Importance of Intercultural Communication to Ist - 7702 Words

Chapter 4 - The Deep Structure of Culture Introduction Our interpretation of reality determines how we define the world and how we interact in that world. We believe the source of how a culture views the world can be found in its deep structure. It is this deep structure that unifies and makes each culture unique. Meaning of the Deep Structure of Culture Although many intercultural communication problems occur on the interpersonal level, most serious confrontations and misunderstandings are as a result of cultural differences that go to the basic core of what it means to be a member of one culture or another. Cultural collisions are evident worldwide e.g. ethnic violence in Africa, clashes between Hindus and Muslims in both India†¦show more content†¦Whether it is the Eightfold Path, the Ten Commandments, or the Five Pillars of Islam, the messages of these writings survive. Each generation is given the wisdom, traditions and customs that make a culture unique. However, one needs to be aware of the fact that often deep-seated hatreds that turn one culture against another also endure. iii) Deep Structure Institutions and their Messages are Deeply Felt The content generated by these institutions, and the institutions themselves, arouse deep and emotional feelings. Think for a moment about the violent reactions that can be produced by taking Gods name in vain. Countries and religious causes have been able to send young men to war, and politicians have attempted to win elections by arousing people to the importance of God, country, and family. Regardless of a persons culture, the deep structure of that culture is something people feel intensely about. iv) Deep Structure Institutions Supply Much of Our Identity We are not born with an identity and of the most important responsibilities of any culture is to assist its member in forming their identities. Through countless interactions we discover who we are. We learn our identities through socialization. Charon. Remember that socialization takes place in the family. As you come in contact with other people, you begin to develop a variety of identities. Everyone hasShow MoreRelatedThe Literacy Level Of The Learner2090 Words   |  9 Pages 1. Classroom talk Learner talk in the target language can only flourish if teachers themselves are prepared to use and maintain the TL the MFL classroom as the main communication language. But there are many other factors that contributes to learner talk in the TL or the lack of it. One prominent factor is the literacy level of the learner in his own mother language. There might be a lack of grammatical knowledge as well as problems with spelling, reading and writing. If the learner has not yetRead MoreMiscommunication: Phonology and Message5776 Words   |  24 PagesInhalt 1. Introduction 1 2. Phonetics and phonology – the transmission of a message 2 2.1. A communication model 2 2.2. Phonological elements of communication 3 2.3. Prosodic elements of communication 4 3. Miscommunication – Problems in the auditory channel 6 3.1. Hearing and Listening 6 3.2. Channel- based and interactional- related miscommunication 8 3.3. Sender and receiver related miscommunication 8 3.3.1 Prosodic problems 9 3.3.2 Phonological problems 10 4. Analysis of miscommunicationRead MoreAbstract: Culture6941 Words   |  28 PagesABSTRACT Culture is the background of every human communication. Cultural embedding as a feature of texts in general is also valid in technical and scientific texts. As translation by humans is based on understanding, the translator needs knowledge in order to detect cultural aspects. This is possible by putting down implicit cultural references to certain structures on the text level. Cultural elements appear in the text on all levels – from the concept and form of words, to the sentence and textRead MoreManaging the International Value Chain in the Automotive Industry60457 Words   |  242 Pagestheopportunitiesofferedbytheglobaleconomic system.However,thecompetitivepositionofan internationallyactivecompanyisnotdetermined MartinSpilker Program director Thechangesthathavetakenplaceinoperations, production,communicationsanddecisionmakingareparticularlyevidentintheautomotive industry.Thereisnosuchthingasaâ€Å"worldcar†; particularlyinthemassmarket,manufacturers needtoadapttheirproductstosuiteachindividualcountry.Thisisnotanewinsight

Things Fall Apart By Chinua Achebe And William Shakespeare...

