Managerial economics economic tools for todays decision makers 7th edtion by keat young and erfle chapter 15

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 Copyright ©2014 Pearson Education, Inc All rights reserved 15-2 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 Copyright ©2014 Pearson Education, Inc All rights reserved 15-3 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? Copyright ©2014 Pearson Education, Inc All rights reserved 15-4 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 Copyright ©2014 Pearson Education, Inc All rights reserved 15-5 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 Copyright ©2014 Pearson Education, Inc All rights reserved 15-6 Economic Overview of the Industry • New Products: Energy Drinks – Health concerns – Differentiation • Ingredients • Packaging Copyright ©2014 Pearson Education, Inc All rights reserved 15-7 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? Copyright ©2014 Pearson Education, Inc All rights reserved 15-8 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? Copyright ©2014 Pearson Education, Inc All rights reserved 15-9 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? Copyright ©2014 Pearson Education, Inc All rights reserved 15-10 Managerial Decision Making in Action • SWOT analysis • What are the threats to Global Foods? – – – – Entrenched competition? Potential new entrants? Higher costs? Others? Copyright ©2014 Pearson Education, Inc All rights reserved 15-11 Managerial Decision Making in Action • Goal: • Profitable growth • Strategies and tactics: – Differentiation strategy? – How can Porter’s model be used? Copyright ©2014 Pearson Education, Inc All rights reserved 15-12 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 Copyright ©2014 Pearson Education, Inc All rights reserved 15-13 ... Inc All rights reserved 15- 12 Summary • The principles of managerial economics are integral to the decision making process within business • Managerial economics provides information on consumers,... Pearson Education, Inc All rights reserved 15- 9 Managerial Decision Making in Action • SWOT analysis • What are the opportunities for Global Foods? – – – – Room for new entrants in this market? Growing... quantities, competition and business strategy • A major contribution of managerial economics is the estimation of risk Copyright ©2014 Pearson Education, Inc All rights reserved 15- 13