Week 11_understanding food suppliers_diversification

Week 11_understanding food suppliers_diversification -...

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LESE204 Department of Food and Resource Economics Understanding Food suppliers : Diversification
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LESE204 Department of Food and Resource Economics 1. Definition Diversifications producing more than one product (across products) running more than one business (across businesses) ex) across the products: different products or similar (related) products Firm Product A Product B Firm Product A Product B Degree of diversification
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LESE204 Department of Food and Resource Economics 1. Definition Types of diversification (Besanko et al., 2010) Type of business Proportion of Revenue from Primary business Examples Single > 95 % New York Times, DeBeers Dominant 70 ~ 95% Harley-Davidson Related > 70 % Abbott Laboratories, RR Conglomerate < 70 % 3M, GE More diversified
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LESE204 Department of Food and Resource Economics 2. Reasons Market power regarding diversification Increasing market share increased power to control price or quantity Economies of scale regarding diversification Reasons of diversification (i) Exercising market power (ii) Exploiting economies of scale (iii) Exploiting economies of scope (iv) Reducing the firm’s risk Average cost Quantity
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LESE204 Department of Food and Resource Economics 2. Reasons P, cost Quantity D A MC A AC A Economies of scale regarding diversification <example> under same cost structure Before diversification (producing only product A)
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Week 11_understanding food suppliers_diversification -...

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