Factors Affecting the Profitability of Health Functional Foods Manufacturers

Abstract

This paper analyzes factors that affect the profitability of health functional food manufacturers from the strategic business management perspective. For this purpose, we estimated a two-way error components model based on panel data of financial statements for health functional foods manufacturers, considering time effects. Our empirical evidence suggests that both industry-level and firm-level strategies are needed for individual firms to gain a competitive advantage by enhancing their profit performance. In response to competition intensification within the health functional food industry, they should consider the following efforts to increase profit performance to secure a competitive advantage: (1) expanding the firm’s size, (2) increasing market share, (3) realizing leverage effect through efficient capital management, (4) enhancing the advertising effectiveness, and (5) improving the efficiency of resource management.