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University Microfilms, Inc., Ann Arbor, Michigan Copyright By This dissertation has been 65—1193 microfilmed exactly as received KALB, Klaus, 1936- PRODUCT DIFFERENTIATION IN THE MIXED FEEDS INDUSTRY. The Ohio State University, Ph.D., 1964 Economics, agricultural University Microfilms, Inc., Ann Arbor, Michigan Copyright by Klaus Kalb 1965 PRODUCT DIFFERENTIATION IN THE MIXED FEEDS INDUSTRY DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Klaus Kalb, M.Sc. ****** The Ohio State University 1964 Approved by Department of Agricultural Economics and Rural Sociology Es gibt kelne patriotische Kunst und keine patriotische Wissenschaft. Belde gehoeren, wie alles andere, der ganzen Welt an. •Johann Wolfgang von Goethe (17^9-1832) There Is no patriotlcal art and no patriotlcal science. Both of them, as everything else, belong to the world as a whole. Johann Wolfgang von Goethe (17^9-1832) li ACKNOWLEDGMENTS Helpful criticism nurtures Improvement and progress in many fields of human society, but especially in the process of education. The final version of this study is a result of the guidance by Dr. Daniel 1. Padberg, Professor of Agricultural Economics, who patiently read and corrected the manuscript. To him, the author wishes to express special gratitude. Valuable suggestions have been made by Professor Elmer F. Baumer, as well as by Professor Ralph W. Sherman, who were able to draw upon their wealth of experience In market research. Special appreciation Is due both of them. Furthermore, the writer is Indebted to many members of the Department of Agricultural Economics and Rural Sociology, especially to Dr. Francis E. Walker for parts of the statistical portion of the study. Also indebtedness is expressed for the work and computations carried out by the clerical staff of the Statistical Pool of the Department. The cooperation of the feed company of which the case study was made, as well as of the great number of feed dealers and farmers in Ohio, is greatly appreciated. Finally, the author is grateful for the financial support provided by the United States Department of Agriculture through the Ohio Agricultural Experiment Station at Wooster, Ohio. VITA October 29, 1936 B o m - Hopfgarten near Weimar, Germany 1956 ........ Degree In General Agriculture, Agricultural College of Eisenach, Germany 1958-1960 ..... Agricultural University, Stuttgart- Hohenhelm, Germany 1960 ......... Award of Scholarship for the United States from the German Academical Exchange Service, Bonn, Germany 1961 ......... M.S., Kansas State University, Manhattan, Kansas 1961-1964 ..... Research Assistant, Department of Agricultural Economics and Rural Sociology, The Ohio State University, Columbus, Ohio Memberships .... American Economic Association, American Farm Economic Association, American Marketing Association, Graduate Student Club and Agricultural Honor Society (Gamma Sigma Delta) at The Ohio State University, Order of Artus at Kansas State University PUBLICATIONS "Producers' Oriented Marketing Programs," unpublished Master's Thesis, Kansas State University, July, 1961 "Collectivism, What's It Like," The Agricultural Student. The Ohio State University, February, 19t>3 "How Do Dealers and Farmers Evaluate Various Merchandising Strategies of Commercial Feed," Feedstuffs. May 9 , 1964 iv FIELDS OF STUDY Major Field: Agricultural Economics Studies In Cooperative and Grain and Supply Marketing, Professors Milton L. Manuel and John W. Sharp Studies in Market Structure* Professor Daniel I. Padberg Studies in Agricultural Policy, Foreign Agricultural Development, and International Trade, Professors Mervin G. Smith, John A. Schnlttker, and John B. Crane Studies in Economic Theory, Professors Edgar S. Bagley and Clifford L. James Studies in History of Economic Thought, Professors Robert D. Patton, A. B. Batchelder, and Norman D. French Studies in Monetary Theory and Policy, Professors Frances W. Quantius and D. F. Decou Studies in Statistics, Professors H. C. Fryer, L. Edwin Smart, and Alva M. Tuttle v CONTENTS Chapter Page I. THE PROBLEM OP THE STUDY AND DEFINITIONS USED ................. 1 The Problem and Importance of the Study ...... 1 Definitions of Terms U s e d ........ 4 II. THE CONCEPTUAL FRAMEWORK OF THE STUDY 8 Views on Price and Nonprice Competition, and Some Empirical Studies of Product Differentiation ....... 21 III. A BRIEF DISCOURSE ON THE MIXED FEEDS INDUSTRY............................. 33 Historical Background............... 33 Developments and Trends In the Industry........................... 37 Summary .................. 62 IV. CASE STUDY OF A FEED MANUFACTURING FIRM ... 68 General Survey of the Feed Company ...... 68 Multiple Regression Analysis of Selling Strategy Variables ...... 80 Summary .................. 