How Distance Impacts Products Price - Research Paper Example

? How does the Relative Distance Traveled by Food Products Impact the Price of those Food Products? Inserts His/Her Inserts Grade Course Customer Inserts Tutor’s Name 25 February 2012 Table of contents Introduction …………………………………………………………………………….3 Method of Data Collection ……………………………………………………………..3 Research Assignment……………………………………………………………………3 Data Presentation and Processing…………………………………………………..…...7 Interpretation and Analysis………………………………………………………………8 Conclusion and Evaluation……………………………………………………………..10 Recommendation……………………………………………………………………….11 References………………………………………………………………………………12 Appendices……………………………………………………………………………..14 Introduction Food stores sell their food products at different prices. The research focuses on the effect of the transportation cost on the food store prices. The research centers on the prices of three United States food stores. Distance significantly influences the prices of food products sold in the United States stores. The research focuses on gathering primary information. The information primary includes the food prices taken from three United States food stores. The three stores are found within the United States. The data gathering process includes analyzing the differences between the prices of food items sold. Method of Data Collection The research focuses on two data collection methods. First, the researcher uses secondary resources. The resources include reference books. The secondary research data complement the primary research data needed to resolve the problem How does the relative distance traveled by food products impact the price of those food products? Specifically, the researcher gathers the food price data from the three food stores’ online shelves. Second, the researcher uses primary resources. The primary resources include the food prices of a handful of food products displayed in the three selected food sores. The three competing food stores are Wal-Mart food store, Netgrocer food store, and Netfoodex.Com food store. Research assignment The research includes related literature. David Kault (Kault, 2003) stated: “When it is not feasible to measure all the individuals in which we are interested, we measure a selection of them. Usually the selection is a small or infinitesimal fraction of the number of individuals in which we are interested. In the case of women's heights, we would measure a small selection of women. The statistical term used here is that we take a ‘sample’ from the population”. Patrick Westhoff (Westhoff, 2010) emphasized the cost of transportation is one important factor affecting food prices of competing products. For example, soybeans that are harvested in Illinois are priced lower than imported European soybeans because it is cheaper to ship the soybeans through the Mississippi river compared to shipping the soybeans through the wide expanse of the Atlantic Ocean. From 2004 to 2006, soybeans were sold at an average of $202 per metric ton in the markets central Illinois. On the other hand, the soybeans that were imported from Netherlands were sold at the higher $261 per metric ton in Illinois. The difference in the food price per metric ton is due to the increase in the transportation fuel prices. In addition, Moshe Milevsky (2010) reiterated fuel costs directly affect the prices of food products. In high income nations, including the United States, the consumer’s average food money is allocated for the reimbursement of the store’s expenses. The expenses include the cost of transporting the goods from the farm to the entity’s store outlet. Many of the prices are tied to energy expenses. In the United States alone, the average farmer is paid 19 cents for every consumer’s food dollar. In addition, the food consumer pays another an average of 7.5 cents for the transportation and energy cost for the farmer to deliver the food products to grocery, or other food retail outlets. Most of the world’s food travels big distances between the farms to the food store outlets. In the United States, the higher fuel costs significantly precipitate to higher food store prices. For example, the average fresh fruits and vegetables that are sold in the United States’ Midwest region are grown in farms located as far as California, Mexico, Florida, and Chile. Likewise, Brazil’s popular orange juice is sold at higher prices outside Brazil when compared to the orange juice prices sold within Brazil’s territorial jurisdiction (Westhoff, 2010). In addition, the International Food Policy Research Institute (1996) affirms the distance price theory. The institute explains that the food stores must generate profits in order to stay in business. When the food prices are reduced to allowable levels, more people belonging to the poverty level communities