Economics
- This is a preview of the essay.
To view the full text you must login!
Table of Contents
Executive Summary
Introduction
The Atlanta Plant
Effects of Capital Investments
Diminishing Marginal Product
Economies of Scope
Economies of Scale
The Bread & Refrigerated Dough Industries
The Competitive Landscape
Barriers to Entry
Industry Level Demand
Technology Implementation
The Regulatory Environment
Changing Cost Conditions
Economic Outlook
Recommendation
Bibliography
EXECUTIVE SUMMARY
We recommend this stock for possible inclusion in our client's portfolios. After spending time researching The Earthgrains Company, our research team feels very encouraged when considering the future of this company. Management has wisely invested the available capital in strategic directions and the quality gains in many of the specific products produced by Earthgrains are superior to their branded competition. The capital improvements have also lowered the per unit prices of products produced at this facility, specifically toaster pastries. This lower price gives Earthgrains a competitive advantage that not only increases the profitability of the company, but also creates price and capacity barriers, which deter entry to possible competing firms.
The Earthgrains Company must also address the changes within the larger competitive landscape. They must continue to focus on the actions their competitors are taking, both from a physical plant perspective as well as from a product line management perspective. The company must continue with its international expansion plans and become more aggressive in leveraging its brand equity globally.
As we look at the overall health of the economy, we believe that raw material costs, labor costs, and exchange rates pose the most significant threat to Earthgrains at this point in time. Earthgrains management must work diligently to ensure that they meet the challenges posed by these potential threats...