Resource Advantage Theory and Fair Trade Social Enterprises

This paper will investigate the competitive position of both fair trade (FT) social enterprises Divine Chocolate Ltd (Divine) and Cafédirect in their respective UK markets, namely chocolate confectionery and hot beverages. Using Eisenhardt’s (1989, 1991, and 2007) approach to building theory from multiple case studies, this four-year PhD study aims to identify the resources that enable FT social enterprises to compete. This research draws on recent developments in competition theory such as resource advantage theory (R-A theory), termed a general theory of competition. The paper will critically analyse if the social and ethical elements of these firm’s product offerings really constitute meaningful differentiators (i.e. comparative advantage) as required by R-A theory (Hunt and Morgan 1995, Hunt 2001). Hunt and Derozier (2004) argue that R-A theory can ground theories of business and marketing strategy and therefore identifying the competitive resources of FT social enterprises will have important strategic implications. The research findings show that both Divine and Cafédirect have established a mainstream competitive position in specific product segments and distribution channels. Thus illustrating intra-industry demand to be heterogeneous. In addition, both companies have been a catalyst for change by influencing the strategies and policies of both branded manufactures and retailers such as Cooperative Food (CF). The key theoretical contribution validates ‘social resources’ and its three inter-related components: ethical and social commitments, connections with partners and consistency of behaviour as a resource to extend R-A theory. These ‘social resources’ in combination with both relational resources and threshold capabilities (e.g. product quality) result in a competitive position for both case organisations. The ethical and social commitments of ‘social resources’ also appears to provide an example of an ethical underpinning to Relationship Marketing. The identification of ‘social resources’ has important wider implications for both other social enterprises and those companies who are aiming to achieve a competitive position based on social commitments.