Roughly based on personal encounters Joseph Conrad uses Heart of Darkness to comment on the negative aspects of colonialism. Colonialism by definition is, â€Å"the policy and practice of a power in extending control over weaker peoples or areas.† In the novel Things Fall Apart by Chinua Achebe and William Shakespeare’s play The Tempest, colonialism plays a significant role in the break down of humans. The conquerors in both stories disregard the natives believing that they are working towards the greater good of civilization. Conrad’s quote plays a significant roles in these stories by highlighting the negative effects of colonialism and the use of religion to claim foreign lands. In Conrad’s quote the description of the conquest colonialism is summed up by, â€Å"taking it away from those who have a different complexion or slightly flatter noses than ourselves.† The novel Things Fall Apart embodies this definition of colonialism. The Igbo people in Africa are an established tribe with customs, laws, and religion. Colonialists rationalize taking over other lands with the idea that they are helping to better these people. The Igbo culture proves to be very structured and we can see examples of this through the respect of the elders and the following of ancient traditions. These Africans are not savage or primitive in spite of the common portrayal by Europeans. The colonialist came to their land insisting that they need a leader, religion, and government. When missionaries arrive in

Human Resource Practices for Uber- myassignmenthelp.com

Question: Discuss about theHuman Resource Practices for Uber. Answer: Introduction On 30th June 2017, the Business Insider Australia reported that Uber was settling unfair dismissal cases. Also, The Australian Financial Review (AFR) reported that Uber does not recognize drivers as employees but contractors.The Rideshare Drivers Association of Australia filed an unfair dismissal case on behalf of a driver who was deactivated. After negotiations, Uber Australia settled for an undisclosed sum. Kamal Farouque, the Maurice Blackburn principal, told Fairfax media that rideshare Uber was compensating employees to avoid their relationship with drivers as contractors being tested by the authority (Tan, 2015). Another driver advocacy group, Rideshares Drivers United, initiated an investigation to find out whether the driver's conditions meet the federal industrial relations laws. The group then claimed that the situation was "a classic sham contracting arrangement." From the news stories, a number of human resource issues show up in the rideshare company. Key Human Resource Issues in Uber Risk employee retention The hiring of employees for an organization is not the only challenge affecting companies but retaining them is more problematic (Mita et al., 2014). Retention of workers is vital to minimize employee turnover. Uber experiences challenges of maintaining provisional workers. Contingent workers include work-at-home employees, part-time and temporary contract. Keeping such employees in the company is a challenge because they are less attached to the company (Gandel, 2015). So it, it a major duty of HRM to make such employees feel that they are a part of the company to retain them for a long term. There are unfair treatments of employees in Uber which kills their morale and has resulted in employee turnover. The dismissal of drivers by the Uber Company Australia not only raise the eyebrows of the trade unions and legal federations but also risk the potential of the organization to retain its employees and the possibility of getting new ones (Kossivi, Xu Kalgora, 2016).Therefore, there i s need to develop proper human resource management strategy for dealing with employees who are found to have committed illegalities rather than dismissing them dishonorably. Moreover, the growing demands for experts employees is a great threat to Uber. Workers with inordinate proficient and technical knowledge are greatly needed in the job market as such employees possess the ability to keep their organization ahead in the race (Hassan, 2016). Such employees are precious assets for any company and HRM should focus on maintaining them. To realize this, the organization is obligated to create a favorable working environment to keep such valuable workers (Mita, Aarti Ravneeta, 2014). Basing on the news story of Uber, the incident of dismissing workers may increase the risk of losing employees (Allen Shanock, 2013). This is evident in an incident of an employee, Ms. Susan Fowler who worked as an engineer for the organization left the rideshare company. Ineffective Conflict Resolution Strategies Uber lack effective conflict resolution measures. Uber has faced many conflicts with their drivers. The company ended up deactivating some of their motorists without a right of reply leading to piling of cases of unfair dismissal against the organization. To avoid conflicts with the drivers, the organization ought to have clarified to them through job analysis and description process (Johansen, 2012). Therefore, Uber can effectively manage its employees through clarifying performance standards required. For instance, Uber should have elaborate requirements