1. Chapter 15 The Global Soft Drink Industry: A Case Study in Managerial Economics

2. Outline Case study: food and beverage Industry background
Industry analysis
Managerial decision making in action
This is the case study from the chapter

3. 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

4. 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?

5. 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

6. 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

7. Economic Overview of the Industry
New Products: Energy Drinks
Health concerns
Differentiation
Ingredients
Packaging

8. 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?

9. 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?

10. 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?

11. Managerial Decision Making in Action
SWOT analysis
What are the threats to Global Foods?
Entrenched competition?
Potential new entrants?
Higher costs?
Others?

12. Managerial Decision Making in Action
Goal:
Profitable growth
Strategies and tactics:
Differentiation strategy?
How can Porter’s model be used?

13. 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.