Can Small, Local Businesses Compete in a Globalized Market?

By Vale Jokisch at BALLE conference 2010

According to Michael Shuman, author of The Small-Mart Revolution, the answer to that question is a resounding yes.  Despite the growing presence of big box chain stores in the US and abroad, Shuman has witnessed a growing number of small businesses using entrepreneurial strategies to gain a competitive edge.  These strategies include cost efficiencies through local distribution, power through aggregation, and product diversification.  At the 2010 Annual BALLE Business Conference, Michael brought together a panel of these entrepreneurs to demonstrate how the “small-mart revolution” is unfolding.

Take, for example, April Harrington of the Oklahoma Food Cooperative.  The co-op started as an informal buying club that would connect local food growers with consumers.  While many community supported agriculture (CSA) programs are locally focused in cities and towns, Oklahoma’s Food Co-op has more than 3,400 members across the entire state.  The co-op has been able to compete through a unique low-cost, volunteer-driven model where customer orders are collected, delivered, and sorted once a month at a central location in Oklahoma City, and then distributed at a number of centers across the state.  Local producers deliver the products themselves; these same trucks are then re-filled with customer orders and re-deployed for more efficient distribution.  The co-op has managed to lower the cost of distribution from 73 cents on the dollar (the national average for large grocery chains) to just 18 cents on the dollar.  Last year alone, they distributed over $694,000 worth of products.  The model has been so successful that there are now 19 “daughter” organizations spread throughout the US and Canada.

Another innovative example is that of Lyle Estill, whose NC-based Piedmont Biofuels is now the largest biofuel co-op in the US.  His biodiesel production facility started as a small project to recycle cooking oil to meet his own energy needs.  It has since grown into a 14-acre campus that houses a biofarm as well as 10 other businesses, including several that use the recycled biomass and oils to produce products like DEET-free insect repellent.  Because of its tremendous growth, the co-op has put increasing pressure on larger fats and oils collectors, most of whom ship rendered oils abroad.  Lyle recognizes, though, that the long-term competitiveness of both small and large producers will depend highly upon policy including tax benefits and regulations set by the National Biodiesel Board.

The ability of small, locally-owned enterprises to compete is not limited to domestic businesses.  A recent study conducted by Community Food Enterprise (a project of BALLE, the Wallace Center, and Winrock International) found that local food businesses throughout the Americas, Africa, Asia and, Eastern Europe are not only helping provide healthy, sustainably grown food to their communities, but are also building a competitive advantage through innovation, cost reduction, and vertical integration.

Vale Jokisch is a first year MBA student at Duke University’s Fuqua School of Business and is interested in how for-profit businesses are finding innovative ways to create social and environmental value.  Her specific interests are around community economic development, local economies, and impact investing.  Prior to enrolling at Fuqua she was the Deputy Director at Empowerment Group, a non-profit  microenterprise development organization based in Philadelphia.  Jokisch has a BA in Economics and  Political Science from Swarthmore College.

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