 years ago. Why?

Also, while not recommending particular change or selling reform, the Wool Industry Future Directions Taskforce (1999) did comment that selling systems “…are poised for great change and dynamism in the immediate period ahead. Woolgrowers will need carefully to weigh up their options and determine which system or systems suit them best.”

WOOL422/522 Wool Marketing and Clip Preparation 14 - 1 ©2009 The Australian Wool Education Trust licensee for educational activities University of New England

This lecture seeks to consider the diversity of growers and the wools they produce. It considers the potential drivers of change, the impediments to change, and strengths of the current selling systems. It attempts to provide a basis upon which pathways can be found through which various wool types might be marketed most successfully, in order to generate demand and interest amongst contemporary consumers.

14.2 A brief background to marketing No matter how much we know about a topic, it is always useful to go back to definitions! In the case of marketing, it can be especially useful as the term can be used to describe anything from a transaction method or system (e.g. the wool auction) through to advertising and promotional campaigns. Agricultural marketing has unique aspects. Kohls and Uhl’s (1990) definition of food marketing is a good starting point for discussion. They state:

Food marketing may be thought of as the connecting link, the bridge, between specialised food producers and consumers. It is both a physical distribution and an economic bridge designed to facilitate the movement and exchange of commodities from the farm to the fork.

This definition makes a number of points:

Marketing deals with the physical movement of products and the methods used to connect with the consumer

Marketing may be supply or demand driven Given the complexity of the systems that it seeks to understand, marketing should be

multidisciplinary in nature.

Another role for marketing is to create value through the way in which marketing systems are designed and implemented. Ritson (1997), comments:

The object of commercial marketing is profit maximisation through the creation and exploitation of monopoly advantages. The monopoly advantage can be anything from a product-idea to favourable access to consumers.

What is described above as a “monopoly advantage” by Ritson, can also be termed a ‘market advantage’, or the ability to supply something others cannot. This advantage may only be temporary, and can range from the complete control of a market to a slight product difference, even if this is only a perception held by the consumer. The important characteristic with respect to those involved in the production and processing system is that the advantage must allow a price premium to be obtained (Ritson 1997).

Whatever marketing system is chosen for a particular product, it should meet this objective of ‘market advantage’. Much recent discussion in the wool industry has focussed on how to bring about marketing changes to deliver this added return. In part, this has been a response to the declining terms of trade which have been experienced by farmers over the long term.

14.3 Commodities and products: What are they and how do they differ?

A frequent debate in the wool industry centres around the way in which we “treat our wool as a commodity”, the implication being that this undervalues or fails to capture its real value. But what is the difference between ‘commodities’ and ‘products’ and do the differences inform how different types of wool might be marketed? (For further information on this topic, you might like to read Champion & Fearne 2001.pdf, in the readings).

14 - 2 – WOOL422/522 Wool Marketing and Clip Preparation©2009 The Australian Wool Education Trust licensee for educational activities University of New England

A commodity can be defined as 'materials in their natural state which are often termed "primary" commodities' (Barker 1992). In contrast, Kohls and Uhl (1990) define a product as “a bundle of physical, service and symbolic attributes that satisfies consumers’ wants and needs”. There are two main differences between the definitions:

Commodities are in their “natural state” and are materials. They do not consist of intangible attributes such as service or other characteristics which may be of value to the consumer; and,

Products are directed towards an end user rather than being sold ‘blind’ onto a market.

These are simple definitions, but the differences between them are quite profound. Intuitively, it would appear that some wool types might align with the commodity description, while others may be more readily defined and sold as a product.

Figure 14.1 Are they commodities or products? greasy wool (left) and top (right).Source: Photographs supplied by S. Champion, The New Zealand Merino Company, (2006).

14.4 Commodities, products and selling system: Making the connection

The definitions of products and commodities are important, not in their own right, but because they have implications for marketing systems. If more than just a material is to be ‘passed’ through a marketing system (i.e. other factors such as service), then the system must provide the facility for this to occur. If it does not, and these are valuable attributes of the ‘product’, then value will be lost due to the inappropriate nature of the marketing system.

Boehlje, Schrader and Alridge (1998) describe these implications in greater detail. They argue that as we shift from producing ‘commodities’ to ‘products’, the nature of our marketing systems and the relationships within these needs to change also.

…in traditional commodity markets where specific attributes are not demanded, supplies are fully adequate and can be obtained from various sources, and information flow between the stages are minimal, traditional spot commodity markets can function quite effectively and efficiently. As one deviates from these conditions - which is increasingly the case with more specificity in raw materials and information flows, and with fewer potential sources of acceptable supplies – various forms of negotiated coordination systems become more effective and necessary for efficient functioning of the production and distribution system. (Boehlje, Schrader & Aldridge 1998).


Given this, the importance of considering whether a parcel of wool is a product or a commodity arises due to the way in which it informs how we might market that parcel. The key question is whether the parcel has attributes both tangible and intangible, which only a more relational marketing system can capture, describe and provide through to the purchaser. The other key question is whether these ‘other’ attributes of the parcel are also of interest and value to the purchaser. They cannot just be considered ‘valuable’ by the seller! If this was the case, a more costly and complex marketing system than that required by the purchaser may be created, conveying attributes in which the purchaser has no interest.

To summarise some of the differences between product and commodity marketing systems, Table 14.1 comparatively examines key characteristics for the systems including the role of information and the market type or context in which they operate. It also examines the roles of primary producers, traders and consumers in determining the value and characteristics of the product or commodity flowing through the system.

Table 14.1 Differences between commodity and product marketing systems. Source: Champion and Fearne (2001b).

Marketing system for:Characteristics Participant Product Commodity

Priority in determining value/characteristics

Consumer High LowTrader/Processor/

RetailerMedium Medium

Primary Producer Low High

Role of informationDetermines quality

through both 'tangible' and 'intangible' factors

Provides description

Relationships required in the market Strong and multi-faceted Weak and trading orientated

Market type Differentiated/ Unpredictable demand

Homogeneous/ predictable demand

Industry StructureCompetition between

supply chainsCompetition

between individual firms

There are efficiency links between a material and the most appropriate marketing system for that material. When a product is treated as a commodity or vice-versa, a mismatch and resultant inefficiency occurs. In most agricultural systems where commodity trading still dominates, it is more likely that the first of these cases will be typical. This means that value will be lost through the inability to exploit or develop non-material aspects of the product such as service, brand etc. as a commodity system does not allow efficient communication of these attributes. The alternative, as described above, is imposition of unnecessary cost. Neither case is helpful!

