Competitive mode: Vertical control and contractual design in the poultry industry - a comparative study between Brazil and Denmark
How do you see the competition in your industry? How do you see your business dealing with the actual situation? There are of course several and different answers to these questions, depending on your competitive mode. Maybe it is a choice of market strategy, cost strategy, resource-based strategy, institutional strategy, or my choice of approach, namely a structural strategy. More precisely, I am looking at the economic organization of production, which Williamson (1991) names second-order economizing – regarding the governance structures. We are not doing the mathematics in trying to calculate efficiency, losses or benefits, as we do not have access to that kind of data. In some countries it would be possible to get hold of economic data that would make it possible to calculate possible benefits, while in other countries, companies are not required to go public with their accountings. You will find that companies deliberately tamper with their financial statements (‘cook their books’), when asked about details in the economy of the production. Going along with the possibilities, what we do want to achieve is a better understanding of why different governance structures are chosen within the same industry. In this article we look at two companies engaged in large-scale industrial production, where one company is located in Brazil and the other in Denmark. The setups of the companies are completely different, where in Brazil strong vertical integration and control is emphasized, this is not equally prominent in Denmark.
Keywords: Competitive mode; Vertical control; Contractual design; Agribusiness.