Please answer the following questions by the tow attached articles.

Describe/explain how Mondelez, which is attempting to acquire Hershey, is pursuing economies ofscale.

Describe/explainMondelezhowCotyispursuingeconomiesofscope.

HowdoesthepurchaseofHersheyprovideMondelezwithpotentialbenefitsrelatedtolearningeconomies?

This article has been reproduced with the permission of Dow Jones Company. These materials have been made available electronically solely for use by students in Dr. Akhmedjonov's ECON 5315: Managerial Economics for the duration of the Spring 2017 semester. These materials may not be further distributed to any person outside of the class, whether by copying or by transmission and whether electronically or in paper form. Citations Jeffrey Sparshott and Georgi Kantchev, Oil Prices Poised to Hit Sweet Spot for Global Economy, The Wall Street Journal , viewed online on August 29, 2016 Robbie Whelan, Trucking Company Failures on the Rise, TheWall Street Journal , viewed online on August 29, 2016 Liz Hoffman, Dana Mattioli and Dana Cimilluca, Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey, TheWall Street Journal , viewed online on August 29, 2016 Annie Gasparro, Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger, TheWall Street Journal, viewed online on August 29, 2016 Ryan Knutson and Deepa Seetharaman, Verizon Agrees to Buy Yahoo's Web Assets for $4.83 Billion, TheWall Street Journal , viewed online on August 29, 2016 Lilian Lin, 'The Great Wall' Trailer is Out: Matt Damon and Chinese Soldiers Battle Monsters, TheWall Street Journal , viewed online on August 29, 2016 Sara Randazzo and Mike Spector, Volkswagen to Pay Up to $14.7 Billion to Settle Diesel-Emissions Claims, TheWall Street Journal , viewed online on August 29, 2016 Jack Ewing and Hiroko Tabuchi, Volkswagen Scandal Reaches All the Way to the Top, Lawsuits Say, TheNew York Times , viewed online on August 29, 2016 Kelsey Gee and Julie Wernau, A Cheese Glut is Overtaking America, The Wall Street Journal , viewed online on August 29, 2016 Leo Lewis, 'Pokmon Go' shows Nintendo the promise of mobile, TheFinancial Times , viewed online on August 29, 2016 John W. Miller, Alcoa Details Plans to Split into Two Companies, TheWall Street Journal , viewed online on August 29, 2016 Laura Stevens, UPS Boosts Commitment to 3D On Demand Printing, The Wall Street Journal , viewed online on August 29, 2016 David Gelles, Taser International Dominates the Police Body Camera Market, TheNew York Times , viewed online on August 29, 2016 Holman W. Jenkins, Jr., That Slow Hissing Sound? The Jet Bubble, The Wall Street Journal , viewed online on August 29, 2016 Ryan Knutson, Verizon to Raise Monthly Wireless Plans by up to $10 a Month, TheWall Street Journal , viewed online on August 29, 2016 Justin Lahart, Wal-Mart Joins Amazon in Squeezing Retail Rivals, The Wall Street Journal , viewed online on August 29, 2016 Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger WSJ http://www.wsj.com/articles/salespressureonmodelezhersheycouldbo... 1 of 5 This copy is for your personal, noncommercial use only. To order presentationready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com. http://www.wsj.com/articles/salespressureonmodelezhersheycouldbolstercaseformerger1469565069 BUSINESS Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger Quarterly results are expected to show both companies continue to grapple with changing consumer tastes Continued sales pressure on Mondelez International and Hershey could bolster some arguments that the two snack giants could benefit from joining forces. PHOTO: ASSOCIATED PRESS By ANNIE GASPARRO July 26, 2016 Rival snack makers Mondelez International Inc. and Hershey Co. are both expected to show continued sales pressure when they report quarterly earnings this week, bolstering some arguments that the two giants could benefit from 8/29/2016 2:08 PM Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger WSJ http://www.wsj.com/articles/salespressureonmodelezhersheycouldbo... 