Proceedings

PR – Developing A Framework In Order To Assist Producers In Forming An Alliance As Part Of Their Competitive Strategy In The Potato Industry (p172-180)

The environment in which potato producers are competing in is changing due to changes in consumer demand, market concentration and strict requirements of buyers. Producers need to be innovative and adapt their strategies in order to be competitive. The formation of alliances can be seen as a form of business model that will give producers economies of scale, decrease their transaction costs and allow producers to add value to their commodity. South Africa’s agriculture is characterised by small farm units, therefore increasingly more farmers are collaborating in order to be competitive. Interviews were held with the managers of five successful alliances within the potato industry and a framework was developed that can advise managers of farm units on how to start an alliance, what are the key success factors that they should be aware of and also what the lifecycle of an alliance look like in order to determine when to expand their production. The results indicated that the key success factors were sound administration, trust and loyalty, government policy, market research and value-adding. Successful alliances will continue to reinvest in their business, providing them with new opportunities to integrate further down the supply chain. The life cycle gives an indication to these producers when to start a new process of value adding. The framework provides managers with all the critical steps to forming an alliance in order to be competitive. In conclusion, the alliances interviewed in this study indicated that as a result of collaborating, they were able to be more competitive within the industry.

Keywords: farm units, market concentration, economies of scale, farmer controlled businesses, alliances, success factors

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Author(s): Terblanche, L., Willemse, B.J.

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Organizations(s): University of the Free State