Analysis of Competitiveness of Greeks Olive Oil Sector Using Porters Diamond Model

Galanos George Visiting Lecturer-Researcher, Department of International and European Studies University of Piraeus E-mail: galgeorg@unipi.gr/ Tel: 2104142747 Giannis Manasis Researcher E-mail: j_manasis@yahoo.gr Tel: 2104142747 Abstract Maybe two of the most recognizable Greek agricultural products are olive oil and table olives. Cultivation of olive trees in Greece lasts for thousands years and their fruit constitutes not only a basic element in local nutrition but also an important component of local culture. Olive oil consumption in Greece is extremely high compared to the global average, a trend also present in most Mediterranean areas countries from where the vast majority of the worldwide production comes from. Greece has the third largest production capacity of olive oil, a product that for certain areas of the country, mainly in coastal and insular regions, is a major source of income. The aim of this work is to study the potential comparative and competitive advantages of the olive oil production in Greece, using Michael Porters Diamond Analysis, a method that relates comparative advantages of international corporations with the competitive advantage of locality that national enterprises experience. The whole method is based on the principle that the international competitiveness of a local company stands on its ability to take advantage of the local physical and business environment, as long as its potential production factors uniqueness. Also a brief study is performed regarding economy structure and profile of Greek rural areas, revealing and analyzing interesting and unique characteristics. Finally remarks, conclusions and suggestions are presented, highlighting the necessity for adoption of innovative and pioneering methods and strategies in order to differentiate, add value to the products offered and support the sustainable growth of the whole sector.

Keywords: Competitiveness, olive oil, agricultural economy, Greece.

1. Introduction
By performing a brief study in economy structure and profile of Greek rural areas interesting and unique characteristics are coming to the surface. The total cultivating surface on Greek territory during 2007 was 4.402.780ha, an area that constitutes only the 2.0% of the total cultivating area in Europe Union. This territory was divided in 854.120 holdings which give an average of 5.1 Ha per holding a figure which is one of the smallest among the EU countries, with the exception of Romania and the insular countries of Cyprus and Malta. In agricultural sector there were engaged about 860.000 persons
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(2007) a figure indicating that the 17.2% of the total national labour force is related to this sector. Agricultural sector contributes the 6.8% of the total Gross Domestic Product of Greece, a percentage which appears as one of the highest in European Union. Further investigation on labour force in agricultural sector reveals that the 96.2% is self-employed whereas 54.6% of them are men and the rest 45.4% are women. For the 54.1% of men and the 45.4% of women farmers this is their only job. The age structure of the agricultural labour force in Greece is a reason for questioning since only the 2.4% of it is below 25 years old, an age group which represents the new professionals in the sector. On the contrary the 9.4% of the total agricultural work force is older than 65 years old, the 29.5% is between 55 and 64, the 23,6% is between 45 and 54, the 17.75% is between 35 and 44 and finally the 13.4% is between 25 and 34 years old. It is more than obvious that a major proportion of this specific labour force is close to retirement when at the same time only small numbers are entering to the profession. This trend makes every effort for radical changes and modernisation of agricultural sector rather difficult and time consuming. Another critical characteristic for the agricultural production in Greece is that the 82% percent of it is originating from mountainous and less-favoured areas, a parameter which reflects all the disadvantages that the sector has to deal with and at the same time the need for providing great support to the developing procedure to these areas. Two of the most recognizable Greek agricultural products are olive oil and table olives. The cultivation of olive trees from Greek citizens is originating from the ancient years and it constitutes not only a basic element in their nutrition but also a part of their culture and religion. Olive oil consumption in Greece is extremely high compared to the global average, a trend also present in most Mediterranean Countries. As long as it concerns the production of olive oil we can clearly observe that the great majority of the whole production is located in the Mediterranean area and that Greece occupies the third place. Some other interesting results are extracted by studying EUROSTATs data. Olive trees cultivation contributes to the 0.6% of the national gross product (2007). Even though this figure might look of minor importance at first glance we must take under account that we are examining only a single type of cultivation and that the regional distribution of olive trees is not uniform. So for certain areas of the country, olive trees cultivation is a major source of income and at the same time olives constitutes the raw material for producing several other products. More specifically the majority of olive trees cultivation areas are located in Greek coastal and insular regions.
Table 1:
Country Greece Italy France Spain Portugal Algeria Argentina Croatia Cyprus Israel Jordan Lebanon Morocco Palestine Syria Tunisia Turkey Iran Libya Mexico MEXICO

Global Distribution of Olive Oil Production

Production* (%) 17,5 28,1 0,1 31,2 1,8 1,8 0,2 0,1 0,1 0,7 0,3 0,3 2,0 0,2 3,3 7,9 4,0 0,1 0,2 0,1 100,0

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Source EUROSTAT, 2001 * Mean Value for the 1999-2001 Period

The aim of this article is to analyze the competitiveness of olive oil sector in Greece. For accomplishing this task at fist a literature review is performed on the issue of competitiveness, focusing primary in the special needs and characteristics of agricultural sector. This section is followed by the presentation of the methodology applied for estimating competitiveness of the sector under investigation. In the last section of this paper the results of the study performed are presented where the article is closing by proposing specific and targeted measures and proposals for maximizing competitiveness of the sector in Greece, based on the whole previous analyses.

