Dakota Growers PastaEssay Preview: Dakota Growers PastaReport this essayDefining economic characteristics of the durum wheat milling and pasta production industry:According to the case, durum wheat quality criteria continually evolve in response to market pressure and consumer preference. Increasing demand for specific durum wheat quality attributes for different end products requires development of more rapid objective means to grade and classify wheat parcels on the basis of processing potential.
Durum wheat prices rose because of increased demand for pasta. In addition, the increase in milling capacity in the late 1990s had helped increase demand for durum wheat, which increased durum prices.
Industrys standout features:ability to meet customer specifications with consistent qualityValue added in the durum wheat milling and pasta production industry:Value-added processing allows farmers to retain most of the profits that are captured by processors who buy raw goods from independent farmers, prepare them according to consumer demand, and sell them to supermarkets at a high markup. The approach makes it possible for farmers to appeal to niche sectors that demand specialty or prepared foods that, at one time, only international or larger corporations could offer.
In 1990, 1,084 North Dakota durum wheat farmers paid for a feasibility study of building an integrated durum milling/pasta manufacturing plant. After receiving positive results and realizing the potential for increased earnings by processing wheat into pasta locally, the farmers went ahead with the project. Their venture met with almost instant success, demonstrating the benefit of turning their raw wheat into marketable pasta.
The economic consequences of processing their crop were clear. Selling durum wheat by the bushel generates $4.65, which translates into $7.76 per 100 pounds. Semolina flour milled from durum wheat sells for $12.60 per 100 pounds. Pasta sells at retail for about $1.25 per pound, or $125 per 100 pounds. The tremendous price difference between raw durum wheat and processed pasta illustrates the extent to which value is added to a product as it moves from the farm to the store.
Recognizing the relatively few steps it takes to turn raw durum wheat into profitable pasta, the farmers formed the Dakota Growers Pasta (DGP) cooperative in 1991 and became one of the nations most successful NGCs. It hired a general manager and national sales manager later in the year, and formed a board of directors to oversee all functions. DGPs facilities now consist of a grain elevator, a mill, four pasta production lines and a warehouse. Two of the production lines make short goods, such as macaroni, and two produce long goods, such as spaghetti.
Industry value chain looks like:Pg C-121 – pasta value chainHow strong is competition in the industry:The pasta industry is extremely competitive and has undergone various changes within the past decade. Globilisation and increasing competition in the pasta industry are making it more important that processors produce pasta products with quality that is consistent over time. Customers are becoming more discriminating in their quality requirements, and variability in product quality is becoming less acceptable, particularly for premium products.
What competitive forces make industry attractive?Buyers demand for high quality product, having buyer seller strategic partnershipsUnattractive:High level of competitionSubstitutesThreat foreign competitors and new entrantsOverall effect of the industrys five competitive forces:Substitutes: other types of foodSuppliers: buyer seller strategic partnershipsBuyers: demand for constant high quality productPotential new entrants: threat foreign competitors and new entrantsRivalry among competitors: high price competitionIndustrys key success factors that ultimately determine the success of rival milling and pasta firms:1) industry capacity utilization2) product distribution costs3) customer service/ service capability4) price of raw materials/ access to
5) quality improvement/ service requirements6) competition/ quality.» The list of factors above is derived from numerous studies that focus on the following elements, with an emphasis on the important factors that can influence business objectives.1. A competitive environment. The factors listed above can help the business identify strategic partnerships in order to meet higher quality of product and the higher quality of services. An industry with high cost of raw materials as part of an import program can benefit from different competitive mechanisms, which may include competition, incentives for higher prices, government contracts, etc.2. Unique manufacturing processes that are attractive. As such, one of the most important factors that determine industry success is the unique quality for its raw material. This quality can make the raw material attractive to a whole industry, thus it can be attractive to many different customers, such as growers, ranchers, restaurants, etc, at the same price.3. Efficiency. In terms of the “constraints” that drive innovation, high cost of raw material and competitive pricing, can make a firm attractive to different consumers, but a highly competitive industry can also become prohibitively expensive: if consumers get the lowest prices, these high cost, competitive ingredients, which are of higher quality, may cause the production to be impeded further from production. However, this doesn’t necessarily lead to efficient products when people only need to pay for them once.3. Supply chain. The main factor that determines the industry’s ability to maintain the highest competitive rates, is profitability. Production of the same raw material and the same packaging quality are generally expected to be very competitive.4. The cost of production. This factor is the second most important factor that influences the quality and competitiveness of a business, after government subsidies. In addition to this, many factors that affect the profitability of a firm also affect its product quality, its quality and other characteristics. The prices that are offered for the raw material are also related to its market cap, and hence more directly impact on the quality and efficiency of company.5. Quality of foodservice. There are a wide variety of factors that make food quality dependable. Quality and pricing factors can influence profitability. If the price of raw materials is high, for example, at a high cost that is due to supply chain, such as for food, there will be a high demand for fresh foods, which may lead to higher rates of profitability. This low quality or price and cost does not mean that the products are not efficient at providing the right quality, because quality and price factors can often influence the quality of products from different sources, thus making the products more competitive.6. The business organization. Most of these factors are highly related to business functions. For example, suppliers can perform most work in the business organization, where costs of production are lowest, and are typically better funded, thereby improving the competitiveness of the business.7. The ability of the business to perform its functions efficiently. Business management should consider the efficiency of its function; how to handle problems in the business and also the level of technical support provided by industry to