Chapter 15

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

• Case study: food and beverage

• Industry background

• Industry analysis

• Managerial decision making in action

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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

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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?

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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

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Economic Overview
of the Industry

Factors and Trends Influencing Supply

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

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Economic Overview
of the Industry

• New Products: Energy Drinks

– Health concerns
– Differentiation
• Ingredients
• Packaging

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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?

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Managerial Decision Making
in Action

• 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?

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Managerial Decision Making
in Action

• SWOT analysis

• What are the opportunities for Global Foods?

– Room for new entrants in this market?
– Growing consumer interest in wellness?
– International demand?
– Others?

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Managerial Decision Making
in Action

• SWOT analysis

• What are the threats to Global Foods?

– Entrenched competition?
– Potential new entrants?
– Higher costs?
– Others?

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Managerial Decision Making
in Action

• Goal:

• Profitable growth

• Strategies and tactics:

– Differentiation strategy?
– How can Porter’s model be used?

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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.

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