Question

1. Ore-Ida is the one of the largest potato processors in the world. Explain why Ore-Ida buys it potatoes from farmers instead of growing potatoes itself?
2. Why would Ikea, a wood furniture and home furnishings manufacturer, buy forests and woodlands?

Answer 1

1} Ore-Ida is one of the largest potato processors in the world, use the strategy to buy the potatoes from the farmers instead of growing it by themselves. This is performed due to the reason that the company purchase the raw materials, which means the potatoes at low whole sale rate and sell the products at higher rates in it's retail sale. The farming of potatoes has increased in the years, but the average yield per land is not that much increased which indicates the farmers are not creating that much benefits. But on the other hand, the Ore-Ida has created an extra ordinary profit in the past years. And in the market of potatoes, there exists "oligopsony", which means that only a very few number of buyers are present and they exert the pressure over the market. In this condition the company has a great control over the market.

2} The Ikea, wood furniture and home furnishing company brought the entire forest and the woodlands in order to meet their growing concern on the demands of wood. When the woods availability decreased, then they want to meet with this problem and to find solutions over it. So in order to ensure this availability now they tend to buy the whole forest area. For example the company has brought the entire forest, almost 83,000 acre woodland in the Romanian forest area. By this purchase the company claimed that the availability of the goods is ensured at good scale and mostly importantly at affordable prices.