Market Intelligence Utilization by Small Food Companies: an Application of the Grounded Theory Method in Exploratory Research Aaron J

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Market Intelligence Utilization by Small Food Companies: An Application of the Grounded Theory Method in Exploratory Research Aaron J. Johnson, Thorsten M. Egelkraut, and Cyrus Grout

Insights into how small agribusinesses acquire, process, and use market intelligence are critical to improving their marketing competencies and to understanding practices that lead to better business performance. However, the current body of literature is limited in this topic. We apply the exploratory research method of grounded theory to better understand how small- to medium-sized food companies fi nd and utilize information in their decision-making process. We develop a taxonomy of information types sought and provide insight into how and when these fi rms utilize this information. In addition, we develop a conceptual model that demonstrates different relationships between information, knowledge, and actions.

Decision-makers continuously face the challenge their decision-making process? Grounded theory, of identifying and interpreting market intelligence which was effectively introduced to agribusiness and balancing the costs and benefi ts of acquiring researchers by Bitsch (2001, 2005), is particularly and using that information. While larger agricultural well suited to this study’s objective, as it provides companies have separate marketing departments, a rigorous and systematic framework to inductively small agribusinesses often lack the resources and generate new understandings and to capture unex- skills for extensive market research and intel- pected results that may be missed by other meth- ligence processing. As a result, small businesses ods that rely on ex ante hypotheses (Finch 2002). are likely to conduct market research haphazardly, Employing grounded theory, we generate nine if at all (Carson, McGowan, and Hill 1996; Udell, testable hypotheses of how small food companies Knotts, and Jones 2002). The current literature on utilize market intelligence and condense these into the subject stops at this conclusion and contains no a conceptual model. discernable attempt to gain in-depth understanding The presentation of the paper follows the ground- of small agribusinesses’ market-research practices. ed theory research process, reserving the traditional Yet insights into how small agribusinesses acquire, literature review of related topics until after data has process, and use market intelligence are critical to been collected and analyzed. This sequence allows improving their marketing competencies and to the data to reveal what is relevant to the research understanding practices that lead to business suc- question rather than applying preconceived no- cess or failure. tions and theories (Bitsch 2005). Consistent with Our study begins fi lling this void by using an ex- this order, we offer fi rst a review of the pertinent ploratory research method called grounded theory to concepts for grounded theory research, followed by investigate market-intelligence utilization in small a description of the data and its analysis. The fi nal Oregon food companies. The objective was to help section presents and discusses the empirical results them make better, more informed decisions. The and contrasts the fi ndings with the limited literature research questions included: How and where do on the subject. small- and medium-sized fi rms fi nd market intelligence? What market intelligence do they utilize? Grounded Theory How do they process this information? What impact, if any, does the gathered information have on Research often starts with a base of knowledge. Yet sometimes this knowledge is limited or suspected Johnson is Assistant Professor, Department of Agricultural of being incomplete. In these situations, exploratory Economics and Rural Sociology, University of Idaho, Moscow. Egelkraut is Assistant Professor and Grout is Graduate Student, research is extremely valuable, and related methods Department of Agricultural and Resource Economics, Oregon have been employed in economics, sociology, and State University, Corvallis. organizational theory with great success (e.g., In- Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 59 gram and Roberts 2000; Levine 1993; Uzzi 1997). After the research problem and the research When exploratory research demands more rigor and questions are identifi ed and framed, data are col- a larger sample size than the case method offers, lected in qualitative form, often through in-depth other qualitative tools are available, and grounded interviews with open-ended questions. Unlike theory is one such tool. traditional quantitative research, the sample for The method was formally introduced in 1967 by exploratory work need not be random but often two sociologists, Glaser and Strauss (1967). In their intentionally includes outliers or other “interest- work they defi ne a grounded theory as being induc- ing” observations to capture the full breadth and tively derived from the data it represents, in contrast depth of the population under study. This is a to traditional methods that test ex-ante hypotheses process known as theoretical sampling. The data against the data. The method’s procedures provide a are recorded, organized, validated, and readied for systematic framework for analyzing qualitative data analysis much like the process of preparing quan- that maintains a balance between objectivity and the titative data. In contrast to estimating and testing ability to respond to nuances in the data (Strauss various econometric models, the analysis of the and Corbin 1998). Grounded theory is not to be qualitative data is conducted through researchers confused with data mining, where