Managerial Economics 13th Edition by James McGuigan,Charles Moyer,Frederick Harris

Exercise 7

The profitability of the leading cola syrup manufacturers PepsiCo and Coca-Cola and of the bottlers in the cola business is very different. PepsiCo and Coca-Cola enjoy an 81 percent operating profit as a percentage of sales; bottlers experience only a 15 percent operating profit as a percentage of sales. Perform a Porter's Five Forces analysis that explains why one type of business is potentially so profitable relative to the other.