are able to buy more food items. Victoria Sekitoleko, regional representative for Southern and Eastern Africa of the Food and Agriculture Organization of the United Nations (FAO), insists that the capacity to buy more food at lower prices reduces the hunger statistics of the United States. However, in some regions of our world, food products are sold at high prices. For example, people living in La Lima and the Sub Sahara regions of Africa must pay more for their food wants, needs, and caprices. One major reason is that the costs of processing and transporting the goods from the fertile farmers’ food production facilities to the plates of the hungry families are very high. The lack of competition in the food market segment contributes to the food suppliers’ unreasonably high food prices. In the United States food environment, Aaron Newton (2009) stated a majority of the residents buy their food needs from the supermarkets. The supermarkets’ food products are generally imported from other countries, including Thailand. Big distances force food companies to deliver the goods using refrigerated trucks and other company vehicles. Likewise, the perishable food products are normally transported by refrigerated diesel trucks along the nation’s interstate highway system. In addition, the shelf life of the perishable food products does not reach one month, when displayed in the nation’s supermarket chains. Further, Nicole Ballenger (2000) insists the reduction of the food stores’ transportation costs will translate to lower grocery store food prices. The steps that will lower of the food products’ transportations costs include the implementing information technology. Information technology can generate an only food product inventory status with just the click of the mouse computer gadget. The structural food industry’s transportation- reduction activities include the structural changes in the food industry. Furthermore, Ruppenthal (2008) insists reducing transportation costs will lower food prices. The long distance delivery of the farm goods to their food client destination should be reduced to more profitable levels. Stores can plant products within their premises. With the reduction in transportation expenses, the grocery and other retail outlets are able to lower their food product prices. The stores’ purchases of locally grown and processed food products can reduce transportation costs to realistic levels. Consequently, the stores’ food product prices will significantly decline to more realistic food prices. James Cortada (2004) emphasized “goods moved physically through the economy from manufacturing, in the form of parts and subassemblies, and then from production to customers, to retail outlets where they were sold, and to the ultimate consumer. This pattern has not changed for at least 2,500 years. It is the ultimate description of what occurs in any economy: making, selling, and buying. During the current generation, modern environment, most goods were distributed to the ultimate consumer through a complex network of wholesale and retail outlets. Transportation provided the physical link between the manufacturing and store distribution to consumers”. Data presentation and processing Statistics theory indicates that “one of the most general meanings of the concept of a relationship between pairs of variables is that knowledge with regard to one of the variables carries information about the other variable. Thus, information about the height of a child in elementary school would have implications for the probable age of the child, and information about the occupation of an adult would lead to more accurate guesses about his income level than could be made in the absence of that information” (Cohen, 1983). Based on the research conducted, primary data are retrieved. The primary data represent the food prices of the three chosen food stores. Table 1 shows the research presentation of Wal-Mart food stores. Table 2 focuses on the study of the food prices of Netgrocer food store. Table 4 centers on the food prices of Shopfoodex food store. According to Table 1, in addition, Wal-Mart sells its food product brand Asia’s Golden Star Coconut Milk at $2.21 per oz. The product is imported from Thailand. Thailand is 8,651 miles away from New York, the USA. In terms of distance, Asia is on the Pacific Ocean, on the other side of the world. At the same time, Wal-Mart also sells the competing product named Golden Start Coconut at $ 1.10 per oz. The product is bought from a local manufacturing company. The company is located in Oregon, the USA. In terms of distance, the Oregon product’s origin is closer to Wal-Mart as compared to the imported product from Thailand. By looking at the prices of the two competing products, it is very clear that the price of the imported