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Costs to Coca-Cola of owning world's most valuable..?
I've got a question in my Economics book:
What are the costs to Coca-Cola, the company, of owning the world's most valuable branded product?
(I know it's not currently the world's most valuable brand but this question is referring to 2004/05 when it was).
Can someone help out with this? I think it would be something to do with having built its brand and hence dependency on one product, not sure how to word it..
My book doesn't give answers, and I need something to start from.
- cactusgeneLv 77 years agoFavorite Answer
The biggest cost is probably the advertizing required to defend and maintain its brand awareness. Other costs that affect its profitability are that the exchange rate of currency in foreign markets is deterioration as against the dollar,
On the production side, the Coca-Cola Company’s profitability can be affected both directly and indirectly by the costs of various production inputs. KO itself is responsible for purchasing the raw materials used to make its concentrates and syrups. Variations in the prices for these goods can affect the company’s total cost of production as well as its profit margins. Changes in the production costs of bottlers can also impact KO’s profitability, though in a more indirect way. If the raw materials necessary for bottling become more expensive, the bottler may be forced to drastically raise prices to compensate. Such a price increase would likely hurt KO and provide a possible incentive for consumers to switch to other companies’ beverages. Aluminum, corn, and PET resin are three examples of input costs that could have significant bearing on the Coca-Cola Company’s profit margins.