Communication has a role as a driver for innovation and there is a need for improved rates of innovation in the Australian wool industry. Drivers (or lack of) of innovation can be further linked to marketing systems, with Fearne and Hughes (1998) finding:

In a highly competitive market…characterised by over supply and a commodity orientation, innovation is the only long-term source of competitive advantage…The lack of product innovation is a feature of commodity markets.

In terms of its specific application to the wool industry, the difference between commodity and product approaches is well described by Dolling (1999) in Table 14.2. As can be seen, there are important differences between the two approaches in terms of specification, price and relationships within the marketing system.


Table 14.2 Commodity and Product/Marketing approaches to marketing wool. Source: Dolling (1999). Commodity Approach Marketing/Product ApproachNo known customerNo agreed price at point of productionNo agreed product specificationNo agreed delivery dateSpeculation on receipt of profitable price at auction

Wool viewed as part of the textile industryExploration and development of an understanding of the customers needsProduction of wool which is fit for purpose to satisfy customer needsDifferentiation of product through brandingPromotion of product on the basis of delivery to an agreed price, specification and dateAn active marketing strategy and plan

14.5 Marketing = selling…or does it? I mentioned at the start of this lecture that in common usage, ‘marketing’ has a broad array of meanings. I would like to argue strongly that the concept of ‘marketing = selling’ is no longer appropriate for the wool industry. The industry must find ways to adapt its fibre and its marketing systems to better align with the needs of the various customers, both through the processing chain, and the end user. The challenge was well summarised by the Wool Industry Future Directions Taskforce (1999), when they said:

Wool now represents an insignificant part of the global textile market and, in many of its end uses, contains little which is special or unique; wool is no longer an essential fibre.

This sounds like a rather depressing outlook, but it does not have to be. Science and technology, innovative production systems and effective marketing structures can all combine to define what is “special or unique” about wool, and then convey this effectively and meaningfully through to consumers. I believe the industry is starting to adapt to this challenge.

14.6 The nature of the apparel wool supply chain The apparel wool supply chain is complicated in terms of the number of participants and the degree of product transformation it brings about. The time for product to flow through from start to finish can also be significant - up to two years. Products potentially cover a significant distance as they are transported around the world for the various stages of transformation.

The overall structure of the supply chain, from original genetic input to final retail product, is described in Figure 14.2.

Some key points to note from Figure 14.2 are:

The chain comprises both ‘transformers’ (shown as rounded rectangles) and ‘service providers’ (shown as diamonds). The ‘transformers’ generate some degree of product conversion, while the service providers, in this case, facilitate transactions.

Not all service providers have been shown in Figure 14.2, only those specific to the wool industry. Others, such as transport and logistics providers, have not been included.

The high degree of transformation means that at each stage of the supply chain, different product attributes may be sought, or the relative importance of these attributes may change. The important product characteristics at each stage of the supply chain are shown in Figure 14.2.

As the product progresses further towards the end consumer, the characteristics of interest become more closely related to those of the consumer.

There can be significant differences in product description between the stages. This can make communication more difficult, especially where this is between non-adjacent members of the chain, for example a wool grower and a spinner.


There will almost always be more than one wool grower supplying into a specific supply chain. Therefore there is a significant degree of horizontal co-ordination within the supply chain, although this is not shown in Figure 14.2.

Figure 14.2 The apparel wool supply chain. Source: Champion and Fearne (2001a), Adapted from Seaman (1998).

Figure 14.3 Topmaking (left) and spinning (right).Source: Photographs supplied by S. Champion, The New Zealand Merino Company, (2006).

14.7 Characteristics of the production base and the farm-gate selling interface

The Australian wool industry continues to be an important export earner for Australia. In 2001-02, exports of raw and processed wools accounted for 7% of Australia’s total rural exports by value (AUD$3.8 billion). Around 40,000 broadacre farms ran sheep in 2001-02, 27% or 10,800 deriving the majority of their income from sheep. The number of farms carrying sheep has declined by 24% in the past 10 years. Production is also highly skewed with approximately 75% of Australia’s wool production coming from the 38% of farms producing more than 11,000kg p.a. (~ 68 bales) (Shafron, Martin & Ashton 2002).


It has been mentioned previously that one of the challenges for wool growers looking to co-ordinate more effectively with post-farm members of the wool supply chain is the mis-match between the scale of production on-farm and that of a processing mill. While there is considerable diversity in both on- and post-farm production, Dolling (1999) provides indicative data with average annual farm production between 7 to 22 tonnes clean, compared to an early stage processor at 10,000 to 20,000 tonnes and a late stage processor at 1,000 and 4,000 tonnes. This size imbalance means that true interdependence is difficult to achieve across the farm-gate (O’Keeffe 1998). It also limits the possibility and effectiveness of processor feedback as many farms are aggregated into a mill batch, with the feedback data generated relating to this mill batch, but not necessarily a constituent farm lot.

The wool broker-buyer interface is the key point of transaction across the farm-gate. Wool brokers sell wool on behalf of growers, the majority (>80%) still moving through the auction system. Ward (1998) reported that while, (in 1998) there were 40 registered brokers in Australia, the largest two handled 60% of production, and the largest ten sold in excess of 90%. Some rationalisation may have occurred in the five years or so since this data was collected, but the concentration in the two largest brokers is still high.

Brokers have a number of important roles which were identified in McKinsey and Company’s (2000) report into the New Zealand wool industry. Brokers:

Receive wool from the grower Provide technical and financial services to the grower Arrange the auction Store wool until sold Assemble bales into lots Arrange for raw wool testing Appraise the wool subjectively Sell wool on behalf of the grower and invoice the buyer Provide feedback to the grower on the quality of the wool and a market appraisal May store wool after sale at cost to the buyer Deliver wool to the dump or the local processor; and Guarantee payment.

Figure 14.4 The broker’s store. Source: Roberts Ltd (www.robertsltd.com.au).Source: Roberts Ltd (www.robertsltd.com.au) with permission.

Equally important and acting on behalf of the processors, are the wool buyers or ‘exporters’. A similar concentration is seen amongst these, with Ward (1998) again reporting that of the 50 buying firms active in the auction sector, 10 account for 55% of all Australian sales. The buyer’s connection to the processing sector can vary. Processors may fill their raw wool requirements through an in-house buyer, through a third-party buyer or a mixture of both. Some, but not all processors will have in-house buying capability.