product, $2.21 per oz., is higher than the price of the local food product from Oregon at $1.10 per oz. The price indicates that Wal-Mart is pricing the Coconut milk higher than the price of the local competing brand because Wal-Mart must recuperate the amount paid to the transportation company for delivering the produce from Far East Asia to the United States. According to table 2, the Netgrocer food store sells Thai rice Jasmine at $.29 per oz. Table shows that the Thailand rice is priced higher than the Kasmati rice. The Kasmati rice is imported from India. The same store sells Rice Select Kasmati Rice (Indian Basmati Style Rice) at $ .18 per oz. The price variance is brought about by distance variance. India is closer to the United States. Thailand is 8,651 miles from New York. However, India is only 7,790 miles from New York. The table clearly shows that Netgrocer has to pay higher transportation cost for importing the Thailand rice Jasmine as compared with the import of the Indian rice Kasmati. According to Table 3, the Shopfoodex online food store company sells Kitchen Coconut milk $ .28 per oz. The food product is imported from Thailand. In addition, the same food store sells Conchita Coconut Milk at $ .13 per oz. The Conchita food product brand is imported from Cuba. Cuba is one of the United States’ neighbors. Cuba is located in Latin America. Observing the prices of the two competing coconut milk products, it is obvious that the price of the imported Thailand food product is higher than the price of the food product, imported from neighbor Cuba. The price variance affirms that Shopfoodex must prioritize the recovery of money spent to import the food products from their country of origin. Interpretation and Analysis During the interpretation and analysis phase, the gathered data are interpreted and analyzed in terms of percentages. Each group percentage is interpreted and analyzed in relation to the percentages of the other groups of individuals answering the survey questions. A table is drawn to create a more picturesque interpretation and analysis of the percentages of the gathered survey data. Next, the gathered data are interpreted and analyzed in terms of correlation. Sherri Jackson (2011) insists that correlation describes the relationship between the two variables, distance and food price. The two tailed correlation statistical tool is used. The two tailed test divides the research data into two parts. Next, each group is interpreted and analyzed whether there is a relationship between the distance and the food price. WAL-MART Food store Statistical data shows the following research results: According to Table 4, Wal-Mart’s selling of its coconut milk food products generates a significant correlation at 0.01 levels, using the 2 tailed statistical tools. The research focuses on using Wal-Mart’s #3441-White Plains, New York Branch food basis for the research. Based on the above prices of goods of Wal-Mart food store, the food prices differ. The food price variances are influenced by the distance between the food products’ origin and the Wal-Mart food stores’ location, the USA. The above data indicates that there is a correlation between the food prices and the distance between the food’s country or place of origin and the food’s country of destination. NETGROCER food store According to Table 5, Netgrocer’s selling of its rice food products generates a significant correlation at 0.01 levels, using the 2 tailed statistical tools. Based on the prices of goods of Netgrocer food Store, the food prices vary. The table shows the correlation between the food price and the distance between the food item’s farms and the Netgrocer’s food shelves. The above data clearly affirms the concept stating food stores must reimburse their transportation costs from the food store’s current and future customers. According to Table 6, Shopfoodex’s selling of its Coconut milk food products generates a significant correlation at 0.01 levels, using the 2 tailed statistical tools. The Shopfoodex online food store company sells Kitchen Coconut milk $ .28 per oz. The Kitchen food product brand emanated from Thailand. In addition, the same food store sells Conchita Coconut Milk at the lower food store price of $ .13 per oz. The price variance indicates there is also a correlation between the price of the brand and the distance needed to bring the food item from its source to the Shopfoodex store shelves. To the consumer, they can always choose between the higher priced imported products. Some clients prefer the higher priced products. Food products that are priced higher indicate that the product is of higher quality compared to the local food products. However, the concept is not completely true. Some products may cost higher than their competing products because the food