data is “tortured” individually coding the transcripts. Coding breaks to confi rm preconceived notions and theories. The down the bulk of words into its schematic structure value of grounded theory has been realized and used using a systematic procedure. It allows researchers extensively in sociology, nursing and health, and to “identify, develop, and relate the concepts that organizational studies including business manage- are the building blocks of [the] theory” (Strauss and ment, marketing, and consumer behavior (Baker Corbin 1998). Put another way, they are the basis 2002; Bitsch 2005; Goulding 2005; Schroeder et for developing testable hypotheses. The coding pro- al. 1986). Grounded theory’s success in exploratory cess is iterative and continues until the researchers organizational studies, in particular, warrants ap- determine that adding one more datum would not plication to agribusiness problems that have limited add to the research fi ndings. This point is considered extant literature (Bitsch 2005; Finch 2002). the theoretical saturation point and concludes the The methods and procedures described in the theory-development stage. following short overview are adapted from Strauss Qualitative methods are commonly assumed and Corbin (1998), to which the reader is referred to lack scientifi c rigor and the outcomes are thus for additional details. The fi rst step in grounded viewed as suspect. In fact, the rigor of a research theory research is to decide on the research problem project often depends as much on the effort and and to frame the research questions, as in traditional process of the researcher employing it as on the agricultural economics research projects. The tra- method itself. Good researchers follow methods ditional model then moves to a review of theory and procedures that have been proven to minimize and an exhaustive literature review yielding ex-ante bias, independent of whether they are quantitative hypotheses to be tested. In contrast, the researcher or qualitative. Rigor in quantitative research may using grounded theory should let theory and ideas be easier to recognize by the agricultural econom- emerge from the data. While the researcher’s per- ics profession as it relates to tasks like applying sonal and professional experiences and knowledge established statistical procedures or manipulating of the literature sensitize her/him to information in data to account for certain conditions or estima- the data, s/he must be aware of the potential for bias. tion processes. However, if qualitative methods In order to maintain a balance between objectivity are designed and executed correctly, they can be and sensitivity, Strauss and Corbin (1998), call for as rigorous as any quantitative approach and often the researcher to maintain an attitude of skepticism require more effort by the research team. Rigor in to hypotheses brought to the project and to repeat- qualitative research can be recognized by measures edly ensure that proposed hypotheses are supported of transferability, dependability, confi rmability, and by the data. Thus researchers should refrain from credibility (Bitsch 2005; Guba 1981; Guba and Lin- extensive literature reviews before collecting and coln 1989). analyzing the data (Bitsch 2005; Strauss and Corbin 1998). 60 July 2010 Journal of Food Distribution Research 41(2)

Data and Methods researchers were not involved in the data collection. Each researcher independently conducted a micro- The study’s population is small- to medium-sized analysis of every interview. Two used paper and (500 employees or less) food manufacturers in pencil and one used computer software. To avoid Oregon whose main activities are related to one or potential bias resulting from the order in which the more of the following categories: bakery, condi- interviews were reviewed, a Latin Square design ment sauces and others, beverages, dairy, fruits, was used to assure that: meat products, nuts, seafood, specialty, and vegetables. The businesses were selected from public • no interview appeared in a particular review records based on state licenses, with the objective to position more than once, provide a diversity of companies in size, function, • there were no consecutive pair repeats (e.g., and market focus. The fi rms’ marketing directors Interview 1 is followed by Interview 2 for or related personnel were recruited by phone for Reviewer 1, by Interview 4 for Reviewer 2, a sixty-minute, in-person interview at their choice and by Interview 3 for Reviewer 3), of location. Often the person interviewed was also • the average position of each interview was the owner. Nine businesses were contacted, and either 13/3 or 14/3 (e.g., Interview 1 has aver- only one fi rm refused to participate. Although the age position (1 + 5 + 7)/3 = 13/3), and remaining sample appears small, it is consistent • the diversity of review order was maxi- with other studies employing grounded theory mized. (e.g., Schroeder et al. 1986). The reason lies in the grounded theory process. The number of subjects Prior to the fi rst group meeting, each researcher is determined by systematically adding subjects independently noted in observations; characteris- until the researchers believe they have reached tics, including their dimensions and the relation- theoretical saturation. Additionally, the sample of- ships among them; and preliminary hypotheses. fers the desired diversity of small- to medium-sized These memos were then reviewed by the other agribusinesses, scope of operations, and function. researchers. The concepts and the relationships All companies in the sample are profi led in Table 1 between them were then integrated through a series (each is given a fi ctitious name in order to maintain of meetings. Specifi cally, at each meeting the con- company confi dentiality). cepts and proposed