New England Bottling was founded in the late 1800s and was owned by the same family until 1960 when the firm went public.
Throughout its life as a public firm, the company has been continuously profitable and recorded slow, but steady, growth. Historically, the company has maintained a steady focus on cost control as the key to profit generation. However, since about 2000 the company has struggled to significantly increase profits. In 1980, the firm bottled merely five brands of product and sold its output through four large wholesalers. Today, the firm bottles 40 brands of product and product life averages only four years. Consequently, the firm is constantly adding and deleting brands in its product line. Further, to market the 40 brands of product, the company sells to dozens of wholesalers, brokers, and large retail chains. The company uses multiple pricing models to accommodate the various outlets.
a. Discuss how the changes in the operating environment of New England Bottling could negatively affect its ability to generate profit.
b. The firm's cost management system has not evolved with the changing complexity of the business environment. Discuss how gap analysis could be used to update the cost management system.