regarding its drivers as this will ensure that only those who meet the needs are hired so that conflicts concerning performance are minimized. Again, Uber has failed to come up with a means of setting up performance standards for its motorists (Gandel, 2015) such that anyone who applies can join and register as a driver something that is risky to the company. Uber should also clearly establish employees duties and responsibilities. Before workers are considered for the job, they must be informed of what they are expected to do. As an employer, uber ought to educate their drivers on what they expect of them. Misunderstanding can also be established by developing appropriate relationships with the employees to facilitate transparency in all undertakings (Nikpour, 2017). Uber should lay down rules and regulations regarding the conduct of their drivers and their relationships with both the company and the clients. Ideally, being accountable on any undertakings will also reduce conflicts which may be caused by employees. As a company, there should be well-formulated strategies of holding the person responsible for accounting for the mess. This will ensure strict adherence to rules and regulations and hence reduce cases of conflicts. Furthermore, job analysis and description will enhance legal compliance and classification whether individuals hired qualifies for the position. Since Uber Technologies Company was secretly compensating the drivers who had filed unfair dismissal cases, it implies that the organization did not follow the job description process promptly. By so doing, they were trying to avoid legal actions against them which reveal there is no apparent procedure put forth to handle such problems. Uber Australia does not stick to compliance requirements Compliance with federal and state labor laws is vital for any organization looking forward to success.The company is fully responsible for ensuring duty awareness regarding safety, working hours, wages and employee benefits and conduct (Nikpour, 2017). It is an obligation of the management team of an organization to fix the compliance issues and ensure that they are fully implemented (Anwar, Shahzad Ijaz-ul-Rehman, 2012).The company is obliged to demonstrate that the Equal Employment Opportunity (EEO) requirements are met and ensure that accurate and up-to-date information is given to the employees. Uber failed to stick to the compliance requirements when the rideshare giant deactivated some of their drivers without notice. Poor Corporate culture in the organization Corporate culture is the beliefs and behaviors that determine the manner in which employees and management of a particular company interact and how they deal with outside business transactions. It can be depicted through dressing code, working hours, the setup of the business and the character of the people hired by the company. According to Buller McEvoy (2012), the corporate culture of uber Australia is below standard as a result of how the organization interacts with its employees. This premise is evidenced by the incidence when the rideshare company dismissed some its drivers. Also, a former employee, Ms. Susan Fowler reported that she was sexually harassed by one of the managers of the organization while she was working as an engineer (Johansen, 2012). Uber can, therefore, enhance its corporate culture through the following ways: Create a culture of collaboration. Managers are at their pre-eminent when the companys culture embraces collaboration. Motivating individual achievement is essential but not enough (Solkhe Chaudhary, 2011). The culture of collaboration will enable Uber to have effective leaders to catapult the organization towards success. Also, Uber should provide training to employees to develop their communication skills. We may expect our leaders to be good communicators, but too often it's not the case. Communication styles vary widely; what may work for one organization may not work for another; therefore, this is appropriate in developing a corporate culture. Uber is supposed to set the bar high for communications skills, provide management training to its employees (Bidisha Mukulesh, 2013). Consequently, good communicators enhance formation of effective teams and trust; nonetheless, poor communicators create uncertainty in the organization. Conclusion Uber Australia has had its performance and relations with employees under scrutiny. The company which has over 60,000 drivers in Australia faces many unfair dismissal cases from drivers who were deactivated - barring them from accessing the companys application. Although Uber does not consider drivers as employees, it went on settle the drivers whose cases were filed by The Rideshare Drivers Association of Australia (RDAA).The argument of drivers as reported to the Fair Work Ombudsman was that the ride shares company was considering them as self-employed or rather contractors yet the organization controlled everything. They further complained that the drivers earned below the minimum wage set by the contractors law. The news story raises important human resource issues that include but not limited to risking employee retention, inappropriate conflict resolution