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Question 1 : Assume that IKEA has developed an infrastructure well suited to large scaleproduction, marketing and distribution of furniture, and that this infrastructuremakes it possible to perform these functions at low cost. Evaluate the followingstatement: A technological innovation that allows IKEA to produce, market anddistribute furniture at lower costs AND on a smaller scale would make this firmbetter off.———————————————————————————————————————————
Question 2 :
There are two downstream key buyers of Pepsis (or Cokes) concentrated soft-drinks: fast-food restaurants and bottlers. Both mix the concentrate with syrupand sell the product down the chain fast food sells it directly to customers whodrink it and bottlers sell to retailers like supermarkets. But both fast food firmsand bottlers buys cola in some form from Pepsi/Coke and then re-sells it to makea profit. A striking difference between the two is that the restaurants make verylarge margins on their cola sales, while the bottlers make small margins. Canyou give a sound conjecture for the key factors that explain this difference inmargins between these two entities?——————————————————————————————————————————–
Question 3;Multiple part question and answer. You privately own Los Pollos Hermanos, a chain of Mexican-style chicken restaurants in the American Southwest. Yourparticular business is structured so that the cooks, who are each located in various sub-regions, are responsible for their own chicken recipe. Each reciperemains the sole and exclusive intellectual property of the cook. While the cooks are responsible for production, Los Pollos Hermanos not only supplies thenecessary inputs and facilities required for production but also conducts the distribution and sale of the product. Historically, even though the cooks areextremely protective of their individual recipes, these recipes have very little variance in the opinion of their customers, which renders the product into a near commodity.Therefore, Los Pollos Hermanos collects the lions share of the companys total profits, while the cook receives a comfortable but relatively small percentageof the profits derived directly from the sale of their chicken. Cooks are employed on an at-will basis. This arrangement has been very lucrative, and you are reluctant tochange this structure due to regulatory issues. Recently, you hired a new cook in Albuquerque who has a recipe of unique quality and characteristics.The cook has named his chicken Blancos Azul. The cost to produce Blancos Azul is nearly identical to the cost of producing any other recipe, but Blancos Azul is so superior to any other recipe that customers happily pay a high premium for Blancos Azul and Bianco Azul is drawing new customers into the stores.Fortunately, this cook is incredibly efficient and his production has generally kept up with Los Pollos Hermanos desired volume targets.Additionally, this cook is unable (or unwilling) to manage and operate the distribution and sale of Blancos Azul, so he desires to cook on anexclusive basis for an entity that can provide him with such capabilities. Unfortunately, this cook is now being approached by a competitor, Pollos Juarez,and being offered an opportunity to cook exclusively for this competitor. Please note the following:
i) Pollos Juarez is an organization with a strong balance sheet and large cash reserves,ii) due to prior dealings, there is a strong mutual animosity between Los Pollos Hermanos and Pollos Juarez, andiii) no one has been able to reverse engineer the recipe for Blancos Azul ( includes you, the other cooks that you employ, and all of your competitors)no.one
A. While you have been busy running your chicken business, you have been studying business in night school. You just learned about the resource based view of the firm.Assuming that your Albuquerque cook is, in fact, a heterogeneous resource how will the scenario described above play out? Who will be the winner or winners on net?
B. How would your answer change if the cook in Albuquerque has a talented but potentially unreliable assistant who may know the recipe for either Blanco Azul or a near proxy? Please explain.
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Joe Broiler is a chicken farmer. He has decided to aggressively lobby the government to allow all chicken farmers to breed their chickens with fewer restrictions. He is doing this because with fewer breeding restrictions his overall operating costs will decline. Under what conditions will Mr. Broiler be better off ifhe succeeds in having the laws changed?
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