hypotheses would be reviewed, The interviews followed a question guide that discussed, and assessed. Those ideas that were not included company descriptors (e.g., nature of busi- agreed upon were revisited by each individual re- ness, size, etc.), perception and practices of mar- searcher between meetings and re-evaluated in the keting and marketing research, and use of external next meeting. Thus the results and conclusions were marketing research services.1 The question guide reached only after a series of assessments, reviews, was designed based on previous experiences of the and re-reviews by the research team. researchers with food companies and directed to- This process resulted in a scientifi cally rigorous ward exploring the research questions of this study. study as determined by the four metrics transfer- Given the exploratory nature of the research, this ability, dependability, confi rmability, and credibility question guide was not subjected to pilot testing, (Bitsch 2005; Guba 1981; Guba and Lincoln 1989). which is itself an exploratory activity. Rather, the Transferability and dependability are both substan- researchers adapted the interview process as each tial due to the sampling procedure and diversity of subsequent interview was completed. All interviews participants, which reduced context and time sen- were recorded and transcribed. sitivity. Credibility is also relatively high, attaining Following Schroeder et al. (1986), the team of good marks on six of the seven sub-dimensions listed researchers who analyzed the transcript data was by Bitsch (2005). Although confi rmability can only assembled to protect against bias in the analysis and be determined as additional researchers test the fi nd- to capitalize on diversity of experience and perspec- ings, the evaluations of all other criteria show that the tive. To further enhance objectivity, two of the three processes and procedures employed by the research 1 The question guide is available from the authors upon team conform to a high degree of “trustworthiness” request. (Guba 1981; Guba and Lincoln 1989). Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 61

Results Sources for Market Intelligence

The rigor of this work builds confi dence in the The analysis of the interviews shows that the generated results. In this section the fi ndings are sources for market intelligence and the type of presented. The fi rst half is dedicated to a general information collected by small agribusinesses are discussion of the sources of market intelligence closely related. Sources that are targeted to the in- utilized by the companies interviewed. The for- dustry in general, such as trade press articles, tend mulated hypotheses then are presented and related to provide more broad, but not necessarily less to what limited body of knowledge currently exists valuable, market information. In contrast, more on this subject. unique sources, such as personal contacts, hold the

Table 1. Profi les of Companies in the Research Sample. CandyCo Two-person operation with occasional help from family members; home-based business; founded in 1992; manufactures a variety of brittles based on a family recipe; sells in Oregon, Washington, Idaho and California via direct sales to small stores and gift shops. IceCreamCo Husband-and-wife owned and operated ice cream manufacturer; four full-time employees including owners; sells in local retail outlet and wholesales primarily in Portland, Oregon; founded in 1975. CheesecakeCo Family-owned wholesale cheesecake manufacturer based on family recipe; started in 1981; fi ve full-time employees including family members; sells mainly through wholesale distributors to restaurants nationwide but some retail to grocery stores. PastaCo Markets a variety of mostly organic pasta-related products through smaller and larger distributors nationwide; founded in 1991; manufacturing outsourced in 1999; six full-time employees. FruitCo Manufactures high-quality fruit preserves, fruit conserves, fruits in brandy, and fruits in light syrup; owner works full-time with 0–20 seasonal employees; own brand and co-packing; sells along West and East coast via distributors and exports to primarily Japan and a dozen other countries; founded in 1995. WineCo Grape grower and fi ne wine manufacturer; 300 acres; premium product; about 40 full-time and 40 seasonal employees; sells 50% plus to restaurants in 46 states and 11 countries but also some direct retail sales via on-site tasting room and phone/Internet business; founded 1982. TortillaCo Manufactures Mexican food products, primarily fresh corn and fl our tortillas; 150 full- time employees in two factories and one distribution center; sells via direct sales and distributors to retail outlets including grocery stores and to restaurants in the Western U.S. and some in the Midwest; founded in 1979. FlavorCo Subsidiary of global foods company; company’s sole production facility for drum dried fruits (30%) and vegetables (70%); products sold as ingredients to other food processors and manufacturers; 35 full-time and some seasonal employees; sells 30% in North America, 30% in Europe, 40% in Asia. 62 July 2010 Journal of Food Distribution Research 41(2) potential to provide information that is relevant only ally not used. The Internet, as an information source to a particular agribusiness. only, played an important role for those companies More specifi cally, a formal classifi cation system who maintained an active website. for market-intelligence sources emerged during the The classifi cation system of market-intelligence data analysis. This classifi cation system is displayed sources developed from the empirical work compre- in Figure 1 and empirically supported by Table 2. hensively shows where small- and medium-sized Respondents used two main sources for market food companies look