strategies, compliance requirements and poor corporate culture.Uber Australia has failed to address these challenges resulti ng to its raw with the employees. Recommendations Following the news stories that have been going viral on the business media, it is recommended that Uber Technologies Company Australia ought to: Adopt legal policies of dismissing their drivers whenever they suspect or confirm them to have committed an offense. This strategy can be implemented through complying with legal imperatives regarding labor while dismissing unproductive employees. Device proper and effective strategies for resolving conflicts between the company and its employees. Uber can pursue this through establishing a relevant body to be addressing any issue that arises between workers. It can further encourage its employees to embrace peaceful conflict management approaches such as mediation and others. Embrace effective and satisfactory means of communication in resolving issues with employees. This strategy can be implemented through establishing effective and clear communication channels. Implement laid down rules and regulations to comply with the requirements of the labor and industrial laws. Uber can achieve this by complying with international regulations regarding employment. Doing this will ostensibly help to avert potential conflicts with workers. Create a culture of collaboration between the management and the employees and will be implemented through soliciting for their opinion before formulating various decisions. References Allen, D.G. Shanock, L.R. (2013) Perceived Organizational Support and Embeddedness as Key Mechanisms Connecting Socialization Tactics to Commitment and Turnover among New Employees. Journal of Organizational Behavior, 34, pp. 350-369. Anwar, C. M., Shahzad, K., Ijaz-ul-Rehman, Q. (2012). Managing conflicts through personality management. African Journal of Business Management, 6(10), pp. 3725. Bidisha, L. D Mukulesh, B. (2013) Employee Retention: A Review of Literature. Journal of Business and Management, 14, pp. 8-16. Buller, P., McEvoy, G. (2012). Strategy, Human Resource Management, and Performance:Sharpening Line of Sight. Human Resource Management Review, 22, pp. 43-56 Gandel, S. (2015). Here's What It Would Cost Uber to Pay Its Drivers as Employees. Fortune.Retrieved Sep. 25, 2017, from https://fortune.com/2015/09/17/ubernomics/ Hassan, S. (2016). Impact of HRM Practices on Employees Performance. International Journal of Academic Research in Accounting, Finance and Management Sciences, 6(1), pp. 15-22. Johansen, M. L. (2012). Keeping the peace: Conflict management strategies for nursemanagers. Nursing Management, 43(2), pp. 50-54. Kossivi, B., Xu, M., Kalgora, B. (2016). Study on determining factors of employee retention. Open Journal of Social Sciences, 4(05), pp. 261. Mita, M., Aarti K. Ravneeta, D. (2014) Study on Employee Retention and Commitment. International Journal of Advance Research in Computer Science and Management Studies, 2, pp. 154-164. Nikpour, A. (2017). The impact of organizational culture on organizational performance: Themediating role of employee's organizational commitment. International Journal of Organizational Leadership, 6(1), pp. 65. Solkhe, A., Chaudhary, N. (2011) HRD climate and job satisfaction: An empirical investigation. International Journal of Computing and Business Research, 2, pp. 1-20. Tan, B. (2015). The Rise and Rise Of Uber In Australia. Retrieved on 25 sep. 2017fromhttps://www.gizmodo.com.au/2015/01/the-rise-and-rise-of-uber-in-australia/

Why Is the Soft Drink Industry so Profitable Essay Example

Why Is the Soft Drink Industry so Profitable? Paper An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits. To be sure, there was tough competition between Coke and Pepsi for market share, and this occasionally hampered profitability. For example, price wars resulted in weak brand loyalty and eroded margins for both companies in the 1980s. We will write a custom essay sample on Why Is the Soft Drink Industry so Profitable? specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Why Is the Soft Drink Industry so Profitable? specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Why Is the Soft Drink Industry so Profitable? specifically for you FOR ONLY $16.38 $13.9/page Hire Writer The Pepsi Challenge, meanwhile, affected market share without hampering per case profitability, as Pepsi was able to compete on attributes other than price. Substitutes: Through the early 1960s, soft drinks were synonymous with â€Å"colas† in the mind of consumers. Over time, however, other beverages, from bottled water to teas, became more popular, especially in the 1980s and 1990s. Coke and Pepsi responded by expanding their offerings, through alliances (e. g. Coke and Nestea), acquisitions (e. g. Coke and Minute Maid), and internal product innovation (e. g. Pepsi creating Orange Slice), capturing the value of increasingly popular substitutes internally. Proliferation in the number of brands did threaten the profitability of bottlers through 1986, as they more frequent line set-ups, increased capital investment, and development of special management skills for more complex manufacturing operations and