HBS Case 9-702-442 MSB30 June 2008 COLA WARS CONTINUE: COKE & PEPSI IN THE twenty-first CENTURY. Houssem Ghorbel Page 1 of 4 HBS Case 9-702-442 MSB30 June 2008 1- Why is the informal fuddle exertion so profitable? Both dressed ore producers (CP) and bottlers are profitable. These two parts of the exertion are exceedingly interdependent, share-out costs in procurement, production, tradeing and distribution. Many of their functions overlap; for instance, motorcycle do some bottling, and bottlers conduct many promotional activities. They in addition deal with similar suppliers and buyers. Entry into the industry would incriminate growth operations in either or both disciplines. In 2000, CPs earned 35% pre-tax profits on their sales, mend bottlers earned 9% profits on their `sales, for a integrality industry profitability of 12% (Exhibit 5). This industry as a whole generates positive economic profits. In addition, the producers of the basic c ommodities for the one C production (like Caramel Colouring, flavour, caffeine or additives, sugar, packaging) have no power over the pricing hence the suppliers in this industry are weak.
Revenues are extremely concentrated in this industry, with bamboozle and Pepsi, together with their associated bottlers, controlling between 70% & 90% of the US retail outlets in 2000 (Exhibit 7). In fact, one could characterize the balmy drink mart as an oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits. To be sure, there was tough competition between Coke and Pepsi for market share, and this occasionally ham pered profitability. For example, price wars! resulted in weak brand devotion and eroded margins for both companies in the 1980s. 2Compare the economics of the concentrate art to the bottling business: Why is the profitability so different? dressed ore business is highly profitable compared to the bottling business. The reasons for this are: • borrow: A typical Concentrate manufacturing...If you want to get a full essay, order it on our website: BestEssayCheap.com
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