for information. This explor- intelligence: relational and non-relational sources. atory study also demonstrates that not all sources are Relational sources rely on connections and/or re- equally utilized and/or valued. A particularly inter- lationships with people or organizations. They can esting fi nding in this context is that decision-makers be differentiated further into those that exist within appear to gravitate to their network of people. One the market channel and non-market channel sources. possible explanation for this result is that social net- Market-channel sources include vertical sources in works incorporate a feedback mechanism that allows the production and distribution chain (e.g., custom- decision-makers to validate their interpretation of the ers, suppliers, brokers) and horizontal sources (e.g., obtained market information and thereby to decrease cooperation with competitors, internal people). the risk associated with using that information. So- Non-market-channel sources include governments cial networks in small- and medium-sized companies and universities, professional organizations and as- could therefore be a valuable area for future study. sociations, consultants, and family and friends. Of the relational information sources, market-channel Market-Intelligence Utilization Hypotheses sources in the distribution chain were used extensively (Table 2). All fi rms collected sales and trend From the analysis of the interviews we generated data from channel participants such as distributors, nine researchable hypotheses, which can be tested in retailers, and/or brokers. Similarly, product feed- future research. Four main hypotheses emerged that back is collected from end consumers at markets, relate to market information gathering and utiliza- retail outlets, and via the Internet. Moreover, fi rms tion. In addition, fi ve other researchable questions that had contact with competitors often cooperated related to marketing decision making in small busi- with them by sharing market information. The use nesses were identifi ed. The four market-intelligence of government, academic, and trade associations as hypotheses are listed with numerical references relational information sources was less prevalent, while the latter are referred to with letters. Each and the use of consultants was limited. Many of the hypothesis is presented and discussed below. relational information sources were based on infor- Hypothesis 1: Market information and the mal contacts rather than on formal agreements. sources from which it is gathered are similar Non-relational sources, on the other hand, are across agribusinesses, making how companies those sources that are independent of relationships. process market information the driving difference They are further differentiated into standardized and in fi rm performance. customized sources. Standardized sources are those All businesses collected both relational and that are not oriented specifi cally to the particular non-relational types of market information. This business but rather to the fi rm’s industry and include information included industry trends, competitor news media, trade press, the Internet, or published information (pricing and product characteristics), material available to the public (free and fee-based). product feedback, sales fi gures, input and produc- Customized sources generate information specifi c to tion factors, and growth opportunities. All fi rms also a business’s needs, such as surveys, self-conducted relied on standardized information; quotes like “I market reviews, and trade show attendance. The em- subscribe to virtually all of the magazines” were pirical results in Table 2 show that the most widely common. TortillaCo noted specifi cally that they “try used non-relational sources of market information to stay on top of demographic trends, national trends were trade press articles for trend information and and some of that information is readily accessible informal market reviews of competitor products for everybody.” regarding prices and product characteristics. Pub- Furthermore, all firms utilized customized lished media, surveys, and focus groups were gener- non-relational information sources. For example, Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 63

Figure 1. Categorization of Market Information Resources Utilized by Small- and Medium-Sized Agribusinesses. a Trade shows were considered a source of information as well, and depending on how companies worked, the shows determined whether they would be relational or non-relational. For the purposes of this graph, classifi cation was conducted from the eyes of a business attending a trade show to gather information in general. 64 July 2010 Journal of Food Distribution Research 41(2) FlavorCo Subscribes to major food industry publications trend information Information on competitors No gro- Visits cery outlets for trend information TortillaCo Demographic gures from fi govt.; news- papers No WineCo Industry press, but sees it as to targeted major industry players; Zagat Guide Internet sales and customer feedback via website Focus group on label design (process failed) Price com- parison at retail outlets; Compares taste with competitive products . a FruitCo Cooking magazines No Reviews grocery outlets FMI, Int’l Food & Drink Exhi- bition, Fancy Foods PastaCo Yes Customer feedback via website Analyzes competitor products at retail outlets CheesecakeCo Food Watches Network maga- Trade zines No No Compara- tive tests of competitive products WUSATA IceCreamCo Trade maga- Trade zines Limited success with student projects Looks at other ice cream parlors for price, etc. avor, fl Yes CandyCo Hospitality news No Examined packaging and related info about competitive products Yes Published media press Trade Internet Surveys/focus grp Market review shows