Compare The Economics Of The Concentrate

The soft drink industry has been very profitable because the company does not have to continuously spend on research and development and need not go in heavy product updations. The formula remains the same this way it is able to control its costs. The market is dominated by a very few big firms and the suppliers and buyers have more power over the industry and the profitability further has increased. The competitors have concentrated more on defying each other though promotions and advertising and hence have not touched the costs. The entry to this industry by small firms is not possible and the big firms have so munch internal and external economies to scale that the high profitability is because of the small number of firms and the barriers to market entry. References http//home.kku.ac.th/petmas/Case_analysis_Coke_Pepsi2.pdf 2. Compare the economics of the concentrate business to that of the bottling business. Why is the profitability so different The concentrate economies are much higher than that of the bottling business. The concentrate suppliers are commodity producers who have rigidity in entry barriers. Their exit costs are very low and their fixed asset base is also low. They do not require high installation capacities hence