Primarily, the buyer’s task is to source raw wool at the lowest cost, by combining farm lots of different specification so that when averaged, they meet the specification required by the processor (McCrea, Dickinson & Hawley 1998). However, like the broker, the buyer provides a range of services which are not always evident or understood, including (Dolling 1999):

Accumulation of wools to fill a processing consignment Combination of wools to meet specification Guarantee of the quality of the wool top, with the carriage of risk Arrangement of transport and handling Organisation or provision of financial facilities such as credit, part-, and extended-payment Arrangement of international trading contracts; and Hedging of interest rates and currency associated with international transactions.


Lecture 2: Supply chains

Learning objectives

On completion of Lecture 2 you should have developed an understanding of:

Supply chains and their function The concept of managed supply chain approaches to marketing (supply chain management –

‘SCM’) The roles of the various ‘actors’ within a chain The role and importance of communication within a chain How chains are formed, maintained and managed, and, How supply chains work to build value

Key terms and concepts Supply chains, actors, value, communication

Introduction to lecture 2This lecture builds on the fundamental principles presented in the previous lecture and develops the concept of the supply chain more fully. Specifically, this lecture looks at the role of supply chains in all their forms, and our understanding of how they function in both the wool industry and other agri-industry. It looks at how managed supply chain approaches differ from other types of marketing relationships and how supply chains are formed, maintained and managed. It also looks at the factors contributing to chain success and the role of communication within the chain.

14.8 Background and context The goal of marketing is to capture value through systems which allow effective communication and the transmission of information on those attributes which are of interest to the consumer. These can be both ‘hard’ (tangible) and ‘soft’ (intangible) characteristics, and the information flow should be two-way i.e. from both the raw material to the consumer, and the reverse.

Strategic alliances or supply chain management are potential mechanisms for this. This lecture examines the nature of supply chains, both ‘managed’ and otherwise; their structure, formation and implementation, maintenance and management and considers aspects of information flow, chain strategy and the factors contributing to chain success.

14.9 Characteristics of strategic alliances and supply chains

The structure of marketing systems with respect to the relationships between actors (participants) is a spectrum from simple transactions to full vertical integration. Intermediates in this continuum are long-term supply relationships, strategic alliances and joint ventures (Mäkimattila & Marttila 2000). The purpose of co-coordinated vertical activity such as a strategic alliance or collaborative marketing venture, is to develop joint sustainable competitive advantage and to extend individual and joint competencies (Faulkner 1995).


In response to the problems of commodity markets and marketing systems highlighted in the previous lecture, there have been numerous calls for all members of the wool processing pipeline to adopt collaborative marketing strategies which draw them closer together. The principle aim of these is to improve communication. To achieve this, a general philosophical approach known as supply chain management (SCM), or ‘value chain’ management, is applied. The latter name is used to emphasize the approach's role in building value, focussing on the customer and being demand-led. For the purposes of this lecture, supply chains and value chains are considered to be the same, and the term ‘supply chain’ is used throughout.

The integration and collaboration at the core of SCM has the purpose of shortening and closing the marketing chain. Integrated supplies do not enter the open market for changes in ownership and pricing but rather product flow between firms is organised on an administered basis (Kohls & Uhl 1990). This differs significantly from the approach in traditional markets and marketing systems, where buyers have favoured simple transaction exchange relationship with their suppliers. Typically in these systems, purchases were split amongst two or more separate sources. Relationships with suppliers were short-term (lasting only for the life of the transaction), adversarial and designed to play competing suppliers off against one another to extract price concessions (Chadwick & Rajagopal 1995).

The philosophy of SCM differs significantly from this approach, with the following definitions highlighting some of the key differences. SCM can be defined as:

A network of connected organisations aimed at the fulfilment of specific consumer needs…in conjunction with the fulfilment of needs of other stakeholders of such an entity (Beers, Beulen & van Dalen 1998).

Supply chain management seeks to break down barriers which exist between each of the links in the chain in order to achieve higher levels of service and substantial savings in costs…and…it seeks to achieve a relationship of mutual benefit by defining organisational structures and contractual relationships between buyer and seller which up to now have been classified as adversarial (Fearne 1998)

Central to these definitions is the dual flow of products and information, the drive to meet the needs of the consumer and the importance of the relationships between actors in the marketing system. A summary of the characteristics and benefits of supply chains is given in Table 14.3.

In the first stages of chain formation, there is a tendency to focus on the economic aspects as typically these are the most accessible benefits initially. Indeed, cost savings of 5-7% are often reported when firms adopt a supply chain management approach (O’Keeffe 1997). However, this approach negates the fact that following the establishment of a chain, its success will depend upon the building of relationships with both colleagues and other firms (Janzen & de Vlieger 2000). As a result, social aspects such as trust, information transfer and learning capability will significantly influence the performance, development and survival of chains.

These chain interactions also facilitate the flow of information and resources between actors and become a stable vehicle through which to conduct further transactions and develop new products and chains. Through this process the relationship itself becomes the competitive advantage (Migchels 2000) and can be seen to be central to the concept of the chain.


Table 14.3 Characteristics and benefits of supply chain relationships. Source: Fearne (1998); Kohls and Uhl (1990); Faulkner (1995); O’Keeffe (1997).

Characteristics BenefitsThey are entered into freelyThey must offer mutual benefitsThe benefits occur over timeThe partners remain substantially independent

Improved market accessImproved communications. Partnership brings people together and invariably involves a greater degree of sharing between the partners, sharing experience, sharing market information, sharing plans and sharing knowledgeHigher profit margins through improvements in cost (collective identification of efficiencies) and value (better meeting the customer’s requirements)Profit potential through assuming additional functionsRisk reduction through improved market coordinationImproved bargaining power and the prospect of influencing pricesEnables more precise market signals down the chain. These are required due to the fragmentation of demand and the increased demand for added value and convenience in products, especially foodFacilitates traceback thus allowing safety and quality concerns to be addressedFacilitates increased competition in markets that are globalised and deregulatedAchieve organisational learningTo gain access to benefits or resources beyond one’s own organisation such as technology, market access, capital, production capacity, products and workforceHelp shape the marketGenerate speed in reaching the marketGenerate synergies which may allow process rationalisation or system improvement

14.10 Traditional versus chain orientation Current developments in society are creating new customer desires, such as mass individualisation, saturated markets, food safety, animal welfare, environmental sustainability, and there is an increasing regulation imposed to support these. Supply chains are emerging as specific entities to enable fulfilment of these desires (Beers, Beulen & van Dalen 1998). As a result, there is a move towards the adoption of SCM approaches as part of an evolutionary process that moves firms from ‘firm vs. firm’ to ‘chain vs. chain’ competition (DPIE 1998). This is especially evident in North American and European food chains, where the separation of genetically modified foodstuffs and animal scares such as BSE and foot-and-mouth disease have focussed public attention and created demands for greater traceability of agricultural produce.

