Factors affecting food development
There are two groups of factors that affect food development. They are External and Internal factors:
External factors (macro-environment) that impact on food product development, including the:
– economic environment
– political environment
– ecological environment
– technological environment
Internal factors (micro-environment) that impact on food product development including:
– personnel expertise
– production facilities
– financial position
– company image.
External factors (macro-environment) that impact on food product development, including the:
– economic environment
– political environment
– ecological environment
– technological environment
Internal factors (micro-environment) that impact on food product development including:
– personnel expertise
– production facilities
– financial position
– company image.
External factors
Economic environment:
The state of the economy can affect food product development. A great new food product idea may work well when consumers have a high income level and the economic outlook is prosperous, but the idea may fail in tougher economic times.
The following economic factors may affect food product development:
• Changes in interest rates: Companies frequently need to borrow money to enable them to buy new equipment and technology or to upgrade existing operations in other ways. To cover these higher costs, the producer may raise the price of its products.
• Exchange rates: Australian food manufacturers frequently import materials and technology from overseas. If the
Australian dollar is stronger than foreign currencies, the imported goods cost less; if the Australian dollar is weaker, the imported goods cost more.
• Tax rates: Company taxes can change, usually more often when a new government is elected at either state or federal level. Such changes affect company profi t margins and are reflected in the prices paid by consumers.
• Wage agreements and salary levels: If a food manufacturer has to pay its employees higher wages, these costs are usually passed on to consumers. On the other hand, as consumers earn more, they have more disposable income and may buy more food.
• Level of unemployment: Low levels of unemployment place less strain on government social services, and taxes can remain low, so many consumers have more disposable income to buy food.
• Drought: Australia is a dry continent because of its low rainfall and the arid nature of many areas of the continent. We experience periods of drought that lead to a decline in agricultural and horticultural production. This decreases the availability of many foods and ingredients (such as grains, fruits and meat) and increases prices for these commodities. Australian farmers face the challenge of restricted water supply for crop irrigation and livestock. During periods of drought, food manufacturers and suppliers often import these commodities at prices higher than for the local products. As a result, consumers face reduced availability and higher retail prices for food.
• Natural disasters: Crop and animal production in Australia are sometimes disrupted by natural disasters, including floods, hailstorms and cyclones, which devastate the production of specific commodities such as fruit, vegetables and grain crops. Natural disasters generally affect smaller regional areas for shorter periods than drought, but the consequences for availability and prices of affected commodities are similar.
Political environment:
Australian manufacturers, producers and distributors of food are all subject to regulations made by federal, state and local governments. At the federal level, the most prominent regulatory body is Food Standards Australia New Zealand (FSANZ), which, in principle, coordinates and oversees food regulation throughout Australia and New Zealand. Local government in NSW acts in partnership with the NSW Food Authority on food regulation. Local government deals specifi cally with local issues relating to foods, such as zoning laws, planning permits and health inspection matters.
The state of the economy can affect food product development. A great new food product idea may work well when consumers have a high income level and the economic outlook is prosperous, but the idea may fail in tougher economic times.
The following economic factors may affect food product development:
• Changes in interest rates: Companies frequently need to borrow money to enable them to buy new equipment and technology or to upgrade existing operations in other ways. To cover these higher costs, the producer may raise the price of its products.
• Exchange rates: Australian food manufacturers frequently import materials and technology from overseas. If the
Australian dollar is stronger than foreign currencies, the imported goods cost less; if the Australian dollar is weaker, the imported goods cost more.
• Tax rates: Company taxes can change, usually more often when a new government is elected at either state or federal level. Such changes affect company profi t margins and are reflected in the prices paid by consumers.
• Wage agreements and salary levels: If a food manufacturer has to pay its employees higher wages, these costs are usually passed on to consumers. On the other hand, as consumers earn more, they have more disposable income and may buy more food.
• Level of unemployment: Low levels of unemployment place less strain on government social services, and taxes can remain low, so many consumers have more disposable income to buy food.
