FAIR TRADE AND GLOBAL SUSTAINABILITY 1
Task 1: Value system of fair trade production
Fair trade goods sell at a higher price than their equivalenttraditional goods without offering any additional physical quality.Proponents of fair trade argue that it addresses environmental andsocial injustices and challenges worsened by traditional trading ininternational markets. However, numerous cases show that theinvolvement of producers in fair trade is unreasonable as it causesoverproduction and market inefficiencies, which eventually worksagainst their welfare. In this regards, the UNDP proposes a strategicapproach to dealing with the elements negatively affecting theoutcome of fair trade.
Process of value creation, protection, and appropriation
At each stage of a value system (retailing and production),companies generate a portion of the value of the final good and atthe same time, they capture a segment of the exchange value.According to Mol, Wijnberg, and Carroll (2005), the value of a goodshould be equivalent to the monetary value to customers. Valuecreation occurs when consumers pay a greater price for products thanthe cost of generating the products. During production, firms createvalue for goods to gratify customers’ current needs without losingthe capacity to satisfy future needs. In fair trade situation, pricesof most products, for example, tea and coffee are highly inflexiblethus, a slight upsurge in supply leads to a large fall in marketprice. A few farmers will get a higher price, but the majority willget considerably lower prices because of the inflexible prices. Thismeans that in the long-run, firms pay lower prices to farmerstherefore, generating more economic value (value creation). The UNDPproposes the setting of a body to regulate the price paid to farmersto ensure that prices paid for a particular good are similarthroughout.
Value protection involves preventing competitive imitation ofpossible rivals. The protection takes the form of economies of scale,especially where large producers use their competitive edge anddynamism to guard value. This allows a few large companies topurchase fair trade products, for example, Starbucks accounts for 25%of all coffee purchases in the U.S (Jaffee, 2014). After creating andprotecting value, retailers and producers need to capture valuethrough bargaining power. As goods pass through the system ofsupplier-buyer association, the value is appropriated and eventually,firms make a profit (Jaffee, 2014). The existing structures,economies of scale, and the presence of absence of complementaryassets disallow farmers from marketing and selling their goodsdirectly thus, producers and vendors are able to create, protect,and appropriate value. The protection of small producers bygovernments and through international regulations, for example, tradeagreements would deal with the issue of value protection.
Value-chain envy and ramifications to other stages
Mol et al. (2005) posit that when firms create less value than theycapture, then actors in other value system’s stages experiencevalue chain envy, for example, in the music industry where valueappropriation is greater than value creation. This envy encouragescompanies to enter the desirable phases of the value system throughvertical integration or a new entry. In the music industry, the valuecreation at the stage of publishing music has decreased while thevalue of appropriation has increased, which has resulted into valuechain envy inside and outside the value system. The envy results inproducers owning the supply chains. Possessing supply chains allowmanufacturers to act as monopolies thus, they can set prices at willand ward off competitors.
The introduction of technology in the sector will have a long-termeffect on the value chain envy. As the administrator of UNDP, Ipropose the establishment and extensive use of information technologywill help to erode the competitive advantage held by major companies.If small firms utilized technology, they would manage to break eveneasily hence, compete with large firms easily. The Smartphone marketillustrates this case well, as unknown Chinese firms continue tocompete with large companies. The erosion of the benefit allows smallcompanies to create value for their products. Moreover, firms thatcreate a high appropriation value will experience inefficiencies,leading to barriers to entry. However, the suggestion as Jaffee(2014) says that this will not have a long-term effect in avertingthe value chain envy since other factors, for example, associationwith other industries that small companies do not have. The musicindustry offers a good instance on the failure of informationtechnology since major firms, for example, Hollywood have greatrelationships with other players in the industry.
Task 2: Institutional logics in global sustainability
Value is fundamental to the institutional logic, as it is the basisof individual identification. According to Thornton and Ocasio(2008), the interests, principles, expectations of individuals andorganizations, and identities are embedded within main institutionallogics. The relationship between organizational structure andindividual activity lead to decisions and outcomes. Furthermore, theinter-institutional system of the society allows different sectors torepresent a diverse set of assumptions and expectations. Market andreligion sectors have different logic thus, they are incompatible asthey emerge from the interaction of different social orders (Thorntonand Ocasio, 2008). This means that the development of the society inalignment to inter-institutional structures allows foundations of theagency. However, firms that represent the logics of religion andmarket can offer compatible guidelines for action. Since the marketlogic treats economizing as a legitimate and valued action it becomeshighly difficult to match with the logic of religion.
