Identification and Procurement of Organic Raw Material
Additionally, the identification of raw material that is used in the organic food is a very demanding job and requires significant market research in order to find an appropriate supplier of organically produced coffee beans and other farming products. Therefore, thisdifficulty also discourages the entrants into the organic food market.
Competition from Non-organic Products
Since the customer awareness of the organic products is very low, and customer prefers to buy conventionally produced less expensive products than buying organically produced premium priced products. Therefore, the competition from the non-organic products also discourages the entrants into the organic food market.
Trained Labor Force
Further the availability of the production staff that processes the organic foods is also a barrier to newcomers because the skilled and trained workers are not in good supply, hence, organic food producers have to import the skilled staff from foreign countries at a high pay scale.
Demand and Supply
Demand Drivers
Consumer Awareness of the Organic Food
Consumer awareness regarding the difference between organic and conventionally produced food products is the key driver of demand. Because an organic food is healthier than other conventionallyprocessed food, therefore, an aware customer who knows that what are the benefits of using organic food and what are the health issues involved in using an un-organic food. However, the customer awareness of the organic food is increasing because of the media and educational campaigns.
Growth in Income Level
Additionally, since the organic food products are considered to be luxury goods,hence, the consumer will only increase the demand of organic food products when they receive an increase in their salary.Therefore, levels of personal income also impact the demand of organic food product.
Trust Development
Meanwhile, the customer confidence in the product that they are organically processed will also affect the level of demand. Because if the customer perception is that the organic products do not include organic ingredients and are not processed organically, then this factor will also impact on the demand levels.
Prices of Alternative Products
However, the organic products are more expensive than the prices of conventional processed non-organic products.Therefore, the prices of non-organic products also affect the demand of organic food products, because the consumers will prefer to buy less expensive food products than to buy an expensive organic food product.
Development of Retail Distribution Channels
However, since the availability of distribution channels is a must for selling the products, meanwhile, the distribution network for organic food products has not been developed and there does not exist an appropriate market in comparison to the distribution channel of non-organic food products. Therefore, in order to sell the organic product, companies have to incur additional cost sue to the unavailability of appropriate distribution channels.
Government Support
Additionally, the demand of organic food products is also affected by the government initiatives to promote the development of organic food industry. Because the organic food industry helps in protecting the environment, which is one of the objectives of the Malaysian government, therefore, the Malaysian government has been promoting the organic farming in order to protect the environment through increased organic food consumption.
Supply Drivers
Development of Organic Farms
However, the supply of organic food products is directly dependent on the availability of raw material used in the production of organic food products. Further, since the available land over which organic fields can be grown is in limited supply, therefore, the supply of organic raw material is also in short supply.Additionally, the development of organic farming can be aided with the government supportand funding in order to promote clean and healthy environment. Therefore, the supply of organic food products is directly affected by the development of organically produced raw materials.
Certification Requirements
Further, the production of organic food products requirescertification for their products that the products are organically produced and processed. However, the certification enables the organic food seller in order to develop consumer’s trust in their product, that their product are tested and approved by the appropriate authorities for being organic. Therefore, the organic certification available in a region will also affect the supply of organic food products.
Research and Development in Production Process
Additionally, the supply of organic food products depends on the availability of efficient technology and research and development work facilities conducted in the organic food.
Demand Elasticity
The price elasticity of demand is measured as the change in demand of a product with respect to change in other factors. However, the price elasticity of demand can be measured by the change in demand of an organic food product due to the change in the price of the organic food products. Further, the elasticity of demand can be divided into...............................
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