Answer to Question #165707 in Macroeconomics for Cephas

Question

How will these events impact the market outcomes of generic soft drinks if effect of 

the tariff is larger the effect of advertising of Coke and Pepsi on the generic type of soft 

drink? [Explain with an appropriate grap

Answer 1

The generic soft drink leaders need the skills to make the best of the adverse situations. With limited power to effect economic change, both Coke and Pepsi have to accept the hand they’re dealt, and the external factors like increased tariffs might force them to rethink their strategy. Larger effect of tariff than that of advertising will evolve the supply chain of Coke and Pepsi on the type of soft drink. The companies will pay more for retail goods from a longtime vendor. Also, the enterprises will pay more to manufacture soft drinks. Besides, the tariffs will kick off new trade wars between the organizations. Tariffs are highly political, and customers will tend to have strong opinions about them. This may result into reactionary protectionism.

Moreover, the market may become more competitive. Whenever tariffs work, Pepsi will be able to compete with larger enterprises like Coke. Furthermore, larger tariffs will redirect the enterprises’ expansion. The tariffs will throw unexpected wrenches into otherwise solid growth strategies.