Trade Standardized Customized Non-relational Table 2. Market Information Resources Utilized by Small- and Medium-Sized Agribusinesses Utilized by Small- and Medium-Sized 2. Market Information Resources Table Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 65 FlavorCo N/A info Trend N/A N/A Market info from parent company, managers TortillaCo Sales fi gures Sales fi Sales force collects info about competitors from retailers Integrated into core customer’s community N/A Marketing staff . a WineCo Information on trends and sales from depletion reports Info on trends, sales, and consumer feedback Feedback from tasting room and internet Design help from label supplier Marketing alliance with Pinot producers Marketing staff FruitCo Feedback from sales process Demos at retail outlets Ideas from label de- signer Pricing information Exchange information about suppliers with competitors N/A PastaCo Developed “psychologi- cal owner- ship” rela- tions; market data on best selling product categories Sales data; works with retails to im- prove sales Feedback from Internet and in-store demos Collects market-information trends N/A Exchange of market information and management tactics with competitors Exchange of ideas CheesecakeCo Supplier names, price points, competitive market info Samples product with restaurants Receives market information No No IceCreamCo N/A Builds relationships with retailers Feedback through retail outlet No N/A Through in- teractions at workshops CandyCo N/A Conversa- tional relationships to Talked customers at trade shows and farmers markets Design help from label supplier N/A No Yes Distributors Retailers Consumers Suppliers Brokers Cooperation Internal people Vertical Horizontal Market channel Relational Table 2. Market Information Resources Utilized by Small- and Medium-Sized Agribusinesses (Continued) Utilized by Small- and Medium-Sized 2. Market Information Resources Table 66 July 2010 Journal of Food Distribution Research 41(2) FlavorCo Faculty in food science dept. Access through parent company TortillaCo Uses consultant with expertise in Hispanic market de- mographics and media Family business . a WineCo No Advi- Wine sory Board No FruitCo WUSATA, WUSATA, in FAS London, State Dept. of Agriculture No Product feedback PastaCo Provider Alliance – natural food industry organization Had poor experience in the past CheesecakeCo State Dept. of Agriculture No Family business IceCreamCo Once, to help ne goals defi and direction Family business CandyCo No Oregon Gourmet Assoc. Foods No Product feedback Govt./Univ. Prof. org./assoc. Consultants Family/friends Non-market channel Non-market Relational A blank fi eld means that use or non-use of a particular information resource could not be recovered from the respondent’s answers. N/A means that the information resource did not did resource information the that means N/A answers. respondent’s the from recovered be not could resource information particular a of non-use or use that means eld fi blank A Table 2. Market Information Resources Utilized by Small- and Medium-Sized Agribusinesses (Continued) Utilized by Small- and Medium-Sized 2. Market Information Resources Table a apply to the agribusiness. For example, CandyCo, does not place product through brokers and therefore cannot use as an information resource. Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 67

FruitCo noted that they visit supermarkets when managers. The owner-managers in turn depend most they travel. “I actually go to a lot of supermarkets heavily on personal contact networks to obtain infor- and do a market survey on my own. Just to fi nd out mation and reports of personal experiences that they what is in the marketplace, what people are charging then use for their own decision-making. Moreover, for it, and just to fi nd out before we launch whether Carson (1993) maintains that the acquisition and use we can be competitive.” The companies also used of information by small businesses is characterized some type of vertical channel information sources, as entrepreneurial: creative, opportunistic, and short- as many noted that they use input from distributors term in scope but almost informal and not according and customers. Non-market relational information to the dictates and conventions of formal marketing sources were employed by several businesses. theory. Thus one can expect that small agribusinesses PastaCo, for example, looks to other manufacturers capitalize on connections with players in the industry about experiences and solutions to problems. Seven they call on or that calls on them, exchanging infor- of the eight fi rms also utilized horizontal relational mation notes as well as transacting business. market-channel information sources. IceCreamCo In addition, small- and medium-sized agribusi- for example admitted “my marketing research is nesses assign greater weight and importance to their basically going to other ice cream parlors and people networks of industry players than to industry gen- in the same business; seeing what they’re doing.” If eralists. In modeling fi rms’ information acquisition this hypothesis holds true in subsequent empirical strategies, Makadok and Barney (2001) found that studies, the type of market information a business a fi rm’s confi dence in a particular resource and the accesses would not be suffi cient to explain perfor- uniqueness of this resource, among other things, mance differences between companies. affects the strength of the impact of a fi rm’s strategy Hypothesis 2: Agribusinesses utilize standard- on its profi ts. The eight agribusinesses interviewed ized information sources for industry context and obviously thought their suppliers and buyers to be customized information sources to make specifi c relevant, unique, and valuable. decisions. Hypothesis 3: Agribusinesses are comprehensive