Can InfoTech E Agribusiness Tools to Coordinate Value Chains Stan

Can InfoTech? … E-Agribusiness: Tools to Coordinate Value Chains? Stan Ernst & Neal Hooker Dept. of Agricultural, Environmental & Development Economics October 28, 2002 Purdue University the chain market power l Improve coordination l Connect with customers l Increase l b2b l b2c l Tighten 10/28/02 Ernst & Hooker Networked IT as value builder What we’re thinking about… : : Adoption Triangulated research l l l : Not supply or demand chain focused : Adding or enhancing value through Firm evaluation 3rd party evaluation Customer assessment Firm & product value Trust issues Tax, Trade, Privacy Ernst & Hooker chain coordination : To individual entities in the chain : Role of quality signals l l : Policy Effects? l 10/28/02 Ernst & Hooker 10/28/02 Definitions : E-Business l l Uses computer media with at least two players Focuses on management and strategy Using a computerized, networked environment in marketing strategy Financial transaction or commitment via Internet E-Business focused on ag/food goods & services Ernst & Hooker What we know : E- Marketing l : : E- Commerce l E-Agribusiness l 10/28/02 1 What we know : The nature of E-Agribusiness : Computer adoption : Internet adoption : E-commerce The Nature of E -AgriBusiness : Increasing consumer power : Speed and time compression : Geographic location : Information management : Intellectual capacity 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker U.S. Computer Own/Access 100 90 80 70 60 50 40 30 20 10 0 U.S. Internet Access 100 90 80 70 60 50 40 30 20 10 0 Percent of Pop. Percent of Pop. 42 15 1990 51 60 65 56 42 26 Dec. 1998 Aug. 2000 2001 63 Dec. 1998 Aug. 2000 2001 2002 (est.) 2002 (est.) U.S. Sources: US Dept of Commerce, ECom-Ohio, Ernst Sources: US Dept of Commerce, NASS, Ernst 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker U.S. Farms Computer Use for Access Business 2003 (projected) Ohio Farms Internet Access 56 43 29 13 2003 (projected) Computer Use for Access Business 70 63 58 41 Ernst & Hooker Internet Access 60 46 35 14 68 55 47 38 39 29 24 20 33 28 25 18 2001 1999 1997 10/28/02 2001 1999 1997 10/28/02 Sources: NASS, US Dept of Commerce, Ernst Ernst & Hooker Sources: NASS, US Dept of Commerce, Ernst 2 InfoTech Adoption Ohio Fruit & Vegetable industry (2001) … : Weekly work computer use = 4 hours : Weekly personal computer = 2 hours : Weekly E-mail/web use = 1 hour Farms Do What Online? U.S. Buy Inputs Market 6 6 @100 Ohio 7 5 @100 Nationally, Nielsen/NetRatings says 2:45/week at home + 5:34/week at work. Seek Info Sources: NASS, USDA-ERS, Ernst 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker E-commerce 100 90 80 70 60 50 40 30 20 10 0 Attractions for Agribusiness Percent of Pop. 30 13 U.S. Ohio 14 US farm 23 4 OH AgBiz OH F&V Sources: US Dept of Commerce, NASS, Ernst 10/28/02 Ernst & Hooker Higher return for farmer – no middleman Wide product choice for consumers : Bigger potential market for niche products : Improve customer relations : : 10/28/02 Ernst & Hooker Farmers’ Responses Commodity agriculture: Low cost, high output : Little product differentiation : E- Business: online sourcing of inputs and commodity marketing : 10/28/02 Non-farm Agbiz does what? In Ohio… : More than half have rethought business Product differentiation: : Unique market plans because of the Internet : 51% have a web site : 23% are selling on line l l position : Build brand; serve niches : E- Business: Direct online marketing, promotion Those sales are about 1% of their total 2/3 of those not selling, say they won’t Source: Ernst, Ehmke, Tweeten (2000) Ernst & Hooker 10/28/02 Ernst & Hooker 3 What we think we know What we think we know : Value in info application, communication : ROI comes from revenue enhancement and cost reduction : Constraints to E-Agribusiness : Adoption driven by Access, Attitude, Aptitude 10/28/02 Ernst & Hooker Constraints to E -Agribusiness : Nature of fresh food : Need for further processing : High distribution costs : Number of people online : Ability to find site Adoption Drivers Factors that Influence On-Line