Ingredient branding play a vital role in how the markets will react towards that product, how trends of a particular finished product will behave in the market and what the product will fetch out from the market.1 The sole purpose which motivates a number of these manufacturing and processing companies to keep rebranding their ingredients over and over again is obviously to stay at the top of their competitors.2 These companies together with their product distributors acknowledge the fact that in order to sell more and keep the cash flowing in, they have to give people or must supplement their target market with more of what they want while giving them less of what they do not want. 1, 3
Rebranding and setting high quality product value is therefore to guarantee a sustainable management of the finished products by both the producers and the purchasing group who endlessly always seem to define new and better production rules for the transformation of their industrial products. 4 This thesis research paper aims to analyze a number of these several issues which are incorporated in the process of upstream differentiation, the potential of one-step transfer prices based on either variable or full costs for coordinating decentralized production and quality-improving investment decisions.5 The paper will entail on some of the factors as to why transfer of prices on the basis of variable costs usually fail to induce better investments on the upstream stage. In contrast, the paper will show that transfer of prices based on full costs provide strong investment incentives for the upstream divisions. 6 Nonetheless, these full costs may fail to coordinate the investment decisions in reaction to this; it is good for companies to try new methods such as negotiations with an aim of trying to prevent such coordination failures. 7 Moreover, in the research paper, a number of various other issues need to be addressed to show how the suppliers will benefit following a higher degree of decentralization so that total profit increases in the number of parameters being subject to negotiations and product rebranding. 1 In this paper an analysis of the ex-post impact of certification which is also a way for retailers to differentiate their products that may lead to a reinforcement of producers’ market power. On this process, a model of vertical relationship in relation to the five aspects discussed will further create a more understanding in demonstrating a situation where other competitors in the supply chain want to market their product. 8, 9
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