Business Decision Making
Pepsi
In 1931 things at the Pepsi-Cola company
were bad.
The President of Pepsi Charles Guth
attempted to sell Pepsi to Coca-Cola but
Coke thought that the company was in too
bad a position to buy.
Pepsi and Coke both sold their drinks in 6
ounce bottles
Guth bought a large supply of 12 oz
bottles which were recycled
Pepsi started pricing the 12 ounce bottles
at 10 cents, twice the price of the 6 ounce
bottles.
This did not boost sales so Guth decided to
use a new strategy.
To sell the 12 ounce bottles at the same
price of the 6 ounce bottles.
Strategy was used in the middle of the
depression so sales shot up
1936 profit was 2.1 million
1938 profit was 4.2 million
Deciding to try and increase profits was a
good one but merely deciding to do this
does not make it happen.
Management does not control profitability
but it does control marketing, pricing,
production etc.
The link between what management does
control and the firms profitability is
mediated by a host of economic
relationships.
Law of Demand
Elasticity of Demand
Strategic behaviour of Coke
Was coke better off to make a
counter move or not
What factors influence the
objectives of the Firm
Size of the firm or market share.
Difference between PC and
Monopoly
In 1975, the average worker in the
British motorcycle industry produced
14 bikes.
The average worker at Honda
produced 106 bikes and 21 cars.
Monopolies Commission prevented
Boots or Beechams from taking over
Glaxo.
Approx 20 years later Glaxo is worth
more than the 2 companies
combined with Sales *3 and Profits *7
Business Strategists offer advice on
what makes companies successful.
Their advice is drawn from many
disciplines but the most fundamental
one is Economics
Economics helps to identify what the
UK motorcycle industry did wrong
and what Honda did right
Why do businesses have different
profit levels
1. Markets in which firms...