However, a major problem in achieving this chain orientation can be the lack of willingness of the various actors to co-operate effectively and their insufficient knowledge about methods of co-operation which ensure ‘win-win’ outcomes (van Beek, Beulen & Meffert 1998). Often, chain members bring ‘philosophical baggage’ with respect to the nature of markets and appropriate forms of interaction between chain members. As power has shifted from the primary


producer through to the retailer over time, trust has dissipated at the interfaces along the agri-food supply chain, with the players at each interface suspecting each other of unscrupulous intentions. As discussed earlier, antagonistic relationships have developed, where customers are ‘enemies’ and price is often the only point of discussion. As a result, stakeholders hoard information leading to the underperformance of all players in the chain because explicit knowledge in not embedded and tacit knowledge is not diffused (Amanor-Boadu 2000). Some feel that these characteristics are indicative of the wool industry with ‘functional silos’, ‘occupational culture’ and mistrust all hindering the industry’s progression to a more open and interactive marketing system.

It also means that the change to a SCM approach is a considerable shift as can be seen from Table 14.4, which highlights some of the differences between traditional and SCM approaches.

Table 14.4 Differences between traditional and SCM approach in markets. Source: DIST (1998); Newton (2000).Factor Traditional Value ChainInformation Sharing Little or none ExtensivePrimary Focus Cost/price Value/qualityOrientation Commodity Differentiated productPower relationship Supply Push Demand pullOrganisational structures Independent InterdependentPhilosophy Self interest Chain optimisationIndividual organisational boundaries Hard Fuzzy

Supply chain boundary Fuzzy HardPoints of inter-organizationalcontact Few Many

Mode of operation Tactical StrategicCommunication betweenstakeholders Formal and slow Informal an fast

Relationships betweenstakeholders Low High

Trust between stakeholders Short-term Longer-termKnowledge diffusion amongststakeholders Low High

Stakeholders/actors/players in thesystem Many Few

Organisational models employed Predominantlymechanistic

Predominantlyorganic

Organisational visions and valuesamong stakeholders

Different, diverse and divergent

More common, focussed and convergent

14.11 Chain formation Alliances and other co-coordinated vertical activity arise because collaborative effort is perceived to be the best means of dealing with some external force (Faulkner 1995). In stable competitive environments, reticence to become involved in such relationships has little penalty. However, in a changing environment characterised by market dynamism, failure to change may have greater consequences (Ohmae 1989). Perhaps Porter and Fuller (1986) sum up this chain formation process most simply when they state that, “Coalitions arise when performing a value chain activity with a partner is superior to any other way.”


The general pressures driving a move to collaborative effort can include (Faulkner 1995); turbulence in markets, identification of potential economies of scale, globalisation of the industry, regionalisation of the industry, fast technological change leading to increasing investment requirements, shortening product life cycles and high economic uncertainty. At the firm level, these general pressures translate to the need for strategies which address market differentiation, quality assurance and chain optimisation (Bouma 2000). Many of these characteristics have impacted the Australian wool industry in the past and will continue to do so in the future. This is in terms of the production base, the related textile processing sector and the end-consumers, so it is perhaps not surprising that the industry has become interested in these issues.

14.12 Maintaining and managing the supply chain At all points during a managed supply chain ‘life’, Fearne (1998) states that the key to developing effective business linkages within the chain is the ‘Three C’s; commitment to the idea, communication of the purpose and continuity of efforts. To achieve the ‘Three C’s’, partners need to:

Share a common vision of how to work together Develop a relationship in which no partner feels under threat but one where all will benefit, all

will be winners and the reputation of each will be enhanced Ensure the organisation cultures do not clash and the collective arrangements are not seen as

a managerial threat Resist the temptation to revert to short-term opportunistic trading that break the actual or spirit

of the agreement Allow the relationships to grow and evolve for the benefit of all partners. Controlling them can

be difficult Take on board the concept of the learning organisation which has become prominent in the

1990’s and adapt it to become the learning chain.

Figure 14.5 Chain learning is important. It can be valuable for growers and brokers to understand the needs of processors such as topmakers. Source: Photographs supplied by

S. Champion, The New Zealand Merino Company, (2006).


O’Keeffe’s (1998) ‘relationship audit checklist’ (Table 14.5) is also useful for thinking about the ‘health’ of the supply chain and its relationships, and also for helping an organisation select the most appropriate partners for a new SCM venture. Such an assessment can be made in each of the key areas of value creation, alignment, alternatives, investment risk and uncertainty, investment rewards, core capabilities and relationship management.

Table 14.5 The SCM relationship audit checklist. Source: O'Keeffe (1998).Key Area Characteristic MeaningValue Creation Vision

Partnering

Competitiveness

We have a vision of creating more value forour customers by working togetherWe are better off working together thanworking independentlyWorking together gives us an edge in themarketplace through lower costs, betterproducts, better service

Alignment Goals

Capabilities

Our goals are well aligned and compatible andare likely to remain soOur capabilities are complementary and relevant to our target market

History Understanding

Levels

The history is such that we understand each others businessHow many people at different levels in the organisation interact with each other on a regular basis

Alternatives Alternatives The number and quality of alternativesInvestments Nature

Balance

The types and extent of investments currentlymade specifically into the relationship; people and time, capital, processes and systems, brand and reputationThe degree to which investment has made oneparty more dependent (score low) or both interdependent (score high)

Investment risks/uncertainty

Uncertainty

Observed quality

Perishability

The level of risk as a result of supply uncertaintyThe ease of evaluating quality along the supply chain, and ability to trace back to problems The magnitude of the risks associated with the storability or perishability of the product

Investment rewards

Sharing

Costing systems

Opportunism

We are all comfortable that the relationship benefits are, and will continue to be, shared equitablyWe have the appropriate costing systems to help us locate our share of the profitsThe other party is unlikely to act opportunistically even if they had the chance to do so

Core capabilities Satisfaction

Performance

Future performance

Boundaries

The level of satisfaction with the performance of our partnerEach party’s performance is best or near best in its classEach party is prepared to invest in their core capabilities, to remain best in their classWe understand the boundaries of this partnership

Relationship management

Consideration

Understanding

Stability

Cultural fit

Internal systems

Our partner will not act without considering the impact on usWe understand each other’s business and why we act the way we doWe can predict how the other party will react to changes in circumstancesWe have similar values as to how customer value can be createdOur internal reward system encourage the development of this relationship


14.13 Problems in the chain While it is useful to consider factors facilitating chain success, it is also useful to look at typical chain problems. One problem is that chains are often not directed to the right market segments and insufficient attention is given to developing chain goals and strategies (Janzen & de Vlieger 2000). Intuitively, given the complex nature of the wool industry supply chain and poor history of success for grower groups who have entered into supply chain or value-add type relationships, ensuring appropriate direction, structures and partnerships is a key criteria for chain success in the wool industry.

