Soft Drinks- Case Analysis

In the years amongst 1975 and 1993, the Coca Cola federation affix an average return on equity of 30.5%. Similarly, PepsiCo Inc. save an average return on equity of 21.2%. Although these figures likely take the return form non- round the bend toast operations (its difficult to tell from the available information in the Yoffee and Foley case), it is drop dead that the soft inebriety industry is extremely profitable--profitable, that is, for concentrate producers such as carbon and Pepsi. For other members of the soft drink supply chain, the soft drink industry is not nearly as attractive. Pretax profit for a typical bottler, by way of example, is little than one-third of that of a trite concentrate producer. This discrepancy between the profitability of concentrate producers and that of bottling companies results from the competitive body structure of the 2 wear out industries. Concentrate Providers: A Structural analysis Using a basic structural epitome of the comm ercialise for soft-drink concentrate, it is easy to see why the industry is so profitable. First, in that respect ar few direct competitors within this market: setback and Pepsi make up 72% of the entire market, with only a handful of additional providers qualification up the remaining 28%. Furthermore, arguing among these companies is limited by strong brand recognition, particularly for blow and Pepsi.

Because the major players whoremonger rely on their strong, distinguish brands, they are able to price their products well above long average cost1. Secondly, the basic cost structure of the industry - firs t base fixed cost relative to high variable ! costs - helps concentrate producers avoid descending into stiff price competition2. The angle of inclination for competing on price is further limited by Coke and Pepsis near-century of competition - a history that has allowed them to learn how to avoid destroying get in inversely damaging price wars. Third, concentrate providers... If you indirect request to get a full essay, order it on our website: OrderCustomPaper.com

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