Table 1 A typological framework of the strategic objectives and associated market strategies and related practices used by dominant processed food manufacturers to increase and consolidate market power
Strategic Objective | Strategy | Illustrative practices | Evidence (by group) |
|---|---|---|---|
Reduce intense competition with equivalent sized rivals and maintain dominance over smaller rivals | Horizontal integration | Acquisition of rival in the same product and geographic market | |
Direct transnational expansion | Direct investment in foreign markets through acquisition of foreign food manufacturing firms | ||
Substantial investments in locally acquired firms to penetrate emerging markets via boosting production and marketing capabilities | Group I: [2] | ||
Horizontal collusion | Explicitly collude by entering price and/or output fixing arrangements with rivals | ||
Tacitly collude with rivals by coordinating behaviour | |||
Horizontal collaboration | Risk-spreading arrangements with rivals to penetrate product markets | ||
Risk-spreading arrangements with local manufacturing firms in foreign markets to penetrate new geographic markets | Group I: [116] | ||
Anti-competitive pricing strategies | Exploit dominant market position to increase prices and profit margins | ||
Anti-competitive pricing practices to push competitors out of markets, e.g. predatory pricing and territorial price discrimination | Group I: [119,120,121,122,123,124] Group II: [125] | ||
Create, maintain and increase consumer demand | Invest in intense and aggressive marketing practices to create/maintain/increase consumer demand for branded products in new and existing markets | ||
Segment consumer markets through marketing and price segmentation practices | |||
Raise barriers to market entry by new competitors | Develop, acquire and protect value of brands and other intangible assets | Make substantial investments in marketing practices to increase and protect the equity of owned brands and brand loyalty | Group I: [29, 58, 63, 64, 118, 141, 142] Group II: [82, 132, 143,144,145,146,147,148,149,150,151,152] |
Build brand equity and loyalty by differentiating products based on different qualities and characteristics | Group I: [33, 64, 107, 134, 153,154,155,156] Group II: [81, 109, 113, 117, 130, 132, 138, 140, 146, 147, 157,158,159,160] | ||
Increase value of owned intangible assets via acquisition of intangible assets of other firms, and make substantial investments in product and process innovation | |||
Protect intangible assets, including brands, through intellectual property right channels whenever possible | |||
Exploit economies of scale (production, marketing and financial) | Increase productive efficiency and minimise marginal cost of production through practices that achieve production economies of scale | ||
Exploit marketing economies of scale by spreading large marketing budgets across a greater range of effective marketing media | Group II: [74] | ||
Exploit financial economies of scale to make large capital investments and to deploy cost-cutting financial strategies (e.g. transfer pricing) | |||
Supply chain control | Control distribution channels using trading practices such as exclusive dealing arrangements, predatory foreclosure, category ‘captaincy’, slotting fees, and calendar marketing agreements | Group I: [29, 58, 99, 118, 123, 127, 153, 174,175,176,177,178,179,180,181,182] | |
Establish distribution networks in hard-to-access areas | Group II: [147] | ||
Supply diversification and competitive sourcing to secure cheap inputs | |||
Update and streamline supply management practices (e.g., automation in production processes) to boost productive efficiency, minimise transaction costs and promote product differentiation | |||
Control ancillary activities by acquiring firms and related assets in ancillary industries, e.g. business management services, storage and transport industries | Group II: [200] | ||
Substantial investments in Big Data platform technologies to acquire, control and manipulate large amounts of supply chain and consumer related information | |||
Counter the threat of market disruptors and drive dietary displacement in favour of their food products | Product diversification (increase economies of scope) | Acquisition of firms in substitute product markets (domestic or cross-border) | Group I: [29, 57, 58, 63, 107, 156, 171, 202] Group II: [32, 74, 79, 88, 89, 109, 159, 164, 167, 203,204,205,206] |
Acquisition of firms in related (e.g. healthcare, pet food) or unrelated industries (conglomerate) | |||
Substantial investments in the development of new products in response to consumer trends | |||
Enter and penetrate related product markets through strategic alliances, joint ventures and co-branding agreements | Group I: [210] | ||
Control market disruptors | Operate as venture capitalists and business incubators in order to eliminate the threat of start-ups and capitalise on and internalise successful start-ups | ||
Drive dietary displacement and adaption in favour of branded processed foods over alternatives | Engineer hyperpalatable, quasi-addictive, and aesthetically and texturally pleasing foods | ||
Drive changes in food consumption habits, e.g. promotion of snacking over regular meals, that favour the consumption of branded processed foods | Group I: [85] | ||
Keep price of branded products low in value-based food markets by taking advantage of economies of scale and cheap commodity inputs | Group II: [91] | ||
Increase firm buyer power via exercising power over upstream food supply chain actors | Vertical integration (backwards) | Acquisition of upstream firms and related assets | |
Vertical control (backwards) | Control access to and use of inputs, e.g. land, production-related plant and equipment, crop varieties, water | ||
Use private standards to control upstream firms | Group II: [132] | ||
Exert power over suppliers through the use of unfair contract agreements | |||
Vertical coordination (backwards) | Coordinate upstream activities through risk-spreading arrangements (e.g., strategic alliances and joint ventures) with upstream firms | ||
Increase firm seller power via exercising power over downstream actors | Vertical integration (forwards) | Acquisition of downstream firms and related assets | |
Vertical control (forwards) | Control distribution channels using practices such as exclusive dealing arrangements, loyalty rebates, product bundling, resale price maintenance, and territorial supply contracts | Group II: [124] | |
Vertical coordination (forwards) | Coordinate downstream processes and activities through risk-spreading arrangements | Group II: [206] | |
Vertical collusion | Collude with retailers to set up price-fixing arrangements of branded products | Group I: [63] Group II: [103] | |
Leverage informational power asymmetries in their relations with consumers | Drive demand within vulnerable consumer groups | Target vulnerable population groups with integrated marketing communication practices and use of multiple marketing channels, especially digital channels | |
Exploit product and process related information asymmetries | Withhold, manipulate or use misleading process and product-related information on food labels via practices such as the use of deceptive health and nutrition claims, misleading marketing claims (e.g. unfinished or irrelevant claims), and greenwashing |