Makadok and Barney (2001) suggest that busi- in the type of market information they utilize. nesses require market information to understand The literature consistently treats small fi rms’ both the context of their situation and the expected marketing competencies as sub-optimal and un- outcome of strategic actions. Our analysis shows conventional, often pointing to limited time and that general market data—found, for example, in fi nancial resources, as well as limited marketing trade press articles and reports—are used mainly expertise, as causes (Carson, McGowan and Hill to identify overall market trends and opportunities: 1996; Chaston 1997; Stoica, Liao and Welsch the context of respondents’ business. As noted in 2004; Udell, Knotts and Jones 2002). With limited the explanation of Hypothesis 1 above, fi rms of- time, and fi nancial resources for that matter, greater ten subscribe to industry magazines and general concentration of efforts on fewer resources can be reports such as demographic descriptions from the expected. Our study’s interviewees contradict this Census Bureau to keep in touch with general trends reasoning. All but one fi rm used at least one specifi c in the industry. On the other hand, agribusinesses information source in each of the fi ve categories use primary information from channel sources to presented in Table 2—standardized non-relational, address market-specifi c issues or to help them un- customized non-relational, vertical market channel derstand the expected outcome of a specifi c action. relational, horizontal market channel relational, and For example, the businesses interviewed regularly non-market channel relational sources. The excep- turned to their distribution channels and sought ad- tion was CheesecakeCo, which did not rely on vice from competitors with whom they cooperate horizontal market channel resources but relied on to better inform their decision-making. all the other four information sources. A possible The use of relational information sources to an- explanation for the comprehensive market informa- swer specifi c questions is consistent with previous tion use is that the lack of marketing expertise may research. Carson, McGowan, and Hill (1996), for leave small businesses seeking multiple resources as example, found that information and decision-mak- a way to mitigate the risk of not gathering the right ing processes rely almost exclusively on the owner- market intelligence from only limited sources. 68 July 2010 Journal of Food Distribution Research 41(2)

Hypothesis 4: Agribusinesses with a high degree experience (Cyert and March 1963). Given that the of interfunctional coordination (integration of all organizational learning curve is steepest for small, functions within the company) gather, process, and young fi rms and that organizational learning is the utilize information effectively. most intense when there are failures or when fi rms The ability of agribusinesses to work as an get unexpected results (Sinkula 1994), it is no sur- integrated unit affects how they approach market- prise that fi rms fall into the pattern of best practices intelligence gathering, which further infl uences based on their experiences. how the collected information is used in the fi rms’ These fi rms adopt certain practices because decision-making processes. When fi rms operate they worked in the past, and the fi rms therefore with a clear strategic intent communicated clearly stick to these practices. In contrast, practices that throughout the company, decentralized market- didn’t work are shed and create a long institutional intelligence gathering is possible. The greater the memory telling fi rms not to try them again. FruitCo, number of people involved in gathering and sharing for example, contracted with a graphic artist to help information, the more extensive the business will be develop their labels. The owner ended up fi ring the in that effort. Interfunctional coordination marks a artist and developing a successful label himself. particular type of corporate culture where teamwork Now, he would be hard-pressed to hire another and cooperation dominate. This type of culture can graphic artist to design his future labels. Likewise, then lead to great effectiveness in utilizing market PastaCo has sworn off all consultants because of information. In a different context than food, Menon their past experience with one consultant. This and Varadarajan (1992) found that organizational evidence supports Carson’s (1993) argument that culture and the environmental context in which the small fi rms may not be receptive to developing business operates infl uences the manner in which marketing competency if business is satisfactory information is processed and used. Other studies without it. Even though there is not a desire to suggest that fi rms that are able to maintain an orga- develop a marketing competency, our result sug- nizational structure and culture appropriate to their gests that some level of marketing effectiveness is environmental contexts are more likely to utilize developed through the creation of best practices. information effectively (Chaston 1997; Stoica, Liao, Hypothesis B: Ability to measure the return and Welsch 2004). on investment of marketing activity increases the The four hypotheses presented above demon- willingness to undertake market research efforts strate the value of using grounded theory to discover and employ marketing tactics. characteristics and constructs important to a prob- The fi rm’s perceived risk and return on investment lem that heretofore has received limited attention (ROI) determine the willingness to undertake mar- in empirical studies. In addition, grounded theory keting and research efforts. Because small agribusi- is benefi cial in identifying new information which nesses usually have limited