• Drought: Australia is a dry continent because of its low rainfall and the arid nature of many areas of the continent. We experience periods of drought that lead to a decline in agricultural and horticultural production. This decreases the availability of many foods and ingredients (such as grains, fruits and meat) and increases prices for these commodities. Australian farmers face the challenge of restricted water supply for crop irrigation and livestock. During periods of drought, food manufacturers and suppliers often import these commodities at prices higher than for the local products. As a result, consumers face reduced availability and higher retail prices for food.
• Natural disasters: Crop and animal production in Australia are sometimes disrupted by natural disasters, including floods, hailstorms and cyclones, which devastate the production of specific commodities such as fruit, vegetables and grain crops. Natural disasters generally affect smaller regional areas for shorter periods than drought, but the consequences for availability and prices of affected commodities are similar.
Political environment:
Australian manufacturers, producers and distributors of food are all subject to regulations made by federal, state and local governments. At the federal level, the most prominent regulatory body is Food Standards Australia New Zealand (FSANZ), which, in principle, coordinates and oversees food regulation throughout Australia and New Zealand. Local government in NSW acts in partnership with the NSW Food Authority on food regulation. Local government deals specifi cally with local issues relating to foods, such as zoning laws, planning permits and health inspection matters.
Other political influences arise from non-government sources such as lobby groups; the Australian Consumers Association and the National Farmers’ Federation (NFF) are good examples. The NFF represents a broad cross-section of Australian agriculture, and much of its lobbying activity has considerable importance to Australian national interests
Ecological environment:
The ecological environment includes the air we breathe, the food we eat, our waterways, biodiversity in both plant and animal species, and the land itself. Today there is concern about endangerment of species and environmental damage because of issues such as pollution, land degradation, inadequate waste disposal and conservation of natural resources. These issues affect consumer attitudes to such things as recycling, biodegradability of packaging, pollution of the atmosphere and waterways, use of pesticides and waste disposal.
Companies have developed a range of strategies to address consumer concerns and enhance the marketability of their products. These strategies include the use of biodegradable and recyclable packaging, better air pollution control, environmentally friendly processing and transport for their products, and more efficient energy use and waste disposal in their processing operations. This needs to be supported by the development of new products, packaging and processing technology
Technological environment:
Changes in science and technology affect the development of new food products. These include new processes such as extrusion techniques, ultrahigh temperature (UHT) processes, new packaging technology such as modified atmosphere, computer control in food processing, automated equipment, improved distribution systems and genetic engineering (genetically modified materials are probably the most controversial of new food ingredients). Technological developments lead to new foods and food components. This includes food additives, such as those contributing to food flavour and texture, fat and sugar replacements and processing aids. New ingredients offer specific opportunities for new foods, such as reduced energy content, better storage life and superior quality.
Developments in processing technology often arise from research and development activities by private or government-sponsored organisations, such as universities and research organisations other than those within companies. New technology offers food manufacturers the benefits of improved production efficiency, expanded product range and increased market share, as well as lower costs and labour requirements.
Ecological environment:
The ecological environment includes the air we breathe, the food we eat, our waterways, biodiversity in both plant and animal species, and the land itself. Today there is concern about endangerment of species and environmental damage because of issues such as pollution, land degradation, inadequate waste disposal and conservation of natural resources. These issues affect consumer attitudes to such things as recycling, biodegradability of packaging, pollution of the atmosphere and waterways, use of pesticides and waste disposal.
Companies have developed a range of strategies to address consumer concerns and enhance the marketability of their products. These strategies include the use of biodegradable and recyclable packaging, better air pollution control, environmentally friendly processing and transport for their products, and more efficient energy use and waste disposal in their processing operations. This needs to be supported by the development of new products, packaging and processing technology
Technological environment:
Changes in science and technology affect the development of new food products. These include new processes such as extrusion techniques, ultrahigh temperature (UHT) processes, new packaging technology such as modified atmosphere, computer control in food processing, automated equipment, improved distribution systems and genetic engineering (genetically modified materials are probably the most controversial of new food ingredients). Technological developments lead to new foods and food components. This includes food additives, such as those contributing to food flavour and texture, fat and sugar replacements and processing aids. New ingredients offer specific opportunities for new foods, such as reduced energy content, better storage life and superior quality.
Developments in processing technology often arise from research and development activities by private or government-sponsored organisations, such as universities and research organisations other than those within companies. New technology offers food manufacturers the benefits of improved production efficiency, expanded product range and increased market share, as well as lower costs and labour requirements.