86 V. SELLING STRATEGIES OF FEED DEALERS IN THE DISTRIBUTIVE CHANNEL OF COMMERCIAL FEED . 89 Purpose of Studying Dealer Behavior, Available Information, end Philosophy of Questions ........ 89 Analysis of Questionnaire Replies ...... 91 Summary ..... 101 vi Chapter Page VI, THE ECONOMIC BEHAVIOR OF FARMERS IN PURCHASING MANUFACTURED F E E D .......... 104 Purpose of Studying the Feed Buying Behavior of Farmers, and Available Information ................... 104 Analysis of Questionnaire Replies ....... 105 Summary......... 119 VII. IMPLICATIONS OF THE STUDY REGARDING COMPETITION IN THE FEED MANUFACTURING INDUSTRY.............................. 123 VIII. SUMMARY AND CONCLUSIONS............ 135 APPENDIX A: TABLES OF DEALERS* ANALYSIS......... 143 APPENDIX B: TABLES OF FARMERS' ANALYSIS .... 164 APPENDIX C: SAMPLES OF DEALER AND FARMER QUESTIONNAIRES AND OTHER INFORMATION.......... 196 BIBLIOGRAPHY............................. 206 vii TEXT TABLES Table Page 1. Prepared Animal Feeds Industry: Number of Establishments* Number of Employees, and Value of Shipments* United States* 1927-1947 ............................... 38 2. Number of Companies* Value of Shipments* and Proportion of Shipments Accounted for by the Largest Companies In the Prepared Animal Feeds Industry* 1958* 1954* 1947, and 1935 .... 40 3. Number of Employees and Production Workers* and Percent of Shipments Accounted for by the Largest Companies In the Prepared Animal Feeds Industry* 1958* 1954* 1951, and 1935 .... 41 4. Class of Feed, Value of Shipments* and Percent of Value of Shipments Accounted for by the Largest Companies* 1954 and 1958 .............. 43 5. Market Share of Large Firms In Grain Processing industries* North Central Region, 1954-1955 and i9 6 0 ............. 46 6 . Number of Companies* Value of Shipments* and Percent of Value of Shipments Accounted for by the Four Largest Feed Manufacturing Companies* by Regions* 1958 .............. 47 7. Proportion of Excess Capacity In Grain Processing Industries* North Central Region, 1954-1955 and i960 ............... 55 8 . Percentage of Mixed Feed Sold Directly to Farmers* by Annual Tonnage of Feed Produced* 8 States* 1959 ......•.......... 61 9. Indices of Feed Sales of the Company, by Class of Feed* and Total Feed Sales* 1958-1962 ................. 73 ▼ill Table Page 10. Index Numbers of Animal Population of Cattle, Dairy, Hogs, and Poultry for Sales Districts of the Feed Company, 1958-1962 ... 73 11. Percentage of Supplements and Complete Feed Sales of Total Feed Sales of the Company, 1960-1963 ................................ 76 12. Index of Changes in Type of Feed Sold by the Company, 1960-1963 .......... 76 13. Percentage of Bulk and Bag Sales of Total Feed Sales of the Company, 1960-1963 ............ 77 14. Index of Changes in Bulk and Bag Feed Sales of the Company, 1960-1963 ............... 77 15. Feed Conversion Factors for Grain Consuming Animal Units, by Class of Livestock ....... 82 16. Grain Consuming Animal Units, Feed Consumption Index, and Adjusted Grain Consuming Animal Units, 1 9 5 8 - 1 9 6 2 ..... 83 17. Promotion and Advertising Expenses and Selling Costs, per Ton of Feed Sold, and as a Percentage of Total Feed Sales, 1958-1962 ................................ 85 lx APPENDIX TABLES Table Page A-l Dealers Indicating They "Would Shift" Feed Brands or "Would Not" if Obtaining a Better Deal, 1963 .................... I1*2* A-2 Dealers Indicating They "Would be Hurt" or "Would Not" if Shifting Feed Brands, 1963 ................................... 144 A-3 Contract Feeding and Vertical integration Schemes, by Class of Livestock, by Feed Dealers, 1963 .......................... 145 A-4 Percentage Estimates of Vertical Integration Schemes in Local Business Areas by Feed Dealers, 1963 .......................... 145 A-5 Rating of the Relative Importance of Advertising and Fleldman Assistance by Feed Dealers, 1963 ................... 146 A-6 Dealers Mixing Their Own Feed Brand in Addition to Handling Other Brands, 1963 ... 146 A-7 Multiple Selection of Selling Activities by Dealers for Augmenting Feed Sales of Feed Companies, 1963 ......................... 147 A-8 Feed Dealers' Selection of the Most Important Selling Activities for Augmenting Feed Sales of Feed Companies, 1963 ........ 148 A-9 "Other Specifications" cited by Feed Dealers, 1963 .......................... 149 A-10 Number of Feed Brands Handled by Dealers in the Sanpllng Area, 1963 ........ 149 A-11 Reasons cited by Dealers for Handling Various Feed Brands, 1 9 6 3 ...... 150 A-12 Dealers' Reasons for Handling Various Feed Brands: Statistical Test Example of MBD and NMBD in Regard to "Experienced Sales Personnel and Good Fleldmen" ............ 152 x APPENDIX TABLES--Continued Table Page A-13
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