distribution. Bottlers were able to overcome these operational challenges through consolidation to achieve economies of scale. Overall, because of the CPs efforts in diversification, however, substitutes became less of a threat. Power of Suppliers: The inputs for Coke and Pepsi’s products were primarily sugar and packaging. Sugar could be purchased from many sources on the open market, and if sugar became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s. So suppliers of nutritive sweeteners did not have much bargaining power against Coke, Pepsi, or their bottlers. NutraSweet, meanwhile, had recently come off patent in 1992, and the soft drink industry gained another supplier, Holland Sweetener, which reduced Searle’s bargaining power and lowering the price of aspartame. With an abundant supply of inexpensive aluminum in the early 1990s and several can companies competing for contracts with bottlers, can suppliers had very little supplier power. Furthermore, Coke and Pepsi effectively further reduced the supplier of can makers by negotiating on behalf of their bottlers, thereby reducing the number of major contracts available to two. With more than two companies vying for these contracts, Coke and Pepsi were able to negotiate extremely favorable agreements. In the plastic bottle business, again there were more suppliers than major contracts, so direct negotiation by the CPs was again effective at reducing supplier power. Power of buyers: The soft drink industry sold to consumers through five principal channels: food stores, convenience and gas, fountain, vending, and mass merchandisers (primary part of â€Å"Other† in â€Å"Cola Wars†¦Ã¢â‚¬  case). Supermarkets, the principal customer for soft drink makers, were a highly fragmented industry. The stores counted on soft drinks to generate consumer traffic, so they needed Coke and Pepsi products. But due to their tremendous degree of fragmentation (the biggest chain made up 6% of food retail sales, and the largest chains controlled up to 25% of a region), these stores did not have much bargaining power. Their only power was control over premium shelf space, which could be allocated to Coke or Pepsi products. This power did give them some control over soft drink profitability. Furthermore, consumers expected to pay less through this channel, so prices were lower, resulting in somewhat lower profitability. National mass merchandising chains such as Wal-Mart, on the other hand, had much more bargaining power. While these stores did carry both Coke and Pepsi products, they could negotiate more effectively due to their scale and the magnitude of their contracts. For this reason, the mass merchandiser channel was relatively less profitable for soft drink makers. The least profitable channel for soft drinks, however, was fountain sales. Profitability at these locations was so abysmal for Coke and Pepsi that they considered this channel â€Å"paid sampling. † This was because buyers at major fast food chains only needed to stock the products of one manufacturer, so they could negotiate for optimal pricing. Coke and Pepsi found these channels important, however, as an avenue to build brand recognition and loyalty, so they invested in the fountain equipment and cups that were used to serve their products at these outlets. As a result, while Coke and Pepsi gained only 5% margins, fast food chains made 75% gross margin on fountain drinks. Vending, meanwhile, was the most profitable channel for the soft drink industry. Essentially there were no buyers to bargain with at these locations, where Coke and Pepsi bottlers could sell directly to consumers through machines owned by bottlers. Property owners were paid a sales commission on Coke and Pepsi products sold through machines on their property, so their incentives were properly aligned with those of the soft drink makers, and prices remained high. The customer in this case was the consumer, who was generally limited on thirst quenching alternatives. The final channel to consider is convenience stores and gas stations. If Mobil or Seven-Eleven were to negotiate on behalf of its stations, it would be able to exert significant buyer power in transactions with 3 Coke and Pepsi. Apparently, though, this was not the nature of the relationship between soft drink producers and this channel, where bottlers’ profits were relatively high, at $0. 40 per case, in 1993. With this high profitability, it seems likely that Coke and Pepsi bottlers negotiated directly with convenience store and gas station owners. So the only buyers with dominant power were fast food outlets. Although these outlets captured most of the soft drink profitability in their channel, they accounted for less than 20% of total soft drink sales. Through other markets, however, the industry enjoyed substantial profitability because of limited buyer power. Barriers to Entry: It would be nearly impossible for either a new CP or a new bottler to enter the industry. New CPs would need to overcome the tremendous marketing muscle and market presence of Coke, Pepsi, and a few others, who had established brand names that were as much as a century old. Through their DSD practices, these companies had intimate relationships with