Internal factors
Personnel expertise:
The expertise of staff is crucial to the operation and development of a business. The personnel (staff or human resources) employed by a food company include some or all of the following:
• production staff on the factory floor
• financial staff
• marketing and sales staff
• purchasing staff
• product development staff
• product testing and quality assurance staff
• maintenance and engineering staff
• management staff
• company directors
• product distribution staff
• warehouse staff
The skill levels of workers have a direct effect on what can be produced. These days, many workers are required to be multi-skilled; this allows greater mobility within and between staff categories and greater flexibility within company operations, with related advantages for both the company and its staff. It should also be recognised that, while competence in hands-on tasks is crucial, other skills such as leadership, planning and operation, decision making, task management, written and oral communication, initiative, integrity, company loyalty and the ability to work collaboratively with other staff are very important, especially among more senior staff. While formal training can provide a broad outline of these skills, experience, capabilities and personality characteristics dictate the level of these skills for individual employees.
The impact of any change on what is produced or the production process may affect staff in the following ways:
• Production workers need to be able to work with new technology to manufacture new products.
• Quality assurance staff need to develop speci cations for new raw materials, quality standards for new products and
processes, and new analytical methods.
• Marketing staff must have the versatility to promote new products, often to new and different markets.
• When making decisions about new products, a company must be aware of existing staff strengths and weaknesses and
address any shortcomings either by training or by employing new, appropriately qualified personnel. Should the company
decide not take this sort of action, it may be advisable not to introduce the new product.
Production facilities:
Production is where raw materials are converted into final products for the market. It is very difficult to produce any food product with the wrong equipment. Production facilities vary in complexity, level of technology, output capacity and also expense. The levels of technology and complexity vary from very simple (such as fruit and vegetables packed into nets or plastic bags) to quite advanced (such as frozen meals, extrusion and ultra-heat treatment). Larger companies often use a mixture of production technologies, while smaller ones may depend on just one, often simple, process. In general, the complexity of equipment is related to specific products and processes, output volume and the financial status of the company.
Several types of processes are used for commercial food production. Each of these requires certain labour skills and technology. Decisions to introduce a particular method of production should take into account issues such as production technology complexity and market size. These are listed in the table bellow:
The expertise of staff is crucial to the operation and development of a business. The personnel (staff or human resources) employed by a food company include some or all of the following:
• production staff on the factory floor
• financial staff
• marketing and sales staff
• purchasing staff
• product development staff
• product testing and quality assurance staff
• maintenance and engineering staff
• management staff
• company directors
• product distribution staff
• warehouse staff
The skill levels of workers have a direct effect on what can be produced. These days, many workers are required to be multi-skilled; this allows greater mobility within and between staff categories and greater flexibility within company operations, with related advantages for both the company and its staff. It should also be recognised that, while competence in hands-on tasks is crucial, other skills such as leadership, planning and operation, decision making, task management, written and oral communication, initiative, integrity, company loyalty and the ability to work collaboratively with other staff are very important, especially among more senior staff. While formal training can provide a broad outline of these skills, experience, capabilities and personality characteristics dictate the level of these skills for individual employees.
The impact of any change on what is produced or the production process may affect staff in the following ways:
• Production workers need to be able to work with new technology to manufacture new products.
• Quality assurance staff need to develop speci cations for new raw materials, quality standards for new products and
processes, and new analytical methods.
• Marketing staff must have the versatility to promote new products, often to new and different markets.
• When making decisions about new products, a company must be aware of existing staff strengths and weaknesses and
address any shortcomings either by training or by employing new, appropriately qualified personnel. Should the company
decide not take this sort of action, it may be advisable not to introduce the new product.
Production facilities:
Production is where raw materials are converted into final products for the market. It is very difficult to produce any food product with the wrong equipment. Production facilities vary in complexity, level of technology, output capacity and also expense. The levels of technology and complexity vary from very simple (such as fruit and vegetables packed into nets or plastic bags) to quite advanced (such as frozen meals, extrusion and ultra-heat treatment). Larger companies often use a mixture of production technologies, while smaller ones may depend on just one, often simple, process. In general, the complexity of equipment is related to specific products and processes, output volume and the financial status of the company.
