An investor is considering in which of two start-up companies to invest. The investor has faith in the industrial organization (
I/O) 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 I/O model?
The basic premise of the (I/O) model is that the key to success is choosing the right industry in which you can compete. The (I/O) model emphasizes the role of management and how they can differentiate the company from its competitors since every company in the market will try to do the same.
The main advantage of RexRich Foods is they have developed a differentiated product, while Green Pastures Foods just believes in a healthy lifestyle, but doesn't everyone feel the same.
