The Global Soft Drink Industry: A Case Study in Managerial Economics

Chapter 15

The Global Soft Drink Industry:

A Case Study in Managerial Economics

Copyright ©2014 Pearson Education, Inc. All rights reserved. 15-2

Outline

• Case study: food and beverage

• Industry background

• Industry analysis

• Managerial decision making in action


Learning Objectives

• Describe the market structure of the food and beverage industry

• Cite the main trends affecting this industry

• Describe the issues facing the industry

• Explain how strategy should be incorporated for Global Foods


Introduction

• Review (from Chapter 1) questions that managers must answer:

– What are the economic conditions in our particular market?

– Should our firm be in this business?– If so, at what price and output levels?– How can we maintain a competitive advantage

over other firms?– What are the risks involved?


Economic Overview of the Industry

Factors and Trends Influencing Demand

– Shift in Demographics: age by demographic group

– Integration of Markets: globalization– Going Back to Basics: Health, wellness,

convenience, and premium status– Demand from Emerging Markets



Factors and Trends Influencing Supply

– Mass Customization– Private Label– Rising Cost of Raw Materials– Asset--Light Business Model--businesses must

adapt faster



• New Products: Energy Drinks

– Health concerns– Differentiation

• Ingredients• Packaging


Managerial Decision Making in Action

• SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)

• What are the strengths of Global Foods?– Market share position?– Brand awareness?– Potential profit margins?– Other?



• SWOT analysis

• What are the weaknesses of Global Foods?– Demographic changes? – Brand recognition?– Declining gross profit margin due to the rise in

input costs.– Others?



• SWOT analysis

• What are the opportunities for Global Foods?– Room for new entrants in this market?– Growing consumer interest in wellness?– International demand?– Others?



• SWOT analysis

• What are the threats to Global Foods?– Entrenched competition?– Potential new entrants?– Higher costs?– Others?



• Goal:

• Profitable growth

• Strategies and tactics:– Differentiation strategy?– How can Porter’s model be used?


Summary

• The principles of managerial economics are integral to the decision making process within business.

• Managerial economics provides information on consumers, prices, costs, quantities, competition and business strategy.

• A major contribution of managerial economics is the estimation of risk.

The Global Soft Drink Industry: A Case Study in Managerial Economics

Business

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