2 of 5 joining forces. Mondelez made a bid to acquire Hershey at the end of June, and it was unanimously rejected by the chocolate company's board of directors. But Mondelez, whose brands include Oreo cookies, hasn't dropped its pursuit of Hershey, and could raise the offer if it sees an opening, two people familiar with the matter have said. Wall Street will likely scrutinize comments by Mondelez Chief Executive Irene Rosenfeld, who is scheduled to speak to with analysts on Wednesday, when the company is expected to report earnings. Ms. Rosenfeld is typically tight-lipped when it comes to acquisition activity, but ongoing pressure from activist investors could prompt her to share insight into Mondelez's strategy. Revenue is expected to be $6.34 billion, down 17% from the same period last year, according to consensus estimates from Thomson Reuters. Both Mondelez and Hershey are grappling with changing consumer tastes toward healthier and more natural foods, and in some cases the trend has sent a few companies in search of deals that help them reduce overall costs. Last year's megamerger of Kraft Foods Group Inc. and H.J. Heinz Co. was intended to help the packaged food conglomerates save on overhead expenses, supply chain and distribution costs. The combined company, Kraft Heinz Co., has posted double-digit increases in profits in recent quarters, despite continued sales declines. David Palmer, an analyst at RBC Capital Markets, said the appeal for Mondelez to buy Hershey lies in the money the combined company could save by pooling resources and ingredient purchasing. Mondelez could also profit from expanding overseas the Hershey brands, which also include Reese's peanut butter cups and Twizzlers, as they are heavily concentrated in the U.S. 8/29/2016 2:08 PM Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger WSJ http://www.wsj.com/articles/salespressureonmodelezhersheycouldbo... 3 of 5 \"Many of Hershey's brands have global brand recognition and distribution upside,\" he said, Others make the case that Mondelez shouldn't further invest in sugary snacks in the slow-growing U.S. market, while noting that Hershey's unique ownership structure, which gives final say to a charitable trust, makes a deal unlikely. One of Mondelez's biggest shareholders, Pershing Square, has said it is wary of a deal to buy Hershey, since the chocolatier is largely concentrated in the U.S., and an acquisition could derail Mondelez's focus on cost-cutting. \"We do have a question as to what Hershey's growth rate is in the future and whether it would be better for Mondelez to invest more in its emerging markets,\" Pershing Square's Ali Namvar, a member of the investment team, said on a recent conference call. Bernstein analyst Alexia Howard agreed that an acquisition of Hershey would be \"strategically unsound\" for Mondelez. \"Our strongly held view that health and wellness trends will play a key part in the U.S. food industry's future makes us naturally skeptical of this transaction,\" she said. Hershey has said its sales and profit for the year will be lower than expected as its chocolate bars struggle to compete with newer snacks like fruit-and-nut bars considered by many consumers to be healthier. Analysts expect Hershey's revenue to be up 2% at $1.61 billion, and earnings to be flat at 78 cents a share when the company provides its quarterly update on Thursday morning. Shareholders of both Hershey and Mondelez have benefited from the latest deal talks. As of Tuesday afternoon trading, Hershey's shares had risen 13% since news of the offer, while Mondelez's shares have risen 5%. However, the market could pull back if earnings don't meet their targets or the 8/29/2016 2:08 PM Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger WSJ http://www.wsj.com/articles/salespressureonmodelezhersheycouldbo... 4 of 5 companies further trim their outlooks for the year. On Wednesday, Mondelez will likely provide updates on sales in China, Brazil and Russia, where its Cadbury chocolates and Prince cookies have taken a hit recently. Mondelez, with its vast global reach, has become a good indicator of disposable income in emerging markets. Typically, snacks are considered an affordable indulgence, making them some of the last foods to be hurt by difficult economic times, Ms. Rosenfeld said in an April interview. Yet, the impact of economic uncertainty has now trickled down to the candy aisle. David Benoit contributed to this article. Write to Annie Gasparro at annie.gasparro@wsj.com Corrections & Amplifications: An earlier headline on this article incorrectly spelled Mondelez's name as Modelez. (Aug. 2, 2016) 8/29/2016 2:08 PM This article has been reproduced with the permission of Dow Jones Company. These materials have been made available electronically solely for use by students in Dr. Akhmedjonov's ECON 5315: Managerial Economics for the duration of the Spring 2017 semester. These materials may not be further distributed to any person outside of the class, whether