A danger when problems start to arise is that chain members may try and realise their own goals which may be incompatible with those of others and the chain as a whole. This can lead to fading interest and commitment amongst the participants. Other major dangers in chains are (Faulkner 1995):

Future conflicts due to agendas being different between the alliance partners Inadequate rapport between alliance partners leading to misunderstandings Fear during technology transfer that a future competitor is being created Cultural incompatibility and Lack of commitment by partners as personnel are provided to the alliance by the partners on

short-term secondments.


Lecture 3: Competitive position of wool as a textile fibre

Learning objectivesOn completion of Lecture 3 you should have developed an understanding of:

Competitive position of wool as a textile fibre Raw wool and its complexities Wool’s decline in textile market share Role and impact of raw wool description Opportunities for improved description in the future, and, Product opportunities for wool in the future

Key terms and concepts

competition, consumer, market context, specification, description, prediction

Introduction to lecture 3This lecture builds on the general and fundamental principles presented in the previous lecture with respect to both the way in which supply chain actors interact, and the concept of managed supply chain approaches. As mentioned in Lecture 2, it is important to remember that supply chains are simply structures, while supply chain management is a philosophy or approach to deal with the complexities and challenges facing modern business.

This lecture examines the specific characteristics of wool and how these relate to the raw wool consumer, be they a processing customer or apparel purchaser. It considers the current description of wool and the opportunities for improved description in the future. It also considers the competitive position of wool compared to other textile fibres and how the market share of wool has declined over the last 40-50 years. Finally it looks to the future and considers where wool may be 10-20 years from now.

14.14 Background and context As a textile fibre, wool faces a number of competitive challenges from both other fibres and the changing needs of its consumer base. The effective description of wool has a significant role to play in meeting these needs and overcoming the problems. This lecture examines the fundamental shifts in consumers and their purchase drivers, and the challenges this presents for the wool industry. Raw wool description is also considered in terms of its current and future roles.

Changing consumer markets – the driver for change Consumer markets are characterised by rapid change. Wool’s consumers are no different. Given that marketing systems should be reacting to the needs of the consumer if they are to capture the maximum value from the products they trade, these systems must adopt strategies that allow them to identify changes in consumer needs. The simple check-list developed by von Alvensleben (1997) provides some questions to help analyse our understanding of both the product and the system through which it is transacted:

Why do consumers buy the product? How is the product perceived? How is the buying decision taken?


Where is the product purchased? What product, in the end, is chosen? How is the buying decision influenced by marketing?

The scale of the changes in the consumer market should not be underestimated. While developing markets continue to see population growth, as has previously been the case in the developed world, many of the mature but high value markets are now characterised by slowing or stagnant population growth. This is forcing significant alterations to marketing strategy, with the certainty of natural increases in product consumption having been eliminated. There are also changes in the relative size of consumer groups and the emergence of new demographics. This poses challenges for both marketers and product. For example, the over-65 age group is predicted to constitute 20% of the European population in 2025 compared to only 10% in 1950. Different to their predecessors, they will be characterised by a continued desire to seek comfort, security, convenience, sociability and ‘old-fashioned’ values in the products they buy (Ray & Hughes 1994).

Change of gender role is also a major driver of social change in the western world as an increasing proportion of women are involved in the workforce. With respect to purchasing habit, an important characteristic of the working woman is that she is time poor (Ray and Hughes 1994), and as a result, aspects of convenience become extremely important purchase drivers for this group. This has implications for wool through changes such as the increased demand for ‘easy-care’ wool garments.

Another important change in consumer thinking is the rise in power of the ‘intangibles’ or ‘soft’ product characteristics. Dagevos (2000) captures this well by describing tomorrow’s economy as one characterised by the importance of ‘emotion’, with ‘hard’ product characteristics and price acting only as part-drivers of consumer choice. This change comes about as good quality and price are no longer enough to persuade people to purchase (these characteristics are often in abundance and not a point of differentiation), and aspects of emotional, ethical, aesthetic or ecological origin, become important influencers of purchase decisions. Dagevos describes this as a transition from ‘real goods’ to ‘feel goods’, a process known as ‘dematerialisation’. Its rise in importance signals a partial fall of materialism and through this, intangible assets have become ‘real’ and economically valuable.

Figure 14.6 Images of nature can have significant intangible and emotional value and become important purchase drivers. Source: Photographs supplied by S. Champion, The

New Zealand Merino Company, (2006).

Income affects the comparative importance placed on the ‘soft’ and ‘hard’ product characteristics. At the high income end, the ‘soft’ or intangible product characteristics discussed earlier may be major drivers of purchasing decisions, while at the lower end, price is the major driver (Ray & Hughes 1994; von Alvensleben 1997) (see Figure 14.7).


Figure 14.7 Changing consumer preference with economic growth. Adapted from: von Alvensleben (1997).

Messages as to the importance of intangibles are also having increasing impact on the farming sector (Shadbolt & Morriss 2000). This change is seen even in the simplest, least transformed, agricultural products. Viaene, Verbeke and Gillynck (1998) found consumers to approach vegetable consumption emotively, seeing vegetable products and purchases in terms of health, quality, nutrition and naturalness. Despite this however, aspects of convenience are not negated in the product assessment process and the preparation of fresh vegetables is increasingly seen as being too time consuming. As a result, to justify the purchase of the processed form, consumers are looking for information at the time of purchase that can act as rational support in meeting these desires for intangible characteristics. It is important for all actors in the marketing system to recognise that these concerns warrant their attention just as much as technical problems (Newton 2000) and that they co-ordinate the outcome to meet consumer needs in this area.