resources, they fi ercely can lead to additional research topics. The following guard those resources. This sentiment is refl ected hypotheses emerged from the data but were not part well in the adage that fi fty percent of a fi rm’s ad of the study’s original intent. budget is wasted—they just don’t know which half Hypothesis A: Market-information utilization is profi table. WineCo, a $4 million company that (and marketing) is a learning process, resulting in saw market research as beyond their means, would the fi rm developing personalized “best practices” rather spend $50,000 on a new salesperson than on based on previous experience. placing ads in gourmet magazines and the like. The Hypothesis A does not refer to the learning or- owner didn’t know if ads would boost sales, but he ganization noted by Senge (1990), whose focus is was certain that a new salesperson had a chance to the capacity to learn, which is arguably a source do it. FruitCo saw marketing as risky, noting that of a competitive advantage. Rather, Hypothesis A it was an enigma to him. Spending $5,000 for an refl ects the impact or result of past experiences. The advertisement in a national magazine was not ap- focus is less strategic and more tactical in nature. pealing because he could not see direct sales from Under the concept of organizational learning, the the effort. Even if sales were to increase, he would processing and utilization of information is de- be suspicious and wonder if there were other causes scribed as learned behavior, evolving with time and making sales grow. TortillaCo gives their marketing Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 69 division a certain amount of freedom, but they do each other’s presence to create the appearance of a require the division to project return on investment sizable company and not a “misfi t child.” WineCo for major marketing efforts brought to the board for was able to advertise nationally by partnering with budget approval. However, the smallest of the fi rms other small area wineries to jointly promote Oregon interviewed were even more constrained in their Pinot Noir. The owner’s perspective was captured resources and limited their marketing research and in this statement: marketing tactics to those that posed low fi nancial “I felt since I started that the most effective risk with greater ties between effort and outcome. promotion for us would be . . . in conjunction with In addition to past experiences (Hypothesis A), other producers who are in the same marketplace. another reason agribusinesses do not utilize con- . . . Sure, we’re competitors, but we’re very small sultants or market research is because they require competitors compared to our competition around a large upfront cost and have an uncertain outcome, the world. And as a group, we can afford to do some whereas most of the information sources utilized things that we simply can’t do alone.” by the fi rms interviewed do not impose a fi nancial WineCo also collaborated with three other burden on the fi rm. competitors to develop a successful information Sub-hypothesis B.1: In the absence of the ability campaign targeted toward major buyers. Thus in- to measure return on investment, a manger’s default stead of allowing limited resources to be hindering, is to rely on past experiences in the market. agribusinesses can join forces to promote a class If the agribusiness lacks the ability to measure of products. return on investment (ROI), or if it cannot be mea- Hypothesis D: Market-intelligence utilization sured for a specifi c marketing-related activity, then and marketing planning increases with the rela- primary knowledge of the markets becomes a larger tive risk exposure. infl uence in the planning process. FruitCo noted In general, as the fi rm size grew in sales volume that there is a lot of confusing information in the and the relative risk exposure of a project increased, world and that he often reverts back to his intuition agribusinesses tended to look for more assurance and what has worked in the past. IceCreamCo, a in planning their marketing work. In contrast, the retail and wholesale company, relies primarily on smaller agribusinesses displayed more of a trial- customer feedback for input on products and other and-error attitude. For example, at one point Can- marketing mix components. These companies fi nd dyCo had excess capacity. This enabled them to it easier to make the direct connection between make the decision to try another formulation with- primary market knowledge and impact of market- out risking the business’s survival and the owners’ ing programs. security. The marginal cost to try something was Hypothesis C: Marketing cooperation is a po- small, and the trial method was often cheaper than tential competitive advantage for small agribusi- researching the issue fi rst. At the other end of the nesses. spectrum, TortillaCo spent more time, effort, and Small- and medium-sized agribusinesses often money to allocate their limited marketing resources have limited access to available funds and other crit- to the investment with the greatest possible return. ical resources. For example, the small fi rms in our Contrary to CandyCo, TortillaCo has a lot to lose sample do not have the marketing budgets required when thousands of units are rolled out with each for large marketing efforts nor the critical mass to new product introduction. present themselves as a formidable company at a trade show. In response to these challenges, many Conceptual Model of Market Intelligence agribusinesses have turned to partnering with other Utilization industry players and even direct competitors to help offset the higher costs and/or to build the critical The nine hypotheses presented are the result of mass needed to conduct these larger efforts. FruitCo, a structured and focused analysis and hence are for example, sought ways to share the costs of dis- grounded in the collected data. They provide novel playing products at trade shows. In their eyes, co- insights into how small agribusinesses utilize market operating in this manner not only splits the costs of information. Coupled with the formal classifi cation renting a booth space but also allows them to share system for market-intelligence sources advanced in 70 July 2010 Journal of Food Distribution Research 41(2)

