Sunday, March 10, 2019
The Future Economy
Imagine yourself living the dream of world an entrepreneur. You are a business man of the 21st century you arrest a popular product that umteen firms want to purchase. You feel financially secure with your future because of the sum up of buyers for your product. Then 5 years go bye, and the once abundant number of firms has dwindled down to a couple of study corporations. You try to think to yourself how did this happen? You then realize that all the diminished companies that fought for your business, and helped you render the highest capital are gone.They were acquired by or merged with bigger firms. You know that when this happens the marketplace gets pocketableer and there are less quite a little to buy your product. With fewer options of companies to sell your product to, comes a smaller amount of profit for you. Two more years go bye and the market gets more concentrated, the remaining giants can now offer you any harm they want. If you choose not to accept it, you d ont sell your product. Your dreams of organism your own boss and selling a quality product for a fair price are fading away.Some multitude may think that this story couldnt happen, entirely mergers and acquisitions take place terrene in the corporate world. This story that I just told you somewhat is real. sooner of being ab protrude business men of the 21st century my denomi race was about the beef kine husbandmans of southwestern Wisconsin.The article talks about Virginia-based Smithfield foods, acquired American Foods Group and Packerland Holdings Co. Smithfield is the nations largest pork processor they substantiate a 20% market share. Besides the two recent acquisitions Smithfield similarly has ownership of Cudahy-based Patrick Cudahy Inc. As a result of this Smithfield will now be the nations forth-largest beef processor, with a 9% market share.Smithfields merger is part of an overall consolidation among the nations large food processors, which includes the compani es of the nations beef industry. Wisconsin is known to many people as the dairy farm utter because of our cheese and milk production. While this is true, when the dairy dismays get older and there milk production drops they get sold to beef processors. Due to this, Wisconsins number of beef cattle has been increasing. Wisconsin had 1.29 million dairy cows as of July 1, according to the Wisconsin Agricultural Statistics Service. The state had 260,000 beef cattle, a 2% increase from July 2000.If I had the other ternion firms information on the market value they deem. I could figure out if the market is highly concentrated or somewhat competitive development the Herfindahl-Hirschman Index which you showed us in clan.Wisconsin beef producers are definitely interested about the latest news of Smithfields plans involving Packerland and American Foods. Tom Thieding, a spokesman for the Wisconsin Farm Bureau Federation said, Any time in a consolidation, you just lose the marketing an d price opportunity.State Agriculture repository Jim Harsdorf also expressed his concern about the consolidation saying we requirement to drop sure theres still opportunity and competitor out there, or the producers are the ones who are going to see their margins cut. The nations livestock sector is already highly concentrated, a luff that is made repeatedly by farm organizations and others. Serious questions have been brocaded about vertical and horizontal integration and market power that puts small livestock producers at a disadvantage and puts consumers at risk. The grangers know that the Smithfield acquisitions encourage concentrate U.S. meatpacking and eliminate an important competitor in the purchase of livestock, precise likely resulting in lower prices for producers.Smithfield believes that it must consolidate in order to keep up with other companies and to provide for their customers. But to make a profit the beef and pork processors will be low pressure to pay fa ir prices to farmers. But the farmers have a very important role in this equation, they supply the product. If the farmers dont have an economic incentive to produce, the processors will not be able to gestate to their customers.Smithfields plan to buy American Foods could be reviewed by the U.S. division of Justice to address the possibility of an antitrust. As we learned in class the antitrust policy tries to promote competition and discourage collusion. But Smithfield believes that American Foods is small enough that the deal wont need restrictive review. The deal with Packerland foods was reviewed and approved by the federal government. Smithfield believes that they are a growth company they will not approach the size of industry leaders IBP, ConAgra and Excel.To beef producers the debate is not theoretical. Mike Riechers, a cattle farmer in southwestern Wisconsin said he believes the competition among cattle buyers dropped in 1998 after Packerland took over the operations M urco Foods. With Smithfield buying Packerland and American Foods farmers are touch that competition could drop even further.In conclusion, consolidation is taking many other forms mergers, partnerships, integration, and similar terms are being used to call a variety of business arrangements that result in the same last(a) product fewer people making decisions in agriculture. In many ways, agriculture is just catching up with the rest of the business world, which has been consolidating at a record pace for the past several years. Meanwhile the farmer will become a grower, providing the labor and often some of the capital, but never owning the product as it moves through the food system and never making the major management decisions. Most consumers already put no thought into the financial cost of growing the hay that fed the cow that ends up on your plate.