Cola wars: What's your soft drink of choice?
Soft drink sales have fallen for six straight years as consumers switched to healthier alternatives such as juices, and cut back on spending in the recession. The two rivals have moved into bottled water, fruit juices, energy drinks, and sports drinks to try to maintain market share. Both companies saw decreased sales, but Pepsi had the greater loss. Overall, Coke product sales were down 0.5 percent while Pepsi saw a 2.6 percent decline.
Source: CBC News, March 18, 2011
Describe the strategies in the advertising and product development game that Coca-Cola and PepsiCo play.
Why would you expect these strategies to not include cutting price?
The strategies in the advertising and R&D game that Coke and Pepsi play are _______.
A.
expand their bottling facilities or don't expand their bottling facilities
B.
increase salaries of advertising executives or decrease salaries of advertising executives
C.
advertise and develop new products or don't advertise and develop new products
D.
increase middle management or decrease middle management
The strategies that Coke and Pepsi are implementing do not include cutting price because ______.
A.
soft drink firms never cut prices
B.
it could decrease demand for one firm
C.
it is against the law
D.
it would bring negative publicity
E.
cutting price can eliminate economic profit if the price falls to the competitive level
1. Correct option: Advertise or develop new products
Reason: Since consumers are shifting their demand to newer products or healthier alternatives, it is in the best interest of the cola companies to develop new healthier products and advertise them to maintain their brand image
2. Correct option: Cutting price can eliminate economic profit if the price falls to the competitive level
Reason: Reducing prices would eliminate economic profits being made by these firms, as the demand is already falling
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