An investor is considering in which of two start-up companies she should invest. The investor has faith in the industrial organizational model of above-average returns, and she is using its concepts to make her decision. Both start-up companies propose to manufacture health-focused foods with such characteristics as 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 healthful lifestyles. Which firm will the investor feel is most consistent with the model of industrial organization?

Question

Quizplus · Accepted Answer

The investor is interested in above-average returns, which the industrial organizational model suggests can be achieved by producing a differentiated product for which consumers are willing to pay more. RexRich Foods' business strategy of producing a differentiated product aligns with this approach, while Green Pastures Foods' focus on healthful lifestyles does not necessarily guarantee above-average returns. Therefore, the investor is most likely to choose RexRich Foods as the more consistent option with the I/O approach.

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