Question

An investor is considering in which of two start-up companies she should invest. The investor has faith in the I/O model of above-average returns, and she is using its concepts to make her decision. Both start-ups 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 I/O?

a. RexRich Foods
b. Green Pastures Foods
c. Both are equally consistent
d. Neither is consistent

Answer 1

The investor will feel that the firm most consistent with the I/O model is RexRich Foods, as its strategy of producing a differentiated product aligns with the model.

Step-by-step explanation:

The investor will feel that the firm most consistent with the I/O model is RexRich Foods.

The I/O (Industrial-Organizational) model of above-average returns focuses on industry factors that can lead to success. In this case, RexRich Foods' strategy of producing a differentiated product for which consumers will pay more aligns with the I/O model. By offering health-focused foods with unique characteristics, RexRich Foods can command a premium price and potentially achieve above-average returns.

In contrast, Green Pastures Foods' internal culture and commitment to healthful lifestyles may not directly contribute to above-average returns according to the I/O model. While their commitment to healthful lifestyles is commendable, it does not necessarily guarantee a competitive advantage in the marketplace or superior financial performance.