Another difficulty for the marketing system is that as incomes rise, there is also the desire for products to be unique. This characteristic is driving the next wave of consumer demand, a process known as ‘mass customisation’ or ‘mass individualisation’ where firms adopt strategies to deliver customer-specific offerings in what have been traditional mass markets (Newton 2000).

Implications for wool – raw wool and its complexities Amongst the general market dynamics discussed above, wool sits in a particular place. Wool is produced in an animal production system, and hence shares some characteristics with other animal-based and agricultural systems. However, as a fibre product, it competes in the textile and apparel, rather than food market. Some wool types compete at high price-points where choices for consumer spending may not be between garments, but rather between wool purchases and other discretionary consumer spending such as holidays, entertainment and consumer electronics. Other wool types compete at lower price-points where competition may be between wool and other natural and man-made fibres. Coupled to this is its presence in a market where fashion and other intangible product characteristics as discussed above, appear to potentially have a significant influence on purchasing decisions.


A number of factors have influenced wool demand, some of which have been discussed in previous lectures. These include (Wool Industry Future Directions Task Force 1999):

Increased levels of environmental control in buildings and in transport have decreased the need for heavy, warmth-giving apparel

Successive and significant improvements in the cost and properties of synthetic fibres A reduction in military use of wool with the collapse of the soviet union A decrease in wearing of more formal, traditional apparel, and, A decrease in the proportion of disposable income spent on apparel purchases.

This last point is highlighted by two interesting German statistics. In the decade from 1987 to 1997 the proportion of household expenditure spent on clothing and shoes in high income German families fell from 9.7% to 6.4% (Ward 1998) and there was a marked shift from formal to casual wear (Hilton 1995), with consumers seeking comfort gains through lighter fabrics, softer touch, smoothness next to the skins, reduced prickle and breathability. In response to this, average wool fabric weights have fallen sharply from between 430 to 475g/linear metre in 1956 to between 280 and 310 g in the late 1990’s (Hunt 1995), resulting lower wool consumption per garment.

It is clear that consumers drive the apparel fibre industry through their choice of clothing purchase. Increasingly, the proportion of income spent on clothing is decreasing not just in Germany as mentioned above, but also more generally. From approximately 10% in the late 1960’s to only 5% today, clothing now competes with other lifestyle items such as holidays and entertainment (Seaman 1998). For example, for the last decade in Italy, growth of apparel sales has lagged behind growth in consumer expenditure and apparel prices have lagged behind average inflation (Woolmark 2000b). That wool demand and hence price can be influenced by consumer sentiment is reinforced by evidence of changing fashion during the 2001 seasons leading to the display of more wool-based fabrics at a textile trade show in 2000 (Woolmark 2000a). Wool is further marginalised by the characteristics of the wool apparel consumer or consuming countries, which include:

High GDP per head A cultural acceptance of wool High disposable income Responsive to fashion, and, Recognition of wool fabric qualities.

A move to apparel expenditure typically occurs when annual incomes exceed US$5000. As a result the major consumers of Merino apparel fibre in 1997-98 were as follows (Seaman 1998): Western Europe (25%) and Asia (35%). It is interesting to note that North America consumes only 3% of Merino apparel fibre, perhaps underlying the importance of the ‘cultural acceptance of wool’ as a key purchase driver.

Changing consumer lifestyles and increased time pressures have increased the demand for ‘easy care’ wool garments. Consumer research undertaken by Woolmark in 1996 found that across 12 countries, 64% of consumers rated machine washability properties as either very desirable or essential. Further driving the need for wool to come to be seen as an easy care fibre is the heavy investments by its competitors, cotton, silk and synthetics, in stressing the easy care nature of their fibres. Demand for washing machines and driers, the latter being especially strong in the North American market, is increasing (Woolmark Europe 1999).

The trend to time saving characteristics in consumer goods is widespread. The demand for easy care wool is paralleled in food by the growth of convenience foods in both the processed and fresh segments. This characteristic is further accelerated by the growth in the number of dual income families and the demise of a full time ‘house spouse’ (Woolmark Europe 1999), leading to demand for ‘easy use’ products across a wide range of areas, including food and apparel.


Another characteristic of the changing market place, are the changes in the retail environment. There has been an increasing move to purchase clothing items ‘on sale’ (60% of all apparel purchases in the US and 50% in Germany in 1996), and there has been the strict imposition of price limits by retailers, with smaller initial orders, followed by later orders for products that sell well (Ward 1998). This ‘squeezes’ margins and further limits wool’s penetration in some markets due to its comparatively high price and often poor recognition amongst consumers outside traditional suiting markets.

Additionally there is increasing importance placed on brands/labels, their role summed up in the following quote:

Label recognition is comfort zone shopping for the customer who is time poor and requires track record of reliability…It is vital to position wool in association with leading brands at all market levels to more easily access the customer. (Rowe 1995).

So what is wool? An interesting question in relation to consumer’s attitude’s and responses towards wool is whether all wools are ‘the same’. While we often treat them as such, ‘wool’ is in fact a large range of products with different end-uses, covering fashion, sportswear, interior textiles and industrial. This diversity is highlighted in the following comment from wool exporters/buyers;

In essence ‘wool ain’t wool’. If wool was capable of mass production and contained little or no natural variability in its major processing or manufacturing properties, then we may not have seen the open cry auction system used at all, let alone survive for as long as it has as the primary method of selling and price determination. The open cry auction system is not perfect, but it does provide a low cost and efficient method of enabling hundreds of thousands of classed shed and rehandled lines to be purchased and assembled into processing batches of between 100 to 300 bales or more for export to more than 40 countries. In so doing, the auction system, utilising display samples and test results, maximises the available trade competition on any day. It is also a transparent system offering equal access to all sellers and buyers. (Quirk 1997).

McKinsey and Company (2000), in their review of the New Zealand wool industry, highlighted the importance of understanding this diversity with respect to understanding the customer and hence building demand.

Different types of NZ wool have very different markets and end uses. Understanding the major markets and the competition that wool faces is the first step in assessing the potential for demand growth or the opportunities to service more attractive market segments (McKinsey and Company 2000).

Figure 14.8 Two different wool products using different wool types; socks (left) and suits (right). Source: Photographs supplied by S. Champion, The New Zealand Merino

Company, (2006).