their retail channels and would be able to defend their positions effectively through discounting or other tactics. So, although the CP industry is not very capital intensive, other barriers would prevent entry. Entering bottling, meanwhile, would require substantial capital investment, which would deter entry. Further complicating entry into this market, existing bottlers had exclusive territories in which to distribute their products. Regulatory approval of intrabrand exclusive territories, via the Soft Drink Interbrand Competition Act of 1980, ratified this strategy, making it impossible for new bottlers to get started in any region where an existing bottler operated, which included every significant market in the US. In conclusion, an industry analysis by Porter’s Five Forces reveals that the soft drink industry in 1994 was favorable for positive economic profitability, as evidenced in companies’ financial outcomes. Compare the economics of the concentrate business to the bottling business. Why is the profitability so different? In some ways, the economics of the concentrate business and the bottling business should be inextricably linked. The CPs negotiate on behalf of their suppliers, and they are ultimately dependent on the same customers. Even in the case of materials, such as aspartame, that are incorporated directly into concentrates, CPs pass along any negotiated savings directly to their bottlers. Yet the industries are quite different in terms of profitability. The fundamental difference between CPs and bottlers is added value. The biggest source of added value for CPs is their proprietary, branded products. Coke has protected its recipe for over a hundred years as a trade secret, and has gone to great lengths to prevent others from learning its cola formula. The company even left a billion-person market (India) to avoid revealing this information. As a result of extended histories and successful advertising efforts, Coke and Pepsi are respected household names, giving their products an aura of value that cannot be easily replicated. Also hard to replicate are Coke and Pepsi’s sophisticated strategic and operational management practices, another source of added value. Bottlers have significantly less added value. Unlike their CP counterparts, they do not have branded products or unique formulas. Their added value stems from their relationships with CPs and with their 4 customers. They have repeatedly negotiated contracts with their customers, with whom they work on an ongoing basis, and whose idiosyncratic needs are familiar to them. Through long-term, in depth relationships with their customers, they are able to serve customers effectively. Through DSD programs, they lower their customers’ costs, making it possible for their customers to purchase and sell more product. In this way, bottlers are able to grow the pie of the soft drink market. Their other source of profitability is their contract relationships with CPs, which grant them exclusive territories and share some cost savings. Exclusive territories prevent intrabrand competition, creating oligopolies at the bottler level, which reduce rivalry and allow profits. To further build â€Å"glass houses,† as described by Nalebuff and Brandenberger (Co-opetition, p. 88), for their bottlers, CPs pass along some of their negotiated supply savings to their bottlers. Coke gives 2/3 of negotiated aspartame savings to its bottlers by contract, and Pepsi does this in practice. This practice keeps bottlers comfortable enough, so that they are unlikely to challenge their contracts. Bottlers’ principal ability is to use their capital resources effectively. Such operational effectiveness is not a driver of added value, however, as operational effectiveness is easily replicated. Between 1986 and 1993, the differences in added value between CPs and bottlers resulted in a major shift in profitability within the industry. Exhibit 1 demonstrates these dramatic changes. While industry profitability increased by 11%, CP profits rose by 130% on a per case basis, from $0. 10 to $0. 23. During this period, bottler profits actually dropped on a per case basis by 23%, from $0. 5 to 0. 27. One possibility is that product line expansion in defense against new age beverages helped CPs but hurt bottlers. This would be expected if bottler’s per case costs increased due to the operational challenges and capital costs of producing and distributing broader product lines. This, however, was not the case; cost of sales per case decreased for both CPs and bottlers by 27% during this period, mostly due to economies of scale developed through consolidation. The real difference between the fortunes of CPs and bottlers through this period, then, is in top line revenues. While CPs were able to charge more for their products, bottlers faced price pressure, resulting in lower revenues per case. These per case revenue changes occurred during a period of slowing growth in the industry, as shown in Exhibit 2. Growth in per capita consumption of soft drinks slowed to a 1. 2% CAGR in the period 1989 to 1993, while case volume growth tapered to 2. 