A cartel is a formal (explicit) agreement among competing firms.

It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production.[1] Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion (also called the cartel agreement) is to increase individual members' profits by reducing competition. One can distinguish private cartels from public cartels. In the public cartel a government is involved to enforce the cartel agreement, and the government's sovereignty shields such cartels from legal actions. Inversely, private cartels are subject to legal liability under the antitrust laws now found in nearly every nation of the world. Competition laws often forbid private cartels. Identifying and breaking up cartels is an important part of the competition policy in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put collusion agreements on paper.[2][3] Several economic studies and legal decisions of antitrust authorities have found that the median price increase achieved by cartels in the last 200 years is around 25%. Private international cartels (those with participants from two or more nations) had an average price increase of 28%, whereas

domestic cartels averaged 18%. Fewer than 10% of all cartels in the sample failed to raise market prices.
There are several factors that will affect the firms' ability to monitor a cartel:[8] 1. 2. 3. 4. 5. Number of firms in the industry Characteristics of the products sold by the firms Production costs of each member Behaviour of demand Frequency of sales and their characteristics

A decision tree is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility. It is one way to display an algorithm. Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal. Another use of decision trees is as a descriptive means for calculating conditional probabilities

A decision tree can be represented more compactly as an influence diagram, focusing attention on the issues and relationships between events.

The squares represent decisions, the ovals represent action, and the diamond represents results.

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Coca-Cola Case Study

1. SWOT ANALYSIS: Strengths Coca-Cola has been an intricate part of American culture for over a century. The products image is laden with sentimentality, and this is an image many people have taken deeply to heart. The Coca-Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable branding is one of CocaColas greatest strengths. Enjoyed more than 685 million times a day around the world Coca-Cola stands as a simple, yet powerful symbol of quality and enjoyment (Allen, 1995). Additionally, according to Bettman, et. al, (1998) Coca-Colas bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and operated by

independent business people who are authorized to sell products of the Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers (Bettman, et. al, 1998). Weaknesses: Although domestic business as well as many international markets are thriving (volumes in Latin America were up 12%), CocaCola has recently reported some "declines in unit case volumes in Indonesia and Thailand due to reduced consumer purchasing power." According to an article in Fortune magazine, "In Japan, unit case sales fell 3% in the second quarter [of 1998]...scary because while Japan generates around 5% of worldwide volume, it contributes three times as much to profits. Latin America, Southeast Asia, and Japan account for about 35% of Coke's volume and none of these markets are performing to expectation (Mclean, 1998). Opportunities: Brand recognition is the significant factor affecting Cokes competitive position. Coca-Colas brand name is known well throughout 90% of the world today. The primary concern over the past few years has been to get this name brand to be even better known. Packaging changes have also affected sales and industry positioning, but in general, the public has tended not to be affected by new products (Allen, 1995). Coca-Colas bottling system also allows the company to take advantage of infinite growth opportunities around the world. This strategy gives Coke the opportunity to service a large geographic, diverse, area (Bettman, et. al, 1998).

Threats: Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea, coffee, juices, milk, and hot chocolate (Cola Wars, 1991). Even though Coca-Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into these markets, allowing them to have further significant market shares and offset any losses incurred due to fluctuations in the market (Cola Wars, 1991). Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produce a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the competition. Furthermore, consumers can easily switch to other beverages with little cost or consequence (Cola Wars, 1991). 2. BOSTON CCONSULTING GROUP MATRIX In accordance with the BCG matrix, I would recommend the following strategies for Coca-cola products in each category: Dog Strategy: Either invest to earn market share or consider

disinvesting. Star Strategy: Invest profits for future growth. Question Mark Strategy: Either invest heavily in order to push the products to star status, or divest in order to avoid it becoming a Dog. Cash Cow Strategy: Use profits to finance new products and growth elsewhere. 3.LIFE CYCLE: To be able to market its product properly, a firm must be aware of the product life cycle of its product. The standard product life cycle tends to have five phases: Development, Introduction, Growth, Maturity and Decline. Coca-Cola is currently in the maturity stage, which is evidenced primarily by the fact that they have a large, loyal group of stable customers. Furthermore, cost management, product differentiation and marketing have become more important as growth slows and market share becomes the key determinant of profitability. In foreign markets the product life cycle is in more of a growth trend Coke's advantage in this area is mainly due to its establishment strong branding and it is now able to use this area of stable profitability to subsidize the domestic "Cola Wars".
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