stores include the amount paid for the imported products’ gasoline and other transportation costs as part of the food store’s selling price. On the other hand, the local United States products are sold at lower prices because the food stores did not pay for the importation costs, which include the transportation expenses. Conclusion and Evaluation The conclusion shows the interpretations and analysis points of the survey results. The above interpretation and analysis indicate the distance between the farms and the food stores significantly influences the food products’ selling prices. The findings indicate there are clear differences in the prices of the food products. The three food stores specify that the store owners must recuperate the transportation costs. There is a correlation between distance and the food selling price for the Wal-Mart, Negrocer, and Cranberry food Products. The conclusion clearly shows that the thesis statement, distance significantly influences the prices of food products sold in the United States stores, should be accepted. The conclusion shows that the price variance direction is similar in all three store environments. Consequently the findings indicate that the average food store located in the United States and other countries must pass on the transportation expense to the food store customers. Indeed, distance and its related transportation cost affect the selling prices of the food products sold in the United States food stores. Recommendation In terms of recommendations, additional researches are not recommended. Conducting a similar research will only generate a similar outcome. The findings of the current statistical research are valid, convincing, and reliable. Instead, the curious interested parties can conduct their research using secondary materials to increase one’s marketing and finance knowledge, in terms of the relationship between the distance and the prices of the food products sold in the United States food stores. References Ballenger, N. (2000). Technological Changes in teh Transportation Sector -- Effects on U.S. Food and Agricultural Trade. New York: Diane Press. Cortada, J. (2004). The Digital Hand: How Computers Changed the Work of American Manufacturing, Transportation, and Retail Industries. New York: Oxford University Press. Cohen, J. (1983). Applied Multiple Regression /Correlation Analysis for the Behavioral Sciences. Hillsdale: Lawrence Erlbaum Press. IFPR. (1996). Feeding the World, Preventing Poverty, and Protecting the Earth. New York: International Food Policy Research Institute Press. Jackson, S. (2011). Research Methods and statistics: A Critical Thinking Approach. New York: Cengage Press. Kault, D. (2003). Statistics with Common Sense. Westport: Greenwood Press. Milevsky, M. (2010). Your Money Milestones. New York: FT Press. Netgrocer. Retrieved February 24, 2012 from Newton, A. (2009). A Nation of Farmers: Defeating the Food Crisis on American Soil. New York: New Society Press. Ruppenthal, R. (2008). Fresh Food from Small Spaces: The Square- inch Gardeners' Guide to Year -Round growing, Fermenting, and Sprouting. New York: Chelsea Green Press. Shopfooddex.com. Retrieved February 24, 2012, from Wal-Mart. Retrieved February 24, 2012 from Westhoff, P. (2010). The Economics of Food: How Feeding and Fueling the Planet Affects Food Prices. New York: FT Press. Appendices A. Tables Table 1 Wal-Mart Coconut Milk       Distance from Farm Store Food Product Price type U. S. (miles) Location Wal-Mart Golden Star Coconut Milk $2.21 Oz 8,651.00 Thailand Wal-Mart So Original Coconut Milk $1.10 Oz 0 Oregon Table 2 Netgrocer Rice         Distance from Farm Store Food Product Price type U. S. (miles) Location Netgrocer Jasmin Rice $0.29 oz 8,651.00 Thailand Netgrocer Kasmati Rice $0.18 oz 7,790.00 India Table 3 Shopfoodex Coconut Milk         Distance from Farm Store Food Product Price Type U. S. (miles) Location Shopfoodex Kitchen Coconut Milk $0.28 Oz 8,651.00 Thailand Shopfoodex Conchita Coconut Milk $0.13 Oz 90.00 Cuba Table 4 Wal-Mart Coconut Milk Correlation Walmart Price Distance PRICE Pearson Correlation 1. 1.000(**) Sig. (2-tailed) . . N 2 2 DISTANCE Pearson Correlation 1.000(**) 1 Sig. (2-tailed) . . N 2 2 ** Correlation is significant at the 0.01 level (2-tailed). Table 5 Netgrocer Correlation Net Grocer Price Distance PRICE1 Pearson Correlation 1 1.000(**) Sig. (2-tailed) . . N 2 2 DISTAN1 Pearson Correlation 1.000(**) 1 Sig. (2-tailed) . . N 2 2 ** Correlation is significant at the 0.01 level (2-tailed). Shopfoodex Table 6 Correlation Shopfoodex Coconut Milk Correlations Shopfoodex Price Distance PRICE1 Pearson Correlation 1 1.000(**) Sig. (2-tailed) . . N 2 2 DISTAN1 Pearson Correlation 1.000(**) 1 Sig. (2-tailed) . . N 2 2 ** Correlation is significant at the 0.01 level (2-tailed). Read More