2. Literature Review
Scientific discussion and efforts for giving an initial definition for competitiveness flourished in the 80s not only to both sides of Atlantic Ocean but also on many developing countries. This discussion was a result of the booming technological evolution, the rapid globalization of markets and trading (Govindaraja and Gurta 2001) and the total economical activity (Reinert 1994). Since 90s and the early 21st century the constitutional nature of competition radically transformed (Tapscott 2001), thus demanding new fundamental principles on the scientific research of the term. On the same period the global geo-economic status severely affected by the Japanese crises (Yoffie 1993) which was followed by the Asiatic crises (McKendrick 2001) and the most recent global recession dramatically altered most principles that global economy was grounded on. In parallel, significant modifications have occurred on the structure United States of Americas economy, which it is very well understood that it is affecting with the maximum weight factor the stability of the global economical and financial system. From 2001 and on United States economy is considered to be under a constant recession, an effect originating from the decrement of productivity and investment rates in this country (Robert Winters 2004). This downturn in economical activity in United States together with a similar but less intense phenomenon on most weighty European countries has obviously affected global economical status which had presented a strong shrinkage trend since 2001 (Xalkias 2002) affecting almost the total of the countries around the world. The downsizing of American economy except of the impact it implies on the total export and production activities (Xalkias 2002) also affected severely the business environment in Euro area. Based on the above presented recent economical and financial data, and the effect applied by global recession, the competitiveness term is focused around the following groups of issues: 1) the definition, the conceptual and functional approach of the competitiveness term in modern economical philosophy and practise 2) the definition of the term on both country and business level, states function and countrywide competitiveness. The definition of competitiveness, if we take under consideration a more general aspect, is referred as the ability of providing products and services with a satisfactory profit in an international competitive environment (Reve and Mathiensen 1994). This definition in principal includes companies, different sectors and even whole nations. However by observing more recent competitiveness theories research works we come across to the need to outline two different definitions, one for microeconomic or business level and another for macroeconomic or national level. The first case refers as the ability of an enterprise to secure and enlarge its sector market share (Porter M. 1990) and under this point of view nowadays each enterprise should be active and interactive in global scale since under the modern economical point of view each companys market can include the whole globe. In macroeconomic level competitiveness is defined as the ability of a country to produce products and services which correspond to markets demands and standards when at the same time secures or increases the income per employee (Cohen et al 1994). In this conceptual approach the term of employee appears for the first time for estimating each nations competitiveness. Another
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definition was given by Organisation for Economic Co-operation and Development (OECD) Programme on Technology and the Economy (OECD 1992), where competitiveness was considered as a countrys capability of to improve quality of living for its citizens in a fully liberated market environment. Taking under consideration these definitions of competitiveness in both microeconomic and macroeconomic level we can easily notice the differences of the two approaches. In the first case competitiveness focuses on market share and productivity when in the latter on civilians quality of life and income. Even more recent works in business strategy (Mitchell 2000) are arguing that companys strategic competitiveness is achieved when she succeeds in formulating a cost leadership strategy. Under this point of view when a company applies methods that other competitors cannot follow or the cost barriers for adopting them are extremely high then this company has succeeded a competitive advantage, improving significantly its competitiveness (Eisenhardt and Brown 1999). For considering competitiveness specifically for agricultural sector, various approaches have been applied the last few years, following a number of different methodologies for quantitative considerations. Gordon et al (2001) estimated Polands agricultural competitiveness based on the Domestic Resource Cost Model (DRC - Pearson and Meyer 1974). This model measures domestic production effectiveness in agricultural sector in terms of international prices; in other words it estimates the opportunity cost of domestic production, using as inputs production indexes like land prices, capital cost, labour cost, compared to the same factors on other competitive countries, performing in parallel an estimation of the added