New Europe College Regional Program Yearbook 2001-2002

N.E.C. Yearbook 2001-2002
This definition underlines the necessity of managerial upgrading as
the prerequisite for the continuation of the upgrading trajectory laid out
by Kaplinsky and Readman. Consequently, managerial upgrading has its
roots within ET but is not as broad as ET.
In addition to the universally applicable examples of functional
upgrading given by Kaplinsky and Readman, two forms of functional
upgrading that this research applies for the specific situation of the food
industry value chain are the extension of the firm’s activities to include
systematic nation-wide distribution and consultancy to farmers.
In a 1991 paper, Ozawa discusses how the changes in both the
domestic market conditions (i.e., demand side) and in the manufacturing
sectors (i.e., supply side) lead to a new dynamo of industrial upgrading in
Japan. 5 The above studies have put more emphasis on the supply side of
the industrial upgrading, as the present study does. Yet the demand side
deserves to be mentioned briefly, since Romania’s low GDP per capita,
coupled with increasing poverty and a growing informal economy, lead
to imbalances in the demand and supply conditions in the food industry.
The market conditions are mostly determined and controlled by the foreign
investors rather than the demand, needs and preferences of Romanian
consumers. The penetration of Western FDI after transition, alongside
trade liberalisation, has introduced new and expensive products into the
Romanian market. However, the capacity of Romanians, trapped by low
real wages with decreasing purchasing power to respond to these products
is limited. The local producers have evaluated the demands of Romanian
consumers better than the foreign producers. Because they are not faced
with consumers demanding luxury or innovative products but with the
needs/aspirations of Romanian consumers to acquire diversified products
at affordable prices – products which are not new on a global scale but
are new for the Romanian market. Thus, the production of new products
(mainly via the imitation of the new products introduced by foreign food
companies into the Romanian market) with affordable prices has become
one of the driving forces for the Romanian producers competing against
foreign producers in Romania. These changes are gradually pushing
domestic producers “to improve and move into newer and more advanced
segments of the food industry over time, often upgrading competitive
advantage in the process” (see Porter, 1990: 89) once they gain the
necessary organisational capabilities.
As discussed in the above-mentioned literature, on the supply side,
the installation of the latest possible machinery and equipment and the
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