Buying Behavior Attitude toward technology Income Motivation to use technology 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker InfoTech Attitude & Aptitude… : Personal/individualized l Attitude l Learning style l Risk-willingness l Organizational structure l Root of motivation InfoTech Attitude Ohio Fruit & Vegetable industry (2000) … : 8.7% will never use a computer : Internet generally helps small firms : Most think online info helps decisions : Internet will generally expand market : Not rethinking business because of Net : Customers will buy high-quality food online 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker 4 Agri-CULTURE & Adoption The influence of personal attitudes and “agri-culture” on business decisions related to the adoption of IT, E-biz and E-commerce. l l l l l What’s Unique about E-Agbiz? : Traditions l Ag's "culture" is one of personal relationships and sensory interaction E-Business de-emphasizes this Management traditions constrain new business models required by E-Business Business Traditions Root demographics IT skills Office aversion Place l l 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker What’s Unique about E-Agbiz? : Agri-Culture : Rogers + Brown + IT Diffusion : Collective uniquenesses and Root Demographics l Industry participants are older than average and disinclined to work inside: a disincentive to computer/Internet adoption historical/cultural roots : Structural behavior & structural change : Collective characteristics : Place l Internet connectivity and IT support more limited/expensive in remote locations where much agribusiness is conducted l Rural areas are fast-growing adopters of Internet – desire for critical resources in those communities 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker Predicting E -Commerce : Does Agri-CULTURE test out? : Applied to fruit & veg study : Limited success : Key is in variables measured : IT calls for broader theoretical base than Diffusion Model l Age; Gender; Education; Gross sales; Proximity to large/small town to large/small town; Optimism; E-Commerce Comfort (2000 fruit & veg study) : Agri-Culture Model l Proximity traditional tech adoption Rate of adoption Human capital issues l Impact of information on business success l l 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker 5 Types of Food Retailing E-Businesses Individual Farms Groups of Farmers : Farmers’ Markets : Specialty Retailers : Large Retailers : : Case: E-Grocery Content Analysis To assess customer facing E-Grocery strategies Consumer Surveys To understand consumer attitudes towards E-Grocery purchases Management E-Strategies ? 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker Factors to E-Grocery excellence 4 key strategic factors to consumer interest Firm Quality CRM Product Quality Product Range E-Grocery Managers Survey Customer communication most critical part of E-Grocery strategy : Online shoppers greatly outspend in-store buyers in brick-click operations. : Fresh fruits, vegetables, and meats are problem products : l l l } Signals about firms } Signals about products Quality control Shipping Communicating quality : 10/28/02 Ernst & Hooker 10/28/02 Profitability main challenge to firms Ernst & Hooker What we need to know… What we Need to know : Consultant vs. Academic : Do strategies transfer between ag sectors? : Is triangulation feasible? l methodological issues abound : Effect on industry structure : Impact of policy 10/28/02 Ernst & Hooker 6 What we need to know… Structural/Management Issues Nimbleness l Information management l Include IT in business strategy …or not l ROI l Timing & Points of deployment l Human capital l What we need to know… : Is product and firm signaling more or less effective online? : How to link E-Agbiz strategies to performance measures : Which InfoTechs enhance chain communication and coordination 10/28/02 Ernst & Hooker 10/28/02 Ernst & Hooker E-Agribusiness: Tools to Coordinate Value Chains? Stan Ernst & Neal Hooker E-Agribusiness Working Group Dept. of Agricultural, Environmental & Development Economics http://aede.osu.edu/programs/e -agbiz/ 7