value produced by this agricultural production. This approach resulted in a rather accounting estimation of Polands agricultural competitiveness. This very method was also followed by Gordon et al (2006) for estimating Hungarys agricultural sector competitiveness. Lee et al (2003) also used the same method but in combination this time with the Net Private Profitability method (NPP - Tsan 1978) in order to estimate aquaculture sector competitiveness between Taiwan, Japan and China. Harrison Kennedy (1997) tried a more classical economical approach based on neoclassic theories for competitiveness. Based on the principle of demand and supply they attempted to apply the framework of achieving a competitive advantage against other antagonists like the modern strategic management theory demonstrates. Technology, attributes of purchased inputs, production economies, product differentiation, and external factors were considered as the primary factors of competitiveness and the primary result of their work was that an estimation of a nations agricultural competitiveness cannot been performed based just on one or two major parameters. Enterprises market share and profit levels provide useful data regarding its competitiveness, however they do not describe the whole image which includes the reasons for the achieved profitability or the market share occupied. Scientific study should be able to investigate these parameters and beyond the usual accounting data provided and focus on operational parameters of the enterprise under investigation. Trying to apply their model in a more empirical manner Kennedy et al investigated the sugar production sector in United States of America. Through this research they concluded that the factors that affect sectors competitiveness are the market share and profitability. However they mention that each parameter, both internal and external, that affects a business competitiveness does so through market share or profitability. Zylbersztajn Pinheiro (2003) applied another interesting approach when they examined the sector of production and processing of beef meat. For analyzing the sector they followed the methodology adopted by Farina and Zylbersztajn, trying to investigate the relationship between coordination and competitiveness. Their methodology was separated in five distinct steps. The first one was to determine the limits of the system, which means the range of business activities included in the sector analysis; the second was the sector analysis where basic indexes and production factors where investigated and measured; the third was the analysis of contracts, since significant interaction was observed through government contracts; the fourth included institutional aspects, where the legal and environmental framework was examined and the way it affects business operation; and the fifth and last step was the dynamic aspects where dynamics and prospects of business were analysed. From this
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work a link between coordination and control of a sector and its competitiveness was indentified. According to the same research work, the need for developing a competitive advantage is closely related with the necessity for state supervision and cooperation in quality aspects and procedures followed in order to achieve the production of high quality and competitive products. Another research performed by Alvarano et al (2008) investigated the communities that border the Parismina River of Costa Rica. The main purpose of this study was to identify the structural weaknesses that are present in enterprises of the region and the impact of these weaknesses on the capacity for raising the sustainable development competitiveness for the area, based on systemic competitiveness factors indentified by OECD. The study used semi-structured interviews and focal interviews as instruments of data collection. The results indicated that factors like the organizational structure and the development of linkages across the value chain, severely affect business competitiveness in the region. Also the ability to make decisions strengthens negotiation and marketing position. Finally researches noted that the comparative analysis of competitive capacity at the vertical level as well as at the horizontal level allowed them to conclude that the hypothesis on the possession of a productive infrastructure (active tangible) is not a good indicator of competitiveness. A more analytical econometrical work was performed by Ball et al (2010) who used Jorgenson and Nishimizu (1978-1981) methodology. They compared price levels of similar products in United States of America and eleven European countries. In practise the study measured purchasing power parities for agricultural output, together with the associated purchasing power parities for the relevant inputs, as data for our analysis of trends in price competitiveness and productivity gaps between the European Union and the United States. After this theoretical study of various models for measuring competitiveness in Primary Sector we have chosen to exploit Porters Diamond Model which addresses competition in terms of the determinants of national advantage, in particular industries or industry segments, whereas the five forces model could be applied at the level of the agriculture specific sector.