Several types of processes are used for commercial food production. Each of these requires certain labour skills and technology. Decisions to introduce a particular method of production should take into account issues such as production technology complexity and market size. These are listed in the table bellow:
Financial position:
A company’s financial position is a major factor in the type of equipment it can afford and hence its product range and new product development activities. The financial position of any company includes the value of its assets (cash, property, equipment), its cash flow, profit-andloss balance, value of its shares (for public companies), amount of borrowings or loans to others, interest rates, equity in other companies and property, value of stock on hand, market share, product range and other aspects that vary between companies.
Financial position is an important factor affecting the ability of a company to compete in the market place. A strong financial position gives a company an advantage over its competitors in marketing, advertising, product range, its ability to counteract macro-environmental factors, and product development
Company image:
Public perception of a food company is a result of the company’s image, which generally evolves over years of operation. It is often a result of strategies, products and market that were chosen deliberately by the company, but it may also develop as an unintended outcome of long-term operation. Company image is reflected mainly in its market segment and consumer attitudes towards the company. It may develop through some of the following factors:
• consumer perceptions of product quality
• prices
• form and convenience of products and packaging
• market availability
• labelling.
Before trying to change its image, a company should consider carefully any possible consequences. For example, a company with an image as the producer of expensive, high-quality products should investigate the possible effects of marketing cheaper products before attempting to do so. Conversely, a company with an image relating to cheaper products should evaluate possible effects of trying to enter the luxury product market. Any misinterpretation of potential outcomes of changes to company image could lead to new product failure and reduced profits.
A company’s financial position is a major factor in the type of equipment it can afford and hence its product range and new product development activities. The financial position of any company includes the value of its assets (cash, property, equipment), its cash flow, profit-andloss balance, value of its shares (for public companies), amount of borrowings or loans to others, interest rates, equity in other companies and property, value of stock on hand, market share, product range and other aspects that vary between companies.
Financial position is an important factor affecting the ability of a company to compete in the market place. A strong financial position gives a company an advantage over its competitors in marketing, advertising, product range, its ability to counteract macro-environmental factors, and product development
Company image:
Public perception of a food company is a result of the company’s image, which generally evolves over years of operation. It is often a result of strategies, products and market that were chosen deliberately by the company, but it may also develop as an unintended outcome of long-term operation. Company image is reflected mainly in its market segment and consumer attitudes towards the company. It may develop through some of the following factors:
• consumer perceptions of product quality
• prices
• form and convenience of products and packaging
• market availability
• labelling.
Before trying to change its image, a company should consider carefully any possible consequences. For example, a company with an image as the producer of expensive, high-quality products should investigate the possible effects of marketing cheaper products before attempting to do so. Conversely, a company with an image relating to cheaper products should evaluate possible effects of trying to enter the luxury product market. Any misinterpretation of potential outcomes of changes to company image could lead to new product failure and reduced profits.
Task:
In groups and using the above information, determine the success or failure of a new product your group wish to develop by reviewing the above factors
Group 1:
New product focus - Fruit
Factors - Drought, High wages, High company image, High financial position
Group 2:
New product - Childs snack
Factors - Does NOT believe in recyclable/ biodegradable packaging, Low company image, Low financial position
Group 3:
New product - Processed/pre- packaged meal
Factors - High ecological considerations, High company image, High financial position
Group 4:
New product - Breakfast cereal
Factors - Low skill level throughout the company, Low company image, Minimal production facilities
Group 5:
New product - Dessert
Factors - High level of unemployment, Low financial position, Lower access to technological developments
In groups and using the above information, determine the success or failure of a new product your group wish to develop by reviewing the above factors
Group 1:
New product focus - Fruit
Factors - Drought, High wages, High company image, High financial position
Group 2:
New product - Childs snack
Factors - Does NOT believe in recyclable/ biodegradable packaging, Low company image, Low financial position
Group 3:
New product - Processed/pre- packaged meal
Factors - High ecological considerations, High company image, High financial position
Group 4:
New product - Breakfast cereal
Factors - Low skill level throughout the company, Low company image, Minimal production facilities
Group 5:
New product - Dessert
Factors - High level of unemployment, Low financial position, Lower access to technological developments