3%. In an struggle to secure limited shelf space with more products and slower overall growth, bottlers were probably forced to give up more margin on their products. CPs, meanwhile, could continue increasing the prices for their concentrates with the consumer price index. Coke had negotiated this flexibility into its Master Bottling Contact in 1986, and Pepsi had worked price increases based on the CPI into its bottling contracts. So, while the bottlers faced increasing price pressure in a slowing market, CPs could continue raising their prices. Despite improvements in per case costs, bottlers could not improve their profitability as a percent of total sales. As a result, through the period of 1986 to 1993, bottlers did not gain any of the profitability gains enjoyed by CPs. Why have contracts between CPs and bottlers taken the form they have in the soft drink industry? Contracts between CPs and bottlers were strategically constructed by the CPs. Although beneficial to bottlers on the surface, the contracts favored the CPs’ long-term strategies in important ways. First, territorial exclusivity is beneficial to bottlers, as it prevents intrabrand competition, ensures bargaining power over buyers and establishes barriers to entry. But it is also beneficial to CPs, who are also not subject to price wars within their own brand. The contracts also excluded bottlers from producing the flagship products of competitors. This created monopoly status for the CPs, from the bottler perspective. Each bottler could only negotiate with one supplier for its premium product. Violation of this stipulation would result in termination of the contract, which would leave the bottler in a difficult position. Historically, contracts were designed hold syrup prices constant into perpetuity, only influenced by rising prices of sugar. This changed in 1978 and 1986, as contracts were renegotiated, first to accommodate for rises in the CPI, and then to give general flexibility to the CP (Coke) in setting prices. Coke could negotiate this more flexible pricing because its bottlers were dependent on it for business. It further ensured that its bottlers would be captive to its monopoly status by buying major bottlers and then selling them into the CCE holding company, which would only produce Coke products. Coke would capture 49% of the dividends from CCE, without the complications of vertical integration. Should concentrate producers vertically integrate into bottling? Given the data in Exhibit 1, indicating the CP business has grown more profitable over the last seven years, while the bottling industry has struggled to retain any profitability, it would not be advisable to vertically integrate. Stuckey and White (p. 8) indicate that a firm should â€Å"Integrate into those stages of the industry chain where the most economic surplus is available, irrespective of closeness to the customer or the absolute size of the value added. † In the soft drink industry, CPs generally miss out on the profits earned through fountain sales. Pepsi, realizing that fast food chains were capturing most of the value of fountain sales, entered the fast food business by purchasing Taco Bell, Pizza Hut, and KFC. These mergers allowed the firm to capture more value from its soft drink sales, but these mergers could also be problematic. For example, PepsiCo might not have a core competency in food sales or a strong position in the industry. Because it might not be able to effectively transfer skills or share activities with its fast food businesses, the mergers might not be successful in the long run. Stuckey and White also point out that â€Å"high-surplus stages must, by definition, be protected by barriers to entry. † So it could be difficult for Coke to enter the fast food business. It could be prohibitively expensive to purchase McDonalds or Burger King, and developing a chain of its own against such formidable competition would be extremely risky. So integration into this phase of the value chain would be difficult or impossible for Coke. As Stuckey and White say, â€Å"don’t vertically integrate unless it is absolutely necessary to create or protect value. † We shall address each of these individually to formally refute the plausibility of vertical integration of CPs into bottling. (1) â€Å"The market is too risky and unreliable. † On the contrary, the concentrate market is highly stable and will be for a long time to come. (2) â€Å"Companies in adjacent stages of the industry 6 chain have more market power than companies in your stage. The opposite is true, CPs already have more market power than bottlers, so they should not vertically integrate. (3) â€Å"Integration would create or exploit market power by raising barriers to entry or allowing price discrimination across customer segments. † In fact, CPs already have market power through efficient barriers to entry, and effectively price discriminate through various retail channels. (4) â€Å"The market is young and the company must forward integrate to develop a market, or the market is declining and independents are pulling out of adjacent stages. † The market is neither young nor declining. Having determined that a vertical integration strategy fails all four of Stuckey and White’s tests, CPs should not pursue vertical integration into bottling.