3. Analysis of Competitiveness of Greeks Olives oil sector

This work analyzes the potential comparative and competitive advantages of the olive oil production in Greece, using Michael Porters Diamond Analysis, a method that relates comparative advantages of international corporations with the competitive advantage of locality that national enterprises experience. The whole method is based on the principle that the international competitiveness of a local company stands on its ability to take advantage of the local physical and business environment, as long as its potential production factors uniqueness. In our analysis we are defining a business competitive advantage which is determined by the way internal and external factors are indicating in figure 1:
Figure 1: Greek olive oil sector Diamond Model

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Factor conditions for our research can be broken down in a) analysis of cultivation procedures and demands b) production and processing infrastructures c) human capital and labour cost d) technological innovation and e) capital. Demand conditions of national market refer to a) structure and characteristics of domestic demand b) size and trends of domestic demand and c) international demand for Greek olive oil and its characteristics. According to Porter, domestic demand can alone lead in economies of scale and actively support international competitiveness of local companies. An example indicating this process is the adoption of innovations in domestic companies originating from strong demand and needs in local markets for higher quality products. Relating or supporting sectors develop a piece of the value system of the product and actively support and affect the proper operation and growth of olive oil sector. In our case such factors are the a) suppliers of growers b) transportation enterprises and c) distribution channels. Aims, culture and overall structure determine largely Corporate Strategy, a crucial factor for the final success of the whole attempt which also affects severely the operation of any other subsidiary or affiliate company. Also domestic competition can lead both parent and subsidiary companys strategic choices and contribute to the final form of its competitive advantage. For Greek olive oil production sector the domestic competition lies a) between same activity companies b) their marketing strategies c) market trends and focus. Finally government as an external factor affects each of the previous mentioned parameters, thus enterprises competitiveness. Governmental policy is applied in regional, national and international level and obviously can directly affect and influence business operations. Factor Conditions a) Olive trees are cultivated in the Greek territory for thousands of years, taking advantage of its special climatic conditions. The warm, temperate to sub-tropical climate of the region is ideal for the growth of olive trees which seem to prefer regions with 30o to 45o of latitude in both north and south hemispheres. Regarding rainfall rating an annual height of 400 to 600mm seems to be the optimal however satisfactory production is provided even with an annual height of 200300mm. In plain landscapes olive trees are estimated to be age-long. However these trees seem to prefer land areas where humidity is low and weather conditions rather warm, exactly the characteristics that large areas of Greek territory have, where summer time lasts for approximately four to six months, from late spring till mid autumn, and mild winters are the rule with only infrequent and short lasting frost periods. b) Regarding human capital and labour cost olive production sector engages more than 450.000 people, more than the half of the total of persons engaged with agriculture in the country, a figure which corresponds to more than 90.000 annual working units. One great advantage of olive trees cultivation is that it provides seasonal employment opportunities during winter time, supplementary to other agricultural activities performed during the rest of the year. Also olives growing provide opportunities for activities relating to pressing milling and olives processing sector. c) Howbeit, for the last few years an inclination of reduction to the workforce in olive production and processing sector is observed. This inclination seems to occur due the large number of illegal workers engaged especially for olives harvesting. d) Many olive oil professionals, by taking advantage of the funding opportunities and tools provided both by European Union and the Greek state, especially during the third European programming period, modernised their infrastructures and production means. As a result a noticeable increase both in the volume and the quality of olive related production and products it is observed. Nowadays the total number of enterprises active in olive oil packaging and labelling industry is between 220 and 270 units and their total annual capacity is estimated at 200.000 tons by employing only one daily shift. We must note at this point that until 1994 olive oil packaging labelling and processing industries were eligible for grants directly from European Union but
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after this measure taken many, mainly small sized enterprises active in bottling and labelling enterprises were forced to terminate their operation. The trend from this date and on was that packaging is performed without following legal standards and published guidelines thus most containers are not labelled and its content not properly examined. In addition distribution system is underdeveloped and direct sales from farmers and presses to consumers and local retailers are dominating the market. e) Based on the data provided by the Agricultural Bank of Greece from year 2000 and on we have a raise in loans provided in businesses related to agricultural sector by 600%. This figure from the one hand reflects the satisfactory funding provided to sectors business but on the other hand projects the undermining of the agricultural economys foundations, inducing significant pressure on the financing status of sectors professionals and enterprises and raising the possibility for bankruptcy of many stakeholders in the near future. Demand Conditions a) According to the data published by the Food and Agriculture Organization of the United Nations (FAO) olive oil and table oils consumption in Greece is colossal with an annual rate of 20 kg and 11Kg per capita respectively. Also there is a noticeable trend the last few years for an ongoing increase in the quantities of table oils consumed in the country. Half the total production of table oils is reserved for own use and the vast portion of the rest production is sold in domestic markets in unlabelled form. Olive oil demand in domestic market is separated in three main subcategories: own consumption needs of olive growers, restaurants and households. According to certain estimations the annually domestic consumption of olive oil in Greece is as high as 200.000 tons. Olive trees cultivators own consumption in olive oil is estimated to rise to 80.000 tons, thus 120.000 tons remain for exploitation. The vast portion of this quantity is traded in unpackaged form and the rest, about 45.000 tons is provided to packaging and bottling enterprises in order to be processed, labeled, distributed and sold in retail market. Internal market structure strongly favors unpackaged product either