by copying or by transmission and whether electronically or in paper form. Citations Jeffrey Sparshott and Georgi Kantchev, Oil Prices Poised to Hit Sweet Spot for Global Economy, The Wall Street Journal , viewed online on August 29, 2016 Robbie Whelan, Trucking Company Failures on the Rise, TheWall Street Journal , viewed online on August 29, 2016 Liz Hoffman, Dana Mattioli and Dana Cimilluca, Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey, TheWall Street Journal , viewed online on August 29, 2016 Annie Gasparro, Sales Pressure on Mondelez, Hershey Could Bolster Case for Merger, TheWall Street Journal, viewed online on August 29, 2016 Ryan Knutson and Deepa Seetharaman, Verizon Agrees to Buy Yahoo's Web Assets for $4.83 Billion, TheWall Street Journal , viewed online on August 29, 2016 Lilian Lin, 'The Great Wall' Trailer is Out: Matt Damon and Chinese Soldiers Battle Monsters, TheWall Street Journal , viewed online on August 29, 2016 Sara Randazzo and Mike Spector, Volkswagen to Pay Up to $14.7 Billion to Settle Diesel-Emissions Claims, TheWall Street Journal , viewed online on August 29, 2016 Jack Ewing and Hiroko Tabuchi, Volkswagen Scandal Reaches All the Way to the Top, Lawsuits Say, TheNew York Times , viewed online on August 29, 2016 Kelsey Gee and Julie Wernau, A Cheese Glut is Overtaking America, The Wall Street Journal , viewed online on August 29, 2016 Leo Lewis, 'Pokmon Go' shows Nintendo the promise of mobile, TheFinancial Times , viewed online on August 29, 2016 John W. Miller, Alcoa Details Plans to Split into Two Companies, TheWall Street Journal , viewed online on August 29, 2016 Laura Stevens, UPS Boosts Commitment to 3D On Demand Printing, The Wall Street Journal , viewed online on August 29, 2016 David Gelles, Taser International Dominates the Police Body Camera Market, TheNew York Times , viewed online on August 29, 2016 Holman W. Jenkins, Jr., That Slow Hissing Sound? The Jet Bubble, The Wall Street Journal , viewed online on August 29, 2016 Ryan Knutson, Verizon to Raise Monthly Wireless Plans by up to $10 a Month, TheWall Street Journal , viewed online on August 29, 2016 Justin Lahart, Wal-Mart Joins Amazon in Squeezing Retail Rivals, The Wall Street Journal , viewed online on August 29, 2016 Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey WSJ 1 of 7 http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey.. This copy is for your personal, noncommercial use only. To order presentationready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com. http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey1467297248 BUSINESS Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey Hershey rebuffs bid aimed at creating the world's biggest candy company 1 of 8 Hershey Kisses move along the production line at the West Hershey plant in Hershey, By LIZ HOFFMAN, DANA MATTIOLI and DANA CIMILLUCA Updated June 30, 2016 8:08 p.m. ET Mondelez International Inc. made a roughly $23 billion bid for Hershey Co. in an effort to create the world's largest candy maker at a time when both companies' sales are under pressure. Mondelez, which makes Oreo cookies and Cadbury chocolate bars, recently sent a letter to Hershey proposing a tie-up at $107 a share, half in cash and half in stock. Hershey's board unanimously rejected the bid Thursday and said it \"provided no basis for further discussion.\" Still, Hershey shares surged 17% to $113.49 on news of the offerfirst reported by 8/29/2016 2:07 PM Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey WSJ 2 of 7 http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey.. The Wall Street Journalremaining elevated even after the company rejected the bid, in an indication investors believe Mondelez won't be discouraged. Mondelez shares gained 6% to $45.51, giving the snack giant a market value of more than $70 billion. RELATED COVERAGE The Latest Chapter in the Storied History of Kraft, Mondelez (http://blogs.wsj.com/moneybeat/2016/06 /30/thelatestchapterinthestoriedhistoryofkraftmondelez/) Heard on the Street: Mondelez and Hershey: The Hunter Could Be the Prey (http://www.wsj.com/articles /mondelezandhersheythehuntercouldbetheprey1467322668) Hershey Gets Sweet on Dried Meat Bars (http://www.wsj.com/articles/hersheygetssweetondried meatbars1461630648) (April 25) Activists Put Mondelez CEO Irene Rosenfeld on the Spot (http://www.wsj.com/articles/twoactivistsputone ceoonthespot1450230598) (Dec. 15) Hershey Discovers Sweet Taste of Losing (http://www.wsj.com/articles /SB10001424052748704893604576200832322228372) (March 15, 2011) Cadbury, Hershey Directors Hold Talks (http://www.wsj.com/articles /SB10001424052748704842604574642611456134996) (Jan. 6, 2010) How Hershey Went Sour (http://www.wsj.com/articles/SB120372795014787393) (Feb. 23, 2008) Hershey Trust Will Meet, Weigh Alternatives to Sale (http://www.wsj.com/articles /SB1031776830853233435) (Sept. 16, 2002) Hershey Foods Is Considering A Plan to Put Itself Up for Sale (http://www.wsj.com/articles /SB1027561165960914640) (July 25, 2002) A takeover of Hershey, known for its namesake Kisses and chocolate bars, would face obstacles. Any deal would require the approval of the Hershey Trust, which holds 8.4% of its common stock and 81% of its voting power and has opposed a sale in the past. A spokesman for the trust, whose board includes three Hershey directors, declined to comment. In preparing its bid, which was disclosed in a private letter last week, Mondelez took steps to win over the trust. The Deerfield, Ill., company pledged to protect jobs, locate the merged company's global chocolate headquarters in Hershey, Pa., and rename it Hershey, said a person familiar with the matter. A Mondelez-Hershey merger would bring together the candy industry's secondand fifth-largest players by revenue, according to research firm Euromonitor. Mondelez is second only to Mars Inc. 8/29/2016 2:07 PM Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey WSJ 3 of 7 http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey.. The union would be expected to face little resistance from antitrust authorities, as Mondelez doesn't have its own presence in the U.S. chocolate market. Hershey, which makes the Cadbury chocolate sold in the U.S. under a licensing deal with Mondelez, has a limited presence outside the U.S. Among the potential hurdles for Mondelez: its bid could flush out other parties who might covet Hershey. Nestl SA is one possibility. The Swiss food giant, which has a big chocolate business, licenses its KitKat brand to Hershey in the U.S. But Nestl could face bigger antitrust issues in the U.S. if it were to try to buy Hershey. Nestl has the right to reclaim control of KitKat at no cost if someone else buys Hershey. That could reduce Hershey's value to Mondelez by $3 billion, according to a person familiar with the matter. 8/29/2016 2:07 PM Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey WSJ 4 of 7 http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey.. The Hershey Trust, established by the 122-year-old company's late founder, Milton Hershey, is the biggest potential roadblock. The trust's primary beneficiary is a school for underprivileged children in Hershey's hometown. Mr. Hershey was considered as much a philanthropist as an entrepreneur. As he built the chocolate company, he raised a town as well, erecting a bank, a department store, churches, golf courses, a zoo and a trolley system. Then, in 1909, he and his wife, Catherine, founded a school for orphan boys, now called the Milton Hershey School. Today the lavishly appointed private school serves disadvantaged children of both sexes. Over a decade ago, chewing-gum maker Wm. Wrigley Jr. Co., now a unit of the privately held Mars, tried to buy Hershey, but resistance from the trust scuttled the deal at the last minute. A joint bid from Nestl and what was then Cadbury Schweppes was also rejected. The Pennsylvania attorney general is investigating the trust's board for alleged overpayment of directors and conflicts of interest, and the trust has said it is working with the attorney general's office on the probe. This year, several of the directors have resigned, which could change the board's attitude toward a possible sale. Indeed, a person familiar with the matter said the trust, which now includes some directors with Wall Street backgrounds, may now be more open to a deal. It also isn't clear how any any deal would be received in the town of Hershey, where streetlights along Chocolate Avenue are topped with giant Hershey kisses. Hershey had sales of $1.8 billion in the first quarter, a 5.6% decline from the year-earlier period, in part because of adverse currency moves. In 2015, the company had sales of $7.4 billion and earnings of $513 million. The company has about 80 brands, and has recently moved to court more health-conscious consumers. Mondelez, based in Deerfield, Ill., had sales of $29.6 billion in 2015, down 14% from a year earlier, also partly due to currency swings. In the first quarter, its revenue fell nearly 