Pepsi vs. Coke

As we analyze Figure 2, we have determined from a costs perspective that basing production manager’s bonuses off of a percentage of sales is unethical because he is not being based off of his “performance.” For starters, in 2008, CBI expanded and began producing Gera beer, which unlike other exported beer, does not collect an eight dollar deposit fee. Next, from 2008 to 2009, CBI was hit with a $6,128,000 bottling

Analyze Scharffen Berger’s industry, competitive landscape and pricing power within its industry - using Porters 5 Forces.

product and starting a price war with competitors that would damage margins. In addition, a low priced

This is a financial comparison between Pepsi and Coca Cola in terms of company liquidity, solvency, asset management, profitability, and valuation between the years 2008 and 2009 respectively.

Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different?

This attractiveness derives from the relative low threat of new entrants, low supplier and buyer

price point than the big 3, the company saw this as the perfect strategy to penetrate the saturated

Huge capital costs to set up an efficient plant for the bottlers while the capital costs in concentrate business are minimal

Backward integration is a type of vertical integration in which a company takes control over its suppliers. It is a form of acquisition of the intermediary players involved in supplying the raw materials used in the production process of the firm. Raw materials, intermediate manufacturing and assembly are controlled by the firm whereas distribution to the end customer is done by a third party company. In this way, company increases production efficiency and gains a competitive advantage by lowering its production cost.

Entrants erode the market and rarely grow it enough to the incumbent’s advantage. New entrants have an impact on the industry business but at a moderate level. This is mainly because new firms will find it difficult to compete against the incumbents’ strong brand, like Starbucks and McDonalds, and because the market is saturated. However, the costs of entry are relatively low. Most of the raw materials are cheap and the distribution chain is not complicated. This makes it easy for new companies to enter the market. Also, established companies might leverage their brands as they enter the industry to compete against the incumbents.

Since EVA is positive for both proposals, the division 's current EVA would improve by $542,000 and therefore both proposals would be accepted. The decision is also in the best interest of the company.

Compare the economics of the concentrate business to the bottling business. Why is the profitability so different?

Although financial information is not available for all competitors, the top 3 competitors show a discrepancy in production efficiency. This would lead the analysis to support the existence of other significant factors influencing the value chain outside of production. These could be the cost of supplies, distribution and marketing.

The Big 3 had high advertising to sales ratios of 10-14%, also deterring entry, because average first year advertising cost for a new brand was over $20 million. We can conclude that total costs related to producing private label products are lower than new branded products. Private label products can offer greater margins to grocers and still sell at lower prices. They have a considerable competitive cost advantage over the new branded products.

The threat of substitutes is low. Buyers are unlikely to substitute Corning’s product because few substitutes exist. Additionally, switching costs would also be high for business buyers to substitute Corning’s with another manufacturer’s