Farm and Sunshine Farms
Given the current economic climate, it is evident that most consumers will shop on price first then branding is secondary. As such, the country that is able to operate their industry at the lowest cost will control the market share of the farming industry. However, while the NAFTA has negatively impacted famers such as Sunshine Farms, it is conceivable that other segments of the US agriculture market could be seeing advances in areas where Mexico is not a dominant factor in the industry.
For example, the meat, rice, corn and bean industries may be experiencing an increase in profits due to the tariff reductions resulting in increased exports to Mexico & Canada. Therefore, while the study addresses highlights the negative impacts on some segments of the farming industry, there are other areas that could be benefitting from the passage of the NAFTA. Question 2: Could Sunshine Farms differentiate its products by placing a “Grown in the USA” label on them in order to charge a premium price?
Sunshine Farms should make an attempt to brand its products to see if that will increase their sales, given that their products are made in the USA.
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However, the increased cost of branding the products should be taken into consideration to determine if the increase in sales offsets the increase in administrative costs. Given that it is already difficult to compete in the market in the current environment, Sunshine Farms cannot increase their prices to a premium to try to offset the increased administrative expenses.
However, it would be a good idea to leave prices unchanged and determine if there is an increase in volume due to the branding. Also, since there are very little farmers that are doing this today, Sunshine Farms will be differentiated among the higher priced US produce, even if they are still higher than some of their Mexican counterparts. While, many consumers will be shopping on price, there is also a ‘niche’ market within any industry that will always purchase locally grown/produced products.
They should be sure to determine the location where the highest population of their niche market resides and try to target those areas with a pilot branding campaign before expanding to all of Florida. Question 3: What would you recommend to Ben McDonald in order to save the farm? Recommendations for Ben McDonald to save the farm: • Launch a pilot branding campaign in locations where they currently see high concentration of sales to determine if the increase in volume will offset the administrative costs. Ben should attempt to shift his focus to other areas of the industry that may be more profitable (for example: nurseries, as indicated in the case study, also other areas such as corn, beans etc. may prove to be profitable products). While, it may be difficult to completely shift the focus, it would be good to do some research on other products that are more profitable and diversify the current product base to include such products. • Attempt to reduce administrative costs to become more competitive.
This could include reduction in labor costs, increased in technology that would make production more efficient, or conducting business on a smaller scale to reduce overhead costs. • Sunshine Farms could also contact and merge with other farmers in the area to assess whether a combined effort would allow them to operate at a lower cost therefore increasing aggregate profits. While the individual profits may not be as high as desired, a merger with other local farmers may help to keep Sunshine Farms in business.