Cultural and historical forces can lead to changes in the logics thatdominate a certain sector, for instance, technology and governancechanged with the rise of Progressivism. On the other hand, the logicof religion is directly involved in the generation, distribution,marketing, and consumption of services and goods. Social structureand cultures shape the market including structures of domination,status, and power status and networks of social interactions. Forexample, selling pork meat in Muslim countries is prohibited meaningthe interplay of cultures and social structure greatly influencemarket logics. People and firms are aware of the differences in thecultural symbols, norms, and practices of different institutionalorders therefore, they incorporate this diversity into theirdecision-making. Motivation and conformity or conflict ofinstitutional logics affect the organizational structure and humanbehavior. Thornton, Ocasio, & Lounsbury (2012) contend that therise of market logic allowed resources competition to greatlyinfluence decisions and organizational actions. In the course oforganizational action, power is inherently important as it allows thedevelopment of both the market and religion logic. According toThornton et al. (2012), institutional logics can be structured asmeta-theory especially given a high level of flexibility. Therefore,diverse systems, for instance, societal-levels, family-levels, andorganizational-levels shape the market and religion logics.
At the macro-level, there exists multiple and competing logics, whichhave created diversity in practice. However, the multiplicity inlogics can result in ambiguity, logic blending, and the creation ofnew logics. Competition between alternative institutional logicsresults in competing logics which facilitate resistance to changes.The dental health system has seen a scenario where change isdominantly influenced by the logics of market and corporation insteadof being dominated by professionals. The competition between medicalprofessionals and business entrepreneurs allow a re-composition of anorganizational field where blending and competing logics motivatepower struggles.
Task 3: Funding cannibalism
Sociopolitical legitimacy denotes the choices made by firms and theconsequence of these decisions on third parties and shareholderswhile cognitive legitimacy represents the public’s comprehension ofthe purpose of a firm’s presence. This means that companies need tomake choices that generate a cognitive legitimacy since if correct,these decisions would concretize the validity. The UNDP will need toestablish a congruency between social principles associated with itsactivities and the acceptable norms. In this regards, the rise offunding cannibalism allows organizations to take money that wouldhave been donated to other causes for other purposes. MacAskill(2015) asserts that large donations in a specific cause mean thatpeople will give less money to other charities. For example, the highdonations contributed to the Bucket challenge lead to lowcontributions in other causes, for instance, UNICEF. Lack ofknowledge and low levels of acceptability result in challenges indealing with funding cannibalism.
The UNDP is the United Nation’s international development networkthat advocates for change and development and connect nations toresources, knowledge, and experience. For example, the UNDP has builton local systems of trust and democratic change. The institute isheaded by an administrator assisted by an executive board made ofrepresentatives from 36 countries. The board headed by a secretarysupervises and supports the activities of the institution and ensurethat the UNDP assist countries with their development agenda. Theorganizational structure consists of an administrator, associateadministrator, an executive office, ombudsman office, humandevelopment office, independent evaluation office, and regionalbureau offices.
At the population level, the UNDP possess the internationalvalidation legitimacy and foundational promise therefore, thelegitimate practices of UNDP have encouraged the formation of newfirms. Its growth has led to the rise in the legitimacy of thepopulation. At the within-population level, new charities haveemerged by arranging the immediate environment of new UNDP. Aldrich(1999) asserts that new organizations can obtain knowledge by servingas traineeship with established proprietors. For example, the UNCATD,United Nations Regional Information Center, and UNAIDS share the samevocabulary in matters of contribution and emerged from the works ofUNDP. These charities were instituted bearing in mind the successesof UNDP. However, new charities, if they try to imitate existing oneswithout fully understanding organizational knowledge will find itdifficult to succeed.
