York University

• ADMS 4900

• 4900 Midterm Read the questions carefully. You have 85 minutes to complete 5 questions and upload your file to “Midterm Part 2 Submission” on eCLASS. You only have 1-page space per question (including the question). Any answer over the 1-page limit will not be read. This means the file you submit to Turnitin shall only have 5 pages. Question 1 General Mills is the Minneapolis-based food conglomerate focusing on daily food items for U.S. households, its top-selling natural products are cereals, yogurts, bakery and snacks. In 2018, General Mills acquired Blue Buffalo Pet Product (a leading natural pet food company) for approximately $8 billion as General Mills plans to diversify its business for future growth. (1) Provide an explanation as the type of diversification being pursued by General Mills (1 point). (2) How do economies of scope work at General Mills in this situation (4 points)? (5 points) Suggested answers: General Mills’ acquisition of Blue Buffalo pet food was an example of pursuing related diversification at the corporate level. Through this acquisition, General Mills can quickly gain its footprint in the pet food segment with a premium brand and enhance its scope to cover multiple well-connected businesses. (1 point) First, this diversification strategy allows General Mills to share its common operational activities with Blue Buffalo, such as purchasing raw material supplies from natural and organic farms, mass production process for both consumer and pet foods, saving cost for inventory and delivery to grocery chains and other retailers. (2 points) Furthermore, General Mills can transfer its marketing expertise to the newly acquired pet food business, including market research, product design and promotion campaign. By leveraging the brand recognition from General Mill’s existing food brands, Blue Buffalo’s addition offer cross sell opportunity when consumers