1. Why did Birds Eye develop as a vertically-producer?
At the beginning of the frozen food industry, the infrastructure for producing, storing, distributing and retailing frozen foods was not well-developed, so Birds Eye had to build its own system. Birds Eye was a pioneer company in the frozen food industry; consequently it had to build all the supply chain of the industry.
2. Explain Birds Eye’s choice at different stage of the value chain e.g. peas, cold stores and retail cabinets. The difference can be explained by the fact that on one hand, in the vegetable market the company was able to secure the supply of vegetables with long-term contracts with farmers. On the other hand, in the fish market Birds Eye didn’t have this control because the supply came from dock side auctions, so they control the supply by vertical integration.
3. Why did specialized intermediaries emerge?
The two main reasons that explained the emerged of specialized intermediaries are the maturity of the market and the specialization. With the industry matured, the barriers to entry are low because the amount of capital to enter is lower, so the specialized intermediaries emerge to offer services to manage the various functions in frozen food retail. As the cost structure decreased, new companies go to this market to specialize in one product to reduce cost. The size of these new entrants led to emergence of these market intermediaries to provide cost synergies.
4. Does a vertically-integrated producer have a competitive advantage in the early 1980s? It depends on the market. The advantage to be a vertically-integrated company is that you control over the supply chain, so you can be faster in demand’s reactions. Moreover, you have better control over the quality of products. However, your overhead costs are very high and you have high exit barriers due to the high investment in infrastructures.
5. What should Birds...