This view is further supported by the price signals for premiums and discounts in the first quarter of the 2000/01 season that clearly indicated that different product categories exist within the total Australian clip as there were differing price penalties for a particular fault, depending on the wool type in which it is found (see Table 14.6). These various premiums and discounts are based on the type and level of defect (defects include vegetable matter and colour contamination and poor fibre strength) and on the most important quality attribute with respect to price determination, fibre diameter.

Table 14.6 Discounts (%) for Various Wool Faults 2005/06: Merino Fleece WoolSource: Figures prepared by K. Stott, The Woolmark Company.

Fibre Diameter Descriptor

Fibre Diameter

(um)

VegetableMatter(3% v FNF)

Strength(W2 v sound)

Colour(medium)

Superfine 17.0 - 18.5 -6.3 -11.6 -6.5

Fine 18.6 – 20.5 -5.5 -9.1 -7.9

Medium 20.6 – 22.5 -4.2 -7.1 -8.3

Strong 22.5 – 24.5 -3.8 -6.5 -7.8

14.15 Competitive position of the wool supply chain The Merino fibre value chain is long and complicated; the time from product development to availability at retail, may be up to two years (Seaman 1998; Wool Industry Future Directions Task Force 1999). Compared to cotton and synthetic fibres, wool is expensive and difficult to process. Against these fibres it typically maintains a 3.5:1 price premium (Seaman 1998). At prices above this ratio, as is currently (August 2003) the case for medium and strong Merino types, wool’s competitive position, viz-a-viz other fibres, is poor. The current situation however is counterbalanced by decreased supply due to the drought and structural industry change with respect to drought and sheep numbers/wool production volume.

Wool is also small with respect to market share. By comparison cotton is approximately 45% of the world textile trade and polyester approximately 35% (Wool Industry Future Directions Task Force 1999). Wool’s market share is currently 2.6%. Additionally, delivery costs in the wool industry are high and were estimated at AUD$0.82/kg in 1996/97. This cost was split between the various activities as shown in Table 31-2 (Ward 1998).

Table 14.7 Delivery costs in the wool industry. Source: Ward (1998).Activity Cost (AUD$)Shearing Shed to WarehouseWarehouse (handling, testing and selling commission)Grower Levy (marketing, R&D)Purchasing Costs (post-sale charges, buying activities)Delivery to Mill (preparation to ship, freight, transport ship to mill)

$0.05$0.19$0.16$0.19

$0.23

There are other differences between the various competing fibres and their production systems. While wool and cotton are both natural fibres, the production environment for cotton is more controlled, typically involving intensive cropping with irrigation, whereas wool is produced from extensive grazing or rangeland enterprises (Wool Industry Future Directions Task Force 1999). In the developed world, the growth of genetically modified cotton plantings designed to deal with various weed and pest issues, has further reduced the system variability.


Polyester and other synthetic fibres have no environmental variability impacting on their production. Wool production is also comparatively dispersed with respect to its production units and in terms of the links between producers and processors. This is certainly true compared to both cotton and polyester and has significant down-side cost implications (Wool Industry Future Directions Task Force 1999).

These differences were summed up starkly by McKinsey and Company's review of the New Zealand wool industry when it found that it costs NZ$8/kg more for a carpet manufacturer to process wool than to make a similar carpet from nylon (McKinsey and Company 2000) (see Table 14.8). While these are data for non-apparel wools, they are indicative of wool’s competitive disadvantage.

Figure 14.9 Bales in the wool store awaiting testing.Source: Photograph supplied by S. Champion, The New Zealand Merino Company, (2006).

Table 14.8 Comparative processing costs (NZ$/kg) for carpet made from competing fibres. Source: McKinsey and Company (2000).Fibre Spinning/dyeing cost Tufting cost TotalWool (scoured) 8 15 23Nylon staple 7 8 15Polypropylene 0 8 8

Similar data can be seen in Figure 14.10 (Wool Industry Future Directions Taskforce 1999) which shows supply chain costs for wool, cotton and polyester. Clearly wool is at a competitive disadvantage!


Figure 14.10 Competitive Supply Chain Costs for Wool, Cotton and Polyester. Source: Wool Industry Future Directions Taskforce (1999).

14.16 Raw wool description – present and future If we accept from the above discussion, the inherent diversity of wool, then raw wool description and its evolution in the future will have an important role to play in the development of the wool industry. Particularly, it will be important in supporting alignment of wool types and attributes with those sought in products by the consumer. This is true of both ‘hard’ and ‘soft’ product features, yet our description of wool still revolves mainly around the measured and subjectively assessed raw wool characteristics. These thoughts are well captured in the following comment from a topmaker (Turk 2002):

Technology and smarter use of knowledge, including improved understanding of wool as a fibre, must be the goal to which we strive. The addition of improved attributes to the fibre, the use of wool in alternative products and the better selection of wool specifically designed for its end use will be the critical success factors for the next 5 years. This places considerable emphasis on the correct interpretation of measurement of wool fibres and its impact on current and potential customer base.

Over the last 30 years, our description of wool has expanded from a purely subjective process of assessment through an ever increasing array of objective measurement. It began with yield and fibre diameter, but measurements themselves and the techniques used to generate the measurements have evolved and expanded to include:

Fibre diameter Fibre diameter variation Fibre, length, strength and position of break Clean colour, and, Fibre curvature.


Figure 14.11 Accurate fibre diameter measurement is critical for determining the price of greasy wool. Source: AWTA (www.awta.com.au) with permission.

The metrology and purpose of these characteristics is discussed elsewhere in this unit and it is not my intention to discuss it further here. However, it is important to remember that these measurements are important descriptors within the wool marketing system and hence they must convey information in order to add value to the product, and most importantly, for its customer. Importantly, all aspects of product value in relation to the raw fibre, for both the initial and following customers in the supply chain, should be described. If they are not, other methods must be found to gain this description, or the potential value of the product to the customer will be lost.

The reverse of the above situation where incomplete description reduces total product value, is where unnecessary description adds cost, either directly through the cost of the sampling, testing and related procedures or indirectly through the confusion it may create. In this area again, Turk’s (2002) comments are instructive and should be remembered:

There is a lot of work being done on measurement of attributes of wool. Some of this work includes the impact on parts of the processing chain and the value of the knowledge of the measurement. This is very valuable but must be put into context. Not all measurement is good. Without a contextual basis (i.e., what does knowledge of this measurement contribute to valuing the fibre), the measurement can be market distorting and of more harm than good.

Given the above, individual raw wool measurements are critical for wool trading and the functioning of an effective marketing system. Their combination through appropriate formulae into predictive equations is also useful and can be used commercially to (Couchman 2002):

Reduce processing risk Optimise price by finetuning purchase decisions, and, Undertake quality management programmes both within and between processing plants.

