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  • Subject area(s): Marketing
  • Price: Free download
  • Published on: 14th September 2019
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  • Number of pages: 2

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A commodity is something useful that enters the market and is available for purchase at a certain cost. It is “a bundle of social relations” (Watts 307). Commodity chains, or paths that objects take from raw materials, through production, to consumption, serve as a way to understand and connect how workers, consumers, firms, and institutions are interdependent due to economic and geographic linkages. These chains in turn form more complex webs, or networks. Coffee is the second most commonly traded commodity worldwide. Looking at one number, the price of coffee, it tells nothing about the journey the coffee has taken to be where it is now. There is so much more to the story that is left out. Starbucks, for example, the World's largest chain of coffeehouses, has a very intricate process through which its products go prior to being consumed. The chain works as follows: Raw Materials ⇒ Processing ⇒ Logistics ⇒ Retailing ⇒ Consumption.

Commodity chains serve as the platforms that connect producers and consumers, even if they are thousands of miles apart. After the coffee is grown and obtained, small exporters buy the coffee from small farmers. Then, importers buy the coffee from established exporters or large coffee firms. Next, it is packaged and shipped to logistics companies worldwide that then send the coffee to retailers so they can sell it. All the consumer sees is the price tag on the coffee at the retailer. The final value is added incrementally to the price of the product throughout its journey within the commodity chain. The input-output structure of commodity chains involves numerous processes, activities, and actors.

The commodities consumed by us daily; things taken for granted, such as breakfast, connect globally.  The geography, or location of a commodity chain, can range from concentrated to dispersed across a very wide range of localities. Clustering of economic activity within a region can lead to additional development, innovation, and benefits to that region. Separate regions that produce the same commodity are in competition and use strategy to protect their market and profits, and to improve their position within the system.

Governance, or way in which a commodity chain is coordinated or controlled, is commonly set by Transnational Corporations (TNCs). They control the earnings, profits, and developments of products and the suppliers, distributors, and retailers of those products. TNCs gain more control as they mold mass consumption activities. Profits come from production and development, in addition to activities that provide support such as branding, design, marketing, and sails. Buyer behavior is related to the working conditions and practices of the suppliers. Institutional frameworks, the way in which global conditions and policies form the chain elements, such as technological advances, allow for large sourcing of goods in the global market. Institutional frameworks for governance are dependent upon the places that the chain connects. Each place is shaped by the conditions and policies that exist there. These can be formal (rules and regulations) or informal (business and political culture). This context varies with spatial scale- regional, local, subnational, global.

90% of coffee is grown and consumed within developing countries. Coffee used to be governed by the International Coffee Agreements (ICA) and managed by the International Coffee Organization, which was organized by the United Nations (UN) to stabilize prices, monitor quality, set quotas, etc. But, there was low-cost export competition, so the ICA was forced to suspend many of its bargaining provisions. Power proceeded to fall into firms and manufacturers whom set standards that trickled all the way down to the farms. Furthermore, most income from coffee commodity chains stayed within the countries consuming the coffee, giving nothing back to those producing it.  

Conceptually, the idea of the commodity chain integrates the true connections between various actors that come together in the creation and consumption of a single commodity. The cautious charting of these chains gives potential for changing the way they functionally operate. Consumers, governments, unions, and businesses, together or individually, can change the conditions under which a commodity is produced. Specifically, the rise of varying standards is important. Some efforts to change these conditions have impacts, but it is important to note potential limitations as well. Regulation attempts can be incorporated into capitalism's mainstream profit-seeking mindset, or if they are not careful and neglect to note geographic variations and complexities, these attempts will have unintended outcomes.

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