Choice of Economic Strategies by Food Complex Enterprises in Conditions of Market Uncertainties

Olga Yermolova, Natalia Kireyeva and Natalja Fisenko

No 7743, 99th Seminar, February 8-10, 2006, Bonn, Germany from European Association of Agricultural Economists

Abstract: The paper presents the results of the sociological survey and expertise describing the factors of risk reduction and increase of the level of trust in contract relations in food networks. The level of contract discipline is analyzed. It is shown that the insufficient rate of development of the institution of trust restricts the liberty of action for companies operating in a food network, deprives them of the opportunity to achieve the local optima and provides no grounds for setting their economic behavior sure-footed standards. Following the sociological survey the dynamics and structure of the transaction costs in food networks are displayed along with the specific features of their accounting in the company's operations. An expertise of the most important risk factors encountered at the current stage of development of the food networks is presented. Case studies for a number of companies enabled to reveal the advantages and contradictions of pursuing the strategies of diversification and integration as a means to reduce the external risks and uncertainties and overcome the negative impact of the asymmetric market information and underdeveloped institutional trust. A quantitative analysis of the synergetic effects from implementing the diversification strategy was made for a number of food companies to find out that the risks get reduced almost twice. At the same time, it is discovered that the transition of diversified companies from the zone of critical risks to that of minimum risks bears both positive and negative consequences. One the one hand, these are lower operational costs, more efficient distribution of the resources, greater market value of the company. But on the other hand, the above gains are offset by the excessively complicated organizational structure, dissipation of the resources, impediments to restructuring and etc.

Keywords: Agribusiness (search for similar items in EconPapers)
Pages: 9
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaae99:7743

DOI: 10.22004/ag.econ.7743

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