taking under account own growers consumption either not, since the same principles are dominating also in purchasing from hotels, restaurants and households. This effect is dominant due to the lack of information to the consumers regarding the various types of olive oil, their quality specifications and the risks for human health from unpackaged and not properly handled products. On the contrary it is a widespread confidence that unbottled olive oil is of superior quality, always brand-new, purified with low fat and acidity, thus extremely healthy. In addition market and consumer researches indicate that six out of ten Greek consumers believe that unbottled products are of virgin or extra-virgin quality and at least of equal quality with the officially bottled, labeled and certificated products. This vast consumption of unpackaged and unlabelled products puts a lot of pressure on all packaging and labelling enterprises despite the fact that since November of 2003 it is obligatory for all stakeholders to follow the claims of Regulation EC 1019/02. This regulation envisages that in retail market no packaging larger than 5 liters is allowed and it provides specific guidelines for determining quality characteristics of the product provided and allowing full traceability. Howbeit this regulation hardly is applied in practice and the larger portion of the domestically traded product is distributed uncontrolled and illegally. b) If we take a closer look to the whole sectors structure we can clearly indicate that in every subsector exist a large number of companies of great variety in size, organisation plan, strategy and objectives. Vertical integrated companies are the exception to the rule, where the majority refers to very small enterprises that have limited volume and geographical operating range. Narrowing our view to olive oil processing procedure we notice that olives production is leaded to pressing mills where the first processing stage takes place. The olive oil produced, is sold either in the retail market and to wholesalers in unpackaged and unlabelled form or is marketed to Greek packaging and labelling companies. Olive pressing mills most of the times retain a certain amount of the oil produced as a reward; a percentage of about 6.5%.
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In Greece a large number of olive pressing mills are operating. The geographical distribution of these establishments covers almost the whole of the country, but with greater density on the areas where olive trees are dominant. Most of these enterprises are very small family businesses which engage seasonal personnel only during harvesting period. For the season 2006-2007 2,310 olive pressing mills where operating all across the country, in contrast with the season 2005-2006 when 2,499 such enterprises where operating; a decrease equal to 7.9%. The vast majority of these enterprises, with a percentage as high as 61%, were located in regions like Peloponnesus and Crete, where olive trees are systemically cultivated and olives are a notable agricultural product. In more detail in Peloponnesus for the 2006-2007 season 859 olives pressing mills where operating whereas at the same time in Crete there were 550 units, a total of 1,409. For the year before data indicate that a total of 1485 olives pressing mills where operating, revealing that the trend for reduction of the subsector operating enterprises is not narrowed to less productive regions. Finally in Region of Sterea Ellada for the season 2006-2007 were operating 321 enterprises and in the islands of Aegean Sea there were another 163 units. c) Greece appears to be a key player in the global trade of olive oil having the third larger production worldwide after Spain and Italy. Howbeit by taking under consideration the quality of olive oil production the situation changes significantly. According to data provided by the Federation of Olive Oil Packaging and Labelling Industries more than 70% of the total Greek olive oil production is of extra-virgin quality, a rule that applies also for the exported unpackaged quantities. These quantities are purchased mainly by Italian olive oil packaging and labelling industries and are used for advancing the quality of the larger quantities of Italian and Spain olive oil. The final product is packaged and labeled as Italian virgin or extra-virgin oil and is moved to retail market. The result of this practice is that Greece appears to occupy a very small part of the labeled olive oil market and hence receive no profit from the added value of the final labeled product. Regarding extra-virgin oil exports Greece again takes the third place worldwide with a total value of 236.45 million Euros for the year 2006 according to a study performed by the Federation of Industries of Northern Greece. An important notice we have to make is the trend for reduction in Greek exports of olive oil in both Italy and Spain. Even though in 2006 there was a significant raise in exports to Italy the total quantities exported from 1999 till 2006 were cut down at half. In more detail the total worth of the olive oil exports towards Italy was 186.4 million Euros for 2006, a value that represents the 78.8% of the national annual olive oil exports. During the 2002-2006 period a reduction of 69% in Greek olive oil exports to Spain was also noted. It is of great importance however to notice the annual enormous differences and the great imbalances for this latter category with the largest one observed in 2006, which was as high as 1356.66%. The value of exports to Spain was 8 million Euros and represented the 3.4% of the total olive oil exports. Finally for 2006 the largest reduction of exports was referring to Holland where Greek olive oil exports were downsized by 84.4%. We must make a note at this point that the decisive push for promotion of the total quantities of olive oil consumed globally came from the increasing demand from United States, a trend that started on mid 80s. The most recent medical researches confirmed what Mediterranean residents already were aware through their traditions; that Mediterranean diet and more specifically olive oil consumption actively supported human health. These results together with communication, promotion and information activities performed by International Olive Council were the foundations for the substantial increase of olive oil consumption both worldwide in general and in United States of America in more detail. We must mention here that greek exports in countries other than Italy and Spain refer mainly to properly packaged and labeled products. So for the period of 2002 to 2006 the greatest increased rate in quantities exported was to Switzerland (116.6%), Canada (106%) and Australia (99.5%). Regarding the important oversea market of USA even though for 2006 there was a minor decrease for Greek exports, the total exports of olive oil between 2002 and 2006 was increased by 38.4% representing the 3.7% of the total Greek olive oil exports.
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The one third of the Greek labeled olive oil is headed to European Union Market and the rest to third countries. It is very well understood that presence of Greek labeled olive oil is rather anemic in all major international markets as it is indicated in Table 1.
Table 1: Greek Labeled Olive oil Market Share*
Market share (%) 2.2 7.0 0.9 7.1 2.3 3.7 Total of Imports (in thousands tons) 255.0 28.0 33.0 30.0 75.5 46.5

