ECON2410 Study Guide - Final Guide: Maxwell House, Profit Margin, Switching Barriers
3 Aug 2018
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Tutorial 11 week 12: short answer/problem solving, coke and pepsi have sustained their market dominance for nearly a century. Motors and ford have recently been hard hit by competition. One of the main differences between the soft drink industry and the automobile industry is technological advance. It is harder to sustain the advantage in the car industry. Over the years, soft drinks formula has not changed that much. However, automobiles/cars have been constantly improved and innovated. New technology allows new entrance to the market by offering something different. Tesla offers electric cars, auto pilot cars (different from others in the market) For car industry, it is costlier to purchase new capital to set up production chain. Sustainability the advantage that you have in the market, your profits. Economies of scale lower average cost at higher quantity. Lower cost improves profit margin so it is more profitable for firms already in the market and it is easier to sustain their profits.
