An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial organization model of above-average returns and is using that as a guideline to make a decision. Both start-up companies propose to manufacture health-focused foods with low salt, low sugar, high fiber, and no artificial additives. RexRich Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures Foods is in the health-foods industry because of its internal culture and commitment to healthy lifestyles, but it does not have any executives with experience in food production. Which firm will the investor feel is most consistent with the model of industrial organization?
A) Green Pastures Foods
B) RexRich Foods
C) Both firms are consistent with the I/O approach.
D) At the entrepreneurial stage, the model that companies follow is not important.

Question

An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial organization model of above-average returns and is using that as a guideline to make a decision. Both start-up companies propose to manufacture health-focused foods with low salt, low sugar, high fiber, and no artificial additives. RexRich Foods has a business strategy of producing a differentiated product for which consumers will pay more. Green Pastures Foods is in the health-foods industry because of its internal culture and commitment to healthy lifestyles, but it does not have any executives with experience in food production. Which firm will the investor feel is most consistent with the model of industrial organization?
A) Green Pastures Foods
B) RexRich Foods
C) Both firms are consistent with the I/O approach.
D) At the entrepreneurial stage, the model that companies follow is not important.

Quizplus · Accepted Answer

The I/O model emphasizes the importance of having a competitive advantage over rivals. RexRich Foods' strategy of producing a differentiated product indicates that they have identified a way to differentiate themselves from competitors and potentially achieve above-average returns. On the other hand, Green Pastures Foods' internal culture and commitment to healthy lifestyles may not provide a unique advantage in the competitive health-food industry. Additionally, Green Pastures Foods' lack of executives with experience in food production may hinder their ability to effectively compete. Therefore, the investor is likely to view RexRich Foods as the more consistent choice with the I/O model.

An Investor Is Considering in Which of Two Start-Up Companies