Country USA Australia Japan Canada United Kingdom Germany (*) pomace oil included

The overturn of the current status in Greek olive oil exports is of great importance since in other way the future of the olive oil sector seems blurred. Greek exports are greatly relying on Italys policy regarding imports and a refusal from their part to buy a major part of Greek production could bring gigantic imbalances for sectors stakeholders. Also current production structure hardly takes any profit from the potential added value of the product. A turn of both exports and domestic demand to packaged and labeled products will considerably assist existing enterprises to upgrade their equipment and machinery and additionally will provide new employment opportunities in Greek rural areas. Finally Greek olive oil sector will be appropriately prepared to follow with the modern global trading rules implied by World Trading Organisation and effectively face the challenge of new competitors and substitute products. d) Even though olive oil consumption represents at present only the 3% of the global demand for eatable oils, it has a weigh role in cultivating areas and countries, where consumption is considerable. Nevertheless since 90s steadily increasing quantities are demanded and consumed in other non productive countries; the same does not imply for production levels since extensive fluctuations have been observed during the same period. Since 1995/96 the global annual increase for olive oil is constantly increasing by 6% and this figure is much larger in non productive countries if we take under account that in traditionally consuming countries like Greece, Spain and Italy demand is more or less saturated. These three countries represent the 85% of the global olive oil consumption turning European Union into the dominant consumer of the product. Concerning third countries United States of America consume the 16%, Turkey the 11%, Syria 7%, Egypt 5% and Brazil 3%. e) Olive oil is basically a fruit juice with the water taken out; it is a mixture of lot of different chemical components, and many of them contribute to the healthiness of the olive oil. Olive oil is primarily a mono-unsaturated fat, the 'Good' fat. This has been shown in many studies to be better than polyunsaturated fats, saturated fats, trans fats or hydrogenated oils/fats. Olive oil typically has about a 75% mono-unsaturated fat content in the form of Oleic Acid. Modern medical researches decidedly support the empirical knowledge for prevention of heart diseases and cancer while it generally contributes in good health and longevity. All of the above have supported the increase of global demand for this product. Reacting to this new status and trend EUs olive cultivating countries are modernizing their relevant industries, production and processing methods and also neighboring production with processing units. This is true primarily for Spain and to a lesser extent for Italy and Greece. Taking under account increasing rates of both production and demand of olive oil in EU we conclude that around 2015 the average production will be exceeding domestic demand by 10.5% to 16.6%, compared to the 5% rate for year 2000. This guides us to the conclusion that exports to third countries is of great importance. Yet we have to take under account the efforts that the last few years several non Mediterranean countries, like New Zealand, Argentina and Australia are spending to cultivate
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olive trees. Until present their production volume but most of all its quality seem to not follow the standards of their competitors in the Mediterranean Region. Strategy and Structures a) In Greek domestic olive oil market the competition is severe and not always fair, since labeled products have to face the competition of the unlabeled ones, even though trading of such products, as it was mentioned also before, is now illegal in EU territory. b) By performing a research in non domestic markets and selling spots we can easily mention the absence of Greek olive oil products. This is particularly true for important markets like these of Western Europe and North America where even though the situation is rather better than one decade ago, Greek products presence is still fragmented both in space and time. This lack of a consistent sectoral strategy is opposed only by certain tenacious exporters and representatives. Another characteristic of this situation is the scarce presence of Greek olive oil products on the shelf of large chain stores and thus narrowed in small and specialised stores targeting to consumers of Greek or Mediterranean origin. This kind of stores is located primarily to Germany, Australia, Canada and USA and more specifically in towns and cities were such population exists in significant numbers. The reason for this situation lies on the fact that little attention is provided to packaging and labelling of the product and most of the production is sold in unpackaged form to Italian industries which after processing it they sell it worldwide as Italian olive oil. c) Continuously more and more countries are trying to cultivate olive trees in order to decrease importing rate since as we mentioned also before demand for this product is constantly growing in non-traditionally olive cultivating countries. The shift of consumers to Mediterranean dieting habits and the well communicated benefits for human health are steadily driving the increase of olive oil consumption. As a result countries that do not produce any olive oil increased the demand for it by 147% in the last two decades. Howbeit rapid constitution of new vast markets for olive oil is hardly possible due to the large consumption of the product in its originating regions, and this reality supports decisions for local cultivation of olive trees away from Mediterranean Region. d) Olive oil provides also new opportunities for business and trade in worldwide scale. As we noted before, Mediterranean diet and cooking habits are creating a new trend in many developed or even developing countries. International Olive Council, in cooperation with European olive productive countries, and major exporting corporations has decided to promote and advertise exactly this aspect of the product. e) China is key player both in global and Greek economy. The size of its economy, its growth rates its geographical state (in the center and a large part at the same time of Asia Continent) reveals its leading role in the evolution of international economy and prosperity. China is a key partner generally for Europe and especially for Greece. The trade between the two countries is constantly growing since Greece is considered by China as a primary gate to European territory and China is considered by Greece as vast virgin market for exporting its products. By focusing to oil trade we can see that according to China Oil Association 20 million tons of plant oils are consumed in the country. Less than eight thousand tons are of olive oil, however the trend for consuming more and more anything that it is western together with the rising of available income by Chinese citizens provides excellent perspectives for Greek olive oil exports. Also this vast, complicated and unique by cultural point of view country provides opportunities for new and non conventional uses for olive oil since in some Chinese regions olive oil is considered as cosmetic or even medicine ingredient.