17% to $6.5 billion, amid pressure on its coffee business. Mondelez has a complicated deal-making history. The company is the product of a 2012 separation from Kraft Foods Inc., which had been under pressure from 8/29/2016 2:07 PM Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey WSJ 5 of 7 http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey.. MARKET TALK Finally the Time for Hershey to Get Hitched? Hershey has long been Wall Street's wish as a takeover play. Problem is the candy giant's ownership structure as the company is controlled by the Hershey Trust, which hasn't been enthused over the years with selling out. But it also has made dissatisfaction known the past decade in driving changes both in director membership and the executive suites. Shares have been trading sideways for more than 2 years, so perhaps selling out might seem a little a little sweeter now. Hershey spikes to record highs on the WSJ report. (kevin.kingsbury@wsj.com; @kevinkingsbury) Hershey Trust Looms Large Over Mondelez Bid. Mondelez or any other suitor could want Hershey all the want. But approaches go nowhere if the company's controlling shareholder doesn't oblige. A trust established by founder Milton Hershey more than a century ago controls about 77% of Hershey's voting power, and it has been reluctant to sell in the past. In 2002, it scuttled a planned merger with Wrigley, and there are some legal restrictions on sales of Hershey stock. (liz.hoffman@wsj.com; @lizrhoffman) Should Mondelez Eat or Be Eaten? Mondelez making an approach to Hershey is likely to surprise some who eventually expected Mondelez to be more of a target than a buyer. William Ackman originally poured $5.5 billion into Mondelez, though he pared that recently and now holds a 5.6% stake. There's been speculation Mondelez would fit well back with Kraft Heinz under the control of cost-cutting Brazilian billionaires 3G. Meanwhile, Trian and Nelson Peltz, who now has a Mondelez board seat, had been urging a combination with Pepsi snack arm Frito Lay. But swallowing Hershey, now sporting a $24 billion market cap with today's 18% bounce, would make Mondelez a mouthful and possibly raise eyebrows among those looking for a sale. (david.benoit@wsj.com; @DaveCBenoit) Deal Would Join Two Top Five Confectionery Makers. WSJ reports that Mondelez made a takeover approach to Hershey this month. That deal would bring the world's second and fifth largest confectionery companies under one roof, according to research firm Euromonitor. Mondelez ranks as the world's second-largest confectionery maker, after Mars. Hershey is the world's fifth largest. Nestle and Ferrero are the third and fourth largest confectionery companies in the world, respectively.(dana.mattioli@wsj.com; 8/29/2016 2:07 PM Snack Giant Mondelez Makes $23 Billion Takeover Bid for Hershey WSJ 6 of 7 http://www.wsj.com/articles/mondelezmakestakeoverbidforhershey.. @DanaMattioli) Market Talk is a stream of real-time news and market analysis that is available on Dow Jones Newswires. Trian Fund Management LP and other activist investors. That came only two years after Kraft had acquired the U.K. chocolate company Cadbury PLC for $19 billion, and the chocolate assets went with Mondelez in the separation. When Kraft bought Cadbury in 2010, it promised it would protect jobs in the U.K. and keep open a factory there. Within months, it announced it would close that plant after saying it had learned new information about its profitability. The U.K.'s Takeover Panel criticized the company and its bankers for the reversal. Last year, William Ackman's Pershing Square Capital Management LP disclosed a 7.5% stake, worth $5.5 billion at the time, betting the company would become a target, rather than an acquirer, in a coming wave of consolidation in the snack industry. Mr. Ackman recently trimmed the Mondelez stake to 5.6% including options. Trian also has a 3% Mondelez stake and the firm's co-founder, Nelson Peltz, is on the snack company's board. Trian in 2013 unveiled stakes in PepsiCo Inc. and Mondelez and began pushing for a merger of the two to be followed by a spinout of Pepsi's beverage business. Pepsi rejected the idea, and Trian dropped its call for a merger when Mr. Peltz joined Mondelez's board in 2014. David Benoit and Annie Gasparro contributed to this article. Write to Liz Hoffman at liz.hoffman@wsj.com, Dana Mattioli at dana.mattioli@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and David Benoit at david.benoit@wsj.com 8/29/2016 2:07 PM