Asked by Cynthia Aborn on Jul 17, 2024
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Beverage Merger
Cott Corp.markets a portfolio of beverages,bottled waters,beverage,and coffee delivery systems for homes and offices.In November,2014,it has agreed to merge with DS Services of America,a water and coffee direct-to-consumer services provider.What is the expected effect of this merger on price-cost margins?
Price-cost Margins
The difference between the selling price of a product and its production cost, indicating the profit margin per unit sold.
Beverage Merger
A process where two or more companies producing drinks agree to operate as a single business entity, usually to enhance market share, efficiency, or competitiveness.
DS Services of America
A beverage company that specializes in water delivery and coffee service to homes, offices, and retail establishments in the United States.
- Examine the impact of consolidations on the price-cost margin and competitive dynamics within industries.
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Trang HoàngJul 20, 2024
Final Answer :
These two companies' products are primarily substitutes for each other.A price increase for one company would both affect own profits but also would shift some demand to the other and thereby increase the other's profits.Before the merger,the second effect would not have been captured by the firm raising prices.After the merger,it would.Therefore it is more willing to raise prices.
Learning Objectives
- Examine the impact of consolidations on the price-cost margin and competitive dynamics within industries.