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Related and Supporting Industries a) A large number of related and supporting industries exist regarding olive oil production and trading. Begging with the industries affecting the productivity of olive trees we can indicate that fertilizers and agricultural medicines industry have a key role in both the performance of the cultivations but also to initiating price levels. Also increased participation in defining the level of prices have transportation companies which in Greece seem to be at present three times higher than in Italy or Spain. b) Official trade and distribution of olive oil and table oils in domestic market is performed mainly by a few large private companies, unions and partnerships, since as we analysed before large quantities are traded using unofficial, individual and local distributing methods. Italy is the dominant importer for Greek olive oil and this status seems hardly possible to change since organisation, information opportunities and culture of Greek exports are extremely poor. Even though great quantities of the Greek olive oil produced are of highest quality the lack of organized distribution channels handicaps any systematic attempt for exporting activities. The current status where Greek high quality olive oil is mixed with Italic olive oil of moderate quality which is finally sold in global retail market seems difficult to be altered. Italian distribution channels are very well organized, the price of the final product is reasonable and most of all, Greeks competitors have won a very good reputation regarding their products quality. Finally in overseas markets Italian officials and non-officials channels after systematic work have managed to associate Mediterranean Diet and olive oil with Italian dieting and cooking habits, a fact that provides them with a concrete marketing advantage. c) To make things worst from the nearly 100,000 tons of Greek olive oil exported only the 6% is properly packaged and labeled, thus traceable and properly marketed. Consequently distribution network is weak, low profiled and most of the times targeted to small and dedicated groups of consumers, both in geographically and socio-economically manner. The current situation and both internal and international tactics and strategies, according to Hellenic Organisation for Exports Promoting, are preventing Sectors enterprises and stakeholders to differentiate their strategies, update sectors structure, promote proper packaging and labelling and gain profits from the added value of the final product sold in retail market. Governance Regulation a) European Union has published more than 13 different Regulations which affect olive trees cultivation and products. It is easy to understand that this regularly changing governance environment is affecting the competitiveness of the sector and how it also affects all stakeholders. Strategic aspects for EUs strategies are the reformed Common Agricultural Policy (CAP) and Common Organisation of Agricultural Markets. The Common Agricultural Policy is the European Union policy of which the overall objectives are to ensure a fair standard of living for farmers and to provide a stable and safe food supply at affordable prices for consumers. It has evolved a lot since it began in 1962. Today, its priorities are to ensure food quality and safety, protect the environment and animal welfare, make European Union farmers competitive globally without distorting world trade and finally preserve rural communities and boost their dynamism and sustainability. In addition from 1 July 2008 olive oil and table oils are covered by the common organisation of agricultural markets. The common organisation of agricultural markets provides a single legal framework governing the domestic market, trade with third countries and rules regarding competition. b) World Trade Organization agreements and decisions play a significant role and have a great influence on shaping EUs actions and strategies since they force the Union and consequently Greece to decrease its protectionist policy. Even though for olive oil sector this is of small importance since EU only exports olive oil to third countries, these decisions side effect olive oil sector since they directly distort agriculture as a whole.
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Chance Olive oil is a product directly originating from primary sector production. Thus natural disasters are a factor which greatly acts on the final production, both in quantity and quality. Indicatively we mention the vast fires that destroyed a huge area of Peloponnesus and other regions in Greece during summer of 2007. Also they destroyed more than 4.5 million olive trees, severely affecting Greek olive oil production and thus causing imbalances both in domestic and international market.

