Body by Me
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Body By Mes fixed costs includes rent, credit interest, maintenance costs, security and administrative expenses. Fixed costs normally remains constant regardless of Body By Mes activity in a given period, but can change when theres a change in Body By Mes organization, changes in technology applied, sale of manufacturing equipment, decisions to undertake advertising activities etc.
The ease of entry and exit does not cause competitive pressure on the major soft drink
companies. It would be very difficult for a new company to enter this industry because they
would not be able to compete with the established brand names, distribution channels, and high
capital investment. Likewise, leaving this industry would be difficult with the significant loss of
money from the fixed costs, binding contracts with distribution channels, and advertisements
used to create the strong brand images. This industry is well established already, and it would be
difficult for any company to enter or exit successfully.
This makes it very
difficult for new, unknown entrants to start competing against the existing firms. Another barrier
to entry is the high fixed costs for warehouses, trucks, and labor, and economies of scale. New
entrants cannot compete in price without economies of scale.
The S&P Industry Survey has shown the soft drink industry profit margin
to be on a steady incline over the past fifteen years. Levels in 1980 were near
14%, while as of year-end 1995 were over 20% and expected to flatten a bit.
This flattening effect may be an indication that fixed costs are on the rise due
to expansion