However, the application of these technologies amongst the processing sector is often poor. Clearly, just as in the farming sector, further efforts in relation to the extension and exploration of the commercial value of this work, should deliver benefits to the processing sector and improve the competitive position of wool as a textile fibre.

Perhaps the most exciting prospect of this prediction technology is that it enables the raw material data provided through the marketing system to better match raw materials to end use. Again, Turk (2002) captures well the importance of this link. Referring to the future he says:

Processors will be increasingly focussed on supplying highly specified and distinguishable products to key clients. Relationships at sourcing stage will become more important as processors seek out specific wool characteristics. Fibre producers will need to understand their choices and commit to producing the best wool for a particular client base that they can. There is no one ‘right’ wool for everyone. There will be a ‘right’ wool for a producer. The challenge is to find the fit.


ReadingsThe following readings are available on CD

1. Beers, G., Beulens, A. and van Dalen, J. 1998, Chain science as an emerging discipline. in: Chain Management in Agribusiness and the Food Industry, Proceedings of the Third International Conference. G.W. Ziggers, J.H. Trienekens and P.J.P. Zuurbier (eds.), p. 295.

2. Champion, S.C. and Fearn,e A.P. 2001, Supply Chain Management. A 'first principles' consideration of its application to wool marketing, Wool Technology Sheep Breeding, vol. 49(3), pp. 222-236.

3. Fearne, A. and Hughe, D. 1998, Success factors in the fresh produce supply chain: Some examples from the UK, Food Industry Management, Wye College, University of London.

4. Hilton, I. 1995, Consumer Wants: Implications for Australian Wool Growers. in: Michell Wool Forum, “The Sheep’s Back,” Salisbury, South Australia, Australia, p. 4.

5. Hunt, T. 1995, Manufacturers Needs: Requirements of the Worsted Trade, in: Michell Wool Forum, “The Sheep’s Back,” Salisbury, South Australia, Australia, p. 28.

6. Janzen, R. and de Vlieger, J.J. 2000, Social Network Theories as a Tool for Chain Building. From the Promise of Profit to the Promise of Persons, in: Chain Management in Agribusiness and the Food Industry. Proceedings of the Fourth International Conference, J.H. Trienekens and P.J.P. Zuurbier (eds.), p. 121.

7. O’Keeffe, M. 1997, Supply Chain Management: The Concept and Implementation, Rabo Australia Ltd, Sydney, Australia.

8. O’Connor, J. 2002, The Wool Industry: Recent History and Future Prospects, Wool Technology Sheep Breeding,. vol. 50(3), pp. 188-196.

9. Shadbolt, N.M. and Morriss, S.D. 2000, Green as Just Another Quality Attribute; Delivering to Intangible and Tangible Specifications Successfully, in: Chain Management in Agribusiness and the Food Industry. Proceedings of the Fourth International Conference, J.H. Trienekens and P.J.P. Zuurbier (eds).

10. Turk, T. 2002, ‘Meeting the Needs of the Processor,’ Wool Technology Sheep Breeding, vol. 50(4), pp. 622-625.

11. Viaene, J., Verbeke, W. and Gellynck, X. 1998, Chain behaviour and chain reversal of the processed vegetable chain, in: Chain Management in Agribusiness and the Food Industry. Proceedings of the Fourth International Conference, J.H. Trienekens and P.J.P. Zuurbier (eds.)

ActivitiesAvailable on WebCT

Multi-Choice QuestionsSubmit answers via WebCT

Useful Web LinksAvailable on WebCT

Assignment QuestionsChoose ONE question from ONE of the

topics as your assignment. Short answer questions appear on WebCT. Submit your answer via WebCT


SummarySummary Slides are available on CD

Lecture 1 has provided an overview and introduction to marketing and some of the specifics of wool marketing. Central to this discussion is the understanding of ‘commodities’ and ‘products’ and the way in which this understanding informs our choice of marketing system. Growers individually and collectively need to make assessments of whether they are seeking to produce a commodity or a product, and the implications associated with each of these choices. All value, both tangible and intangible, associated with their wool needs to be objectively identified, and a marketing system subsequently chosen which enables these value attributes to be defined and conveyed in a manner that maximises value.

The material in Lecture 2 has focussed heavily on the theory of supply chains and has considered their application to the wool industry. A key point to remember is that the wool industry has a supply chain currently, however, it does not employ a managed supply chain approach to marketing as a whole. The question is at what point on that continuum between simple transactions and vertical integration, does the industry and/or individuals and elements of the industry, wish to ‘sit’? Clearly there are benefits to more co-coordinated approaches within the wool supply chain, with respect to information sharing etc., but there are also difficulties to be managed through these collaborative efforts. There are also history and ‘functional silos’ to be overcome. The question is does the potential value such an approach may add, justify the difficulties that may arise.

It will be interesting to see the industry’s progression over the next few years.

Building on the issues covered by the previous two lectures, this lecture has examined the complexities and diversity of wool fibre, the changing demands and nature of the consumer base, the competitive pressures impacting on wool and both the current role and future opportunities for wool description. While the challenges are real, the opportunities are immense, but require co-operation of all industry sectors if they are to be seized. A retreat to the ‘functional silos’ of the past will not provide success. Rather, it is essential that we understand our consumer and integrate best-practice science and technology, wool growing and wool processing to ensure a viable and prosperous industry for all participants.

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Woolmark, 2000a, Optimism at Prato-Expo as the woollen business grows, Press release 6th October, 2000. www.woolinfo.com.

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http://www.woolinfo.com/

Glossary of termsActors A sociological term to describe the participants in a supply chain

Commodity A material in its natural state

Communication Sharing of information formally or informally

Competition Those with similar products competing for access to the same consumer

Consumer The final purchaser of a product flowing out of a supply chain

Description A listing of a product’s measured or assessed attributes

Prediction The process of using known relationships between inputs and outputs, to generate output values from input values

Product A commodity (tangible) linked to other service, symbolic and intangible attributes

Raw wool

marketing

The process of selling greasy wool

Specification A description of what is required in a product

Value That which is typically added to a product at each stage along

the supply chain and which translates to a higher price

received

Wool supply

chain

The system and entities which transfer and transform greasy

wool into a retail product available to a consumer


microsoft word - t14_lecture04.doc€¦ · web viewon completion of lecture 1 you should have...

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