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In the last few years colleges and universities have signed exclusive agreements with a variety of private companies In the last few years colleges and universities have signed exclusivity

In the last few years, colleges and universities have signed exclusive agreements with a variety of private companies In the last few years, colleges and universities have signed exclusivity agreements with a variety of private companies. These agreements bind the university to sell that company’s products exclusively on the campus. Many of the agreements involved food and beverage firms. A large university with a total enrollment of about 50,000 students has offered Pepsi-Cola an exclusivity agreement, which would give Pepsi exclusive rights to sell their products at all university facilities for the next year and an option for future years. In return, the university would receive 35% of the on-campus revenues and an additional lump sum of $200,000 per year. Pepsi has been given 2 weeks to respond.The management at Pepsi quickly reviews what they know. The market for soft drinks is measured in terms of the equivalent of 12-ounce cans. Pepsi currently sells an average of 22,000 cans or their equivalents per week (over the 40 weeks of the year that the university operates). The cans sell for an average of 75 cents each. The costs, including labor, amount to 20 cents per can. Pepsi is unsure of its market share but suspects it is considerably less than 50%. A quick analysis reveals that if its current market share were 25%, then, with an exclusivity agreement, Pepsi would sell 88,000 cans per week or 3,520,000 cans per year (calculated as 88,000 cans per week * 40 weeks).gross revenue= 3,520,000 cans x $75 revenue/can= $2,640,000 This figure must be multiplied by 65%since the university would rake in 35% of the gross. Thus,65% X $2,640,000 = 1,716,000The total cost of 20 cents per can(or $704,000 and the annual payment to the university of $200,000 is subtracted to obtain the net profit.Net profit = $1,716,000$704,000 - $200,000 = $812,000Their current annual profit isCurrent profit = 40 weeks X22,000 cans/week X $.55/can= $484,000If the current market share is 25%, the potential gain from the agreement is$812,000 - $484,000 = $328,000the only problem with this analysis is that Pepsi does not know how many soft drinks are sold weekly at the university. In addition, Coke is not likely to supply Pepsi with information about it's sales, which together with Pepsi's line of products constitutes virtually the entire market.A recent graduate of a business program believes that a survey of the university students can supply the needed information. Accordingly, she organizes a survey that asks 500 students to keep track of the number of soft drinks they purchase on campus over the next 7 days. perform a statistical analysis to extract the needed information from the data. Estimate with 95% confidence the parameter that is at the core of the decision problem. Use the the estimate to compute estimates of the annual profits. Assume that Coke and Pepsi drinkers would be willing to buy either product in the absence of their first choice.a. On the basis of maximizing profits from sales of soft drinks at the university, should Pepsi agree to the exclusivity agreement?b. Write a report to the company's executives describing your analysis . Please note: all answers and responses must be comprehensive in nature and very!!! very!!! detailed and explainable. Looking for a great product. Thanks

a. Yes, Pepsi should agree to the exclusivity agreement. As per the Survey it has beenrevealed that the Estimate is having 95% Confidence for Decision Problem whichmeans that total cans will be...

Apr 11 2020 View more View Less

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