Figure 1 and Table 2, the hypotheses independently Finally, subsequent analysis tools must be able to have value in directing future research efforts in that accommodate latent variables and multiple depen- any particular hypothesis can be tested. The infor- dent relationships (i.e., allow a variable to be endog- mation classifi cation system could, for example, be enous and exogenous within the overall model) in tested using a Likert-scale approach with varying order to obtain meaningful results. Structural Equa- degrees of agreement or disagreement regarding tion Modeling, for example, would be one possible various market-information sources. However, the method for this type of work (Kline 2005). impact of this research increases substantially when all hypotheses are taken together to formulate a con- Conclusion ceptual model of market-intelligence utilization like the one presented in Figure 2. This study leads to insights about how small agri- From Hypothesis 1 we expect information- businesses fi nd and utilize information. It devel- processing capabilities to signifi cantly impact fi rm ops a classifi cation system of market-information performance. Hypothesis 2 is depicted by non- sources that includes fi ve categories: vertical market relational, custom information being connected channel relationships, horizontal market-channel to fi rm-level issues and non-relational, standard relationships. non-market-channel relationships, information being connected to industry context. standardized non-relational sources, and custom- Hypothesis 3 is represented in the fact that all infor- ized non-relational sources. Our results show that mation sources are present in the model. Hypothesis these market-information sources are not utilized in 4 on interfunctional coordination is closely tied with the same way and that many factors infl uence how Hypothesis 1 in that it is expected to positively im- a fi rm processes information. We used grounded pact how fi rms process information. Best practices theory to analyze the interviews of the eight subjects are determined through past experience, which ac- in order to generate nine hypotheses about the fi rms’ cording to Hypothesis A should impact both how market-information utilization, an important issue fi rms make decisions and the actual decisions they about which little empirical or theoretical work ex- make. Hypothesis B implies there are other charac- ists to date. Collectively the research has yielded teristics, such as ROI, that moderate the infl uence a model of how small agribusinesses utilize infor- of past experiences and information-processing ca- mation in their decision-making processes. Since pabilities on marketing practices. The opportunity exploratory work must be followed by confi rma- to collaboratively or cooperatively market products tory work, the study’s qualitative fi ndings must be also infl uences what marketing practices a fi rm un- tested quantitatively by independent researchers as dertakes (Hypothesis C). Finally, the intensity or the logical next step toward theory development. overall effort put into this process of market-intel- Thus this new model, in part or in whole, provides ligence utilization is infl uenced by the relative risk ideas that future projects could consider testing. exposure the fi rm feels (Hypothesis D). Our work also demonstrates how a qualitative The conceptual model displayed in Figure 2 is tool can be used in addressing a particular research a proposal of future research as the hypotheses of problem. However, scholars must overcome a num- connections still need to be quantitatively tested. ber of challenges for these tools to be more widely This future research will require the development adopted. First, qualitative research is often more of mechanisms to measure the different variables. time-demanding than is quantitative work. Assum- Some will be easier to measure than others, which ing that primary data collection is equivalent for by their very nature are diffi cult to observe or reduce both qualitative and quantitative approaches, the to a value. For example, measuring what informa- actual qualitative data analysis can be more exten- tion sources are utilized is fairly straightforward, sive and drawn-out. Grounded theory, for example, but measuring a fi rm’s decision- or information- requires that every researcher must deeply think processing capability is more challenging. Such through each transcript, reading it several times to variables are latent variables requiring proxies or identify constructs. This process is repeated for all multi-item scales. The data for this type of research observations. The constructs in turn are reviewed, will defi nitely need to be collected directly from revisited, and revised multiple times by the research companies, and it will likely be an iterative process. group as a whole. Because this iterative process is Johnson, Egelkraut, and Grout Market Intelligence Utilization by Small Food Companies 71 Figure 2. Conceptual Model of Small Agribusiness Market Intelligence Utilization. 2. Conceptual Model of Small Figure 72 July 2010 Journal of Food Distribution Research 41(2) not necessarily sequential, it demands substantial Ingram, P. and P. W. Roberts. 2000. “Friendships amounts of time, motivation, and focus. 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