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Coca-Cola Georgia-Based Coca-Cola Is Reentering the Indian Market

question 44

Multiple Choice

Coca-Cola Georgia-based Coca-Cola is reentering the Indian market. Coke is attracted to India's market because India's per capita consumption of carbonated beverages is less than half of Pakistan and about five percent of China's, yet India has the fastest-growing demand for consumer products in the world. Coke's first attempt to enter the Indian market over a decade ago was plagued by gross mismanagement, and the company lost 20 billion Indian rupies. In that first attempt, Coke purchased Thumbs Up, the leading India-based carbonated soft drink. The company hoped to replace Thumbs Up with Coke, while maintaining the Thumbs Up distribution strategy. For its return to the market, Coke built five plants, cut costly staff, revamped transport, and reduced the size and weight of bottles in order to increase a truck's carrying capacity. It also increased its number of distributors and dumped a global advertising campaign that proved irrelevant to the Indian market. Refer to Coca-Cola. One way Coca-Cola increased distribution of Coke was to enter into a ____ with a refrigerator manufacturer. In order to ensure that retailers had the proper refrigeration units, Coke provided the financing needed for the retailers to purchase them, and the refrigeration manufacturer gave deep price discounts.

Definitions:

Shutdown Point

The shutdown point is the level of output and price at which a business covers its variable costs; operating below this point would lead the firm to losses greater than its fixed costs.

AVC (Average Variable Cost)

The cost of labor, materials, and other variable inputs divided by the quantity of output produced.

MC (Marginal Cost)

The increase in total production cost that comes from making or producing one additional unit of a product or service, a concept critical in economic theory for determining the optimal production level.

Shutdown Point

The level of production and price where a firm's total revenue just covers its variable costs, below which it would cease operations.