L11Oct09.306

L11Oct09.306 - Lecture 11: International Competitiveness,...

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Lecture 11: International Competitiveness, Procurement and Investment FRE 306
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L11: International Competitiveness, Procurement, Investment Competitiveness with foreign firms? What if border protection declines? (if Doha agreed to. .yes) Paradigm of old-school producers: this is zero sum game, that processors are the enemy of farmers But if competition on end-products, then competitn is between farm-processor teams, not within teams All costs in this chain hurt all members of that team; better quality, cheaper products help all team members All this is strengthened with brand names and product differentiation This now seen in export market competition Tree fruit industry example from BC, WA, NZ Problem evident w/ attempted mktg bd control of exports
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L11: International Competitiveness, Procurement, Investment If producer raw material cost is 25% higher than foreign competition, what cost disadvantage does this levy on processors? What other data needed? What would be optimal arrangement between producer and processor if this industry team is to be competitive with offshore firms? How does this situation differ when processor is a monopsony vs competitive firm? How can producer prevent excessively high margin by processor or excessively low farm price? If there is a marketing board, what is its optimal role in achieving international competitiveness?
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L11: International Competitiveness, Procurement, Investment The cost disadvantage depends on revenue or cost share of raw materials. If 50%, then a 25% P disadvantage on raw materials means a 12.5% cost disadvantage on processors Some kind of cooperation or joint decisions to keep costs down, quality up. One extreme = vertical integration. Alternatively, some joint decision-making on product, price
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L11Oct09.306 - Lecture 11: International Competitiveness,...

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