4. Conclusions Suggestions for the development of Greeks Olives Oil Sector Competitiveness
In Greece a large number of mainly very small family businesses olive oil sector enterprises are operating which engage seasonal personnel only during harvesting period. The geographical distribution of these establishments covers almost the total of the country, but with greater density on the areas where olive trees are dominant. Official distribution and trading of olive oil is performed by only a few major companies, union and partnerships. Since 1981, when Greece joined European Union, a wider potential market of more than 300 million people is accessible for Greek olive products. Howbeit Greek companies are facing great difficulties in promoting their products in European market. On the contrary large quantities of the highest quality olive oil are exported in unpackaged and unlabelled form mainly in Italy, where it is mixed with olive oil of moderate quality, processed appropriately, bottled, packaged and labeled as Italian extra-virgin or virgin oil. The consequences of this situation is that only 6% of the Greek exports refer to properly packaged and labeled olive oil, and thus due to its small quantities and the minor if not any marketing actions, greek olive oil is widely unknown, especially to third countries consumers. Also Greeks main competitors, Italian and Spanish industries, are bringing home the total of final retail products added value, which is estimated as high as 100 million Euros. In addition, by implementing this strategy, Italian and Spanish companies take under their control larger quantities promoting further their domination in European and global market. Greek olive oil enterprises are called to turn over this situation. First of all they have to deal with the practically illegal, however dominant trade of unpackaged olive oil in domestic market. Even though this practice offers direct profits to growers and allows them to avoid transactions with wholesalers, it still leaves them little space for maneuvering in case production chain comes across to unusual circumstances. For example a possible denial of Italian industry to buy the usual large quantities of Greek olive oil would lead to oversupplying in domestic market which will lead prices to fall and that will result in huge loses of income. A situation like this will generate significant financial pressure to many stakeholders. Hence Greek olive oil and table olives sector has to be properly structured in order to face upcoming challenges and greatly improve its market positioning. Another issue which has to be answered is the establishment of an effective and adequate distribution chain. Todays situation with the nominal and fragmented presence in all major consuming markets stands against promotion of such a qualitative product like Greek olive oil. To succeed in this Greek stakeholders have to adopt a common strategy for following European and International trading rules regarding packaging and labelling and since sufficient quantities are available to proceed in developing effective supplying chains. The whole structure must be able to come against all possible direct competitors like Italian and Spanish olive oil but also substitute products like other popular oils like sunflower and seed oil. This strategy has of course to take under serious consideration inevitable pricing war, since Greek olive oil as a premium product cannot directly follow. Having in mind the facts displayed until present we believe that it is of great importance the definition of an effective marketing and positioning strategy. The establishment and promotion of a national brand name, which will reflect the supreme quality of the product and the biggest advantages for good health seems to be of crucial importance since it can in principle differentiate and add value to the retail product. A well designed and carefully implemented marketing plan can effectively support
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the actions and measures suggested until this point. This campaign will have to face the Italian and Spanish counterparts, which are well positioned for an already long period. Supplementary in modern international business and marketing environment it is a necessity the adoption of innovative and pioneering methods, which based on a product of premium quality, will provide to Greece the opportunity to upgrade and advance all related activities related to olive oil production, processing and manufacturing. Such an innovative strategy for Greek stakeholders could be the establishment of Agricultural Corporations. This transformation will provide the tools needed for modern business operation, effective accounting policy and high quality marketing and management practices. These structures would also provide an indirect solution for all growers that own small sized fields, since all attempts until today for land consolidation have completely failed. The main idea of the whole concept is that even though each grower will still own his own small sized field, the access to the market will be realised through a major entity whose negotiation power will be emphatically greater. Also under this scheme a vertical integration will be much easier and profitable compared to current status. These structures will greatly assist Greek olive oil professionals to deal with the new situation which will rise after 2013, when a new reform in European Agricultural Police is going to be negotiated and funding is expected to shrink. Supplementary a solution widely discussed today and already is being under examination in a number of regions is the combined cultivation of olive trees and other plants which will significantly raise productiveness of growers available fields. Of course close attention has to be given since it is found that some planting combinations are incompatible. Edible truffles cultivation is suggested as such a complementary plantation with olive trees. Truffle is a fungal fruiting body that develops underground and edible species which are held in high esteem in French, Spanish, northern Italian and Croatian cooking, as well as in international haute cuisine. In addition latest scientific researches indicate that this type of combined cultivations specific biological benefits for olive trees.

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