Between-population level, the interplay between charities whetherliaising or contending affect the distribution of resources in anenvironment. It is critical to point out that new populations aresusceptible to attacks as they are encircled by existing populations.Aldrich (1999) contends that organizations that feel threatenedattempt to alter the terms on which materials are available toevolving industries by questioning their conformism to establishedorder. Emerging charity companies find it difficult to operate in anexisting market, as they face a huge competition from the establishedfirms. For example, charities, such as, Commission on SustainableDevelopment, Ridge Global, the Halo Trust, and Birdlife Internationalhave not managed to compete favorably with UNDP. The UNDP is apartner with governments, United Nation system, InternationalFinancial Institutions, civil society organizations, numerousfoundations, and the private sector thus, other charities find itdifficult to compete.
At the community level, the UNDP has political mechanisms that createknowledge trough experiments hence, they manage to link fresh andpast ventures through symbolic behavior and language environmentalresources control its carrying capacity. The carrying capacity pointsto how populations can carve out spaces. Current charities across theworld, for example, the Red Cross, Birdlife International, UNAIDS,Wellcome Trust, Ford Foundation, and MasterCard Foundation havecarved out space, partnered with other bodies, and called on theprivate sector and the public to donate to their cause. Since thesecharities have beneficial and easily identifiable objectives, theymake people feel good about their actions instead of ensuring thattheir actions do much good. In this regards, funding cannibalismensures great contribution to a certain cause, but it takes attentionand money away from other donations, for example, most of the moneydonated go to the biggest charities.
Task 4: Improving funding cannibalism
Funding cannibalism is a foremost problem among donations sincemoral licensing does not always occur. However, commitment effect isthe most effective phenomenon of solving funding cannibalism issue.It acts as a counterbalance psychological force where people givingmoney to charity do not see the act as doing their part. Instead,people see making a donation to a cause as taking a small step tomaking selflessness a part of their identity. Charities should tiefresh philanthropic commitments to thoughtful and long-lastingbehavior change. Tying assurances to charities and letting peopleunderstand the various aspects of a challenge will resolve the issueof cannibalism. Instead of individuals making a little donation to acontribution that they have never heard of, they can make acommitment to discern, which contributions are most effective. Forexample, donations to UNDP provides an effective and honest way todiminishing funding cannibalism since people are able to perceive theeffectiveness of UNDP causes and developments. After seeing thecharities that are reliable and effective, individuals should manageto set up a constant promise to those contributions. Alternatively,they can openly make a pledge to donate a proportion of their income.Behavior change occur with the appeal hence, charities that wouldmanage to motivate people would see a greater contribution. In fact,organizations dealing with cost-effective contributions would see anoverall increase in the money provided.
Making a commitment and pledge result in a meaningful behaviorchange. People manage to actualize and structure their behaviors.Moreover, the alteration allows them to live a positive life and actsas a way of making selflessness part of a person’s identity (Wei,2013). Increasing the commitment effect and encouraging people tomake pledges would ultimately change their behaviors. Although thenumber of pledges would be smaller in the short-run after running themovement, the number would greatly increase in the long-run (Wei,2013). Therefore, the commitment effect would have a huge impact oncharities. For example, Bill & Melinda Gates Foundation,MasterCard Foundation, Lilly Endowment, and the RockefellerFoundation have managed to place an honest and efficient phenomenonto their charity, which has changed the behavior of some people intoperceiving it as cost-effective and meaningful. On the other hand,UNDP attaches great significance to helping the underprivileged bycreating cases on the use of contributions. It is imperative to notethat UNDP receives contributions from governments, internationalorganizations, and global foundations. UNDP should continue to makedecisions that appeal to the public as doing so allows people toappreciate and identify with the decisions. According to Aldrich(2009), legitimacy is about the decision-making process andindividuals’ comprehension of a company’s purpose therefore,tying a commitment to any charities would appeal to most people.Charities that run regularly need to appeal to individuals tomaintain their cause. Red Cross, Save the Children, UNDP, MasterCardFoundation, UNAIDS, and Wellcome Trust among others provide goodexamples of charities that have appealed to make a commitment sincethey are tied to meaningful causes.
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MacAskill, W. (2015). Comment: The cold, hard truth about the icebucket challenge. Special Broadcasting Service. Retrieved 2 November2016 fromhttp://www.sbs.com.au/news/article/2014/08/18/comment-cold-hard-truth-about-ice-bucket-challenge.
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