The Coca-Cola Company offers its product, Coke or Coca-Cola Classic, for sale in the beverage industry. Included in the beverage industry are sub-categories such as the soda or soft drink industry. Introduced in 1886, the Coca-Cola Company sought to offer its coke product to the masses. Coke has been successful in winning its market share of the soft drink industry as evidenced by a report that states, "the drink is reportedly recognized by 94 percent of the world's population" (Hartlaub, n.d.). In an expansion of the typical market, Coke took its place in history by becoming the first soft drink to be consumed in outer space (Hartlaub, n.d.). This paper discusses the market structure in which the Coca-Cola product is offered. The different market structures are analyzed and implications of the market for the product are described.
Types of Market Structures
There are four types of market structures: Pure or Perfect Competition, Imperfect or Monopolistic Competition, Oligopoly, and Perfect Monopoly (Reynolds, 2005). Because of the range of strategies adopted by the seller, market structures may evolve from one type to another during the life of the product ("Oligopoly & Monopoly," n.d.).
On one end of the spectrum of optimal market structure is Pure or Perfect Competition. Perfect Competition is defined as:
The theoretical free-market situation in which the following conditions are met: (1) buyers and sellers are too numerous and too small to have any degree of individual control over prices, (2) all buyers and sellers seek to maximize their profit (income), (3) buyers and seller can freely enter or leave the market, (4) all buyers and sellers have access to information regarding availability, prices, and quality of g...
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...Soft Drink (CSD) industry have shifted the focus to healthier drink alternatives and are forcing companies to diversify into different products. The Coca-Cola Company has found a niche in the market with the original Coke product and any changes to the product line will be secondary to the primary focus. A recent report in Forbes Magazine states,
Just two of its brands, Coke and Diet Coke, together command almost 27% of the U.S. CSD market. All its brands together control 42% of the CSD volumes in the U.S. while PepsiCo holds 28% share in the U.S. Moreover, Coca-Cola has also strengthened its grip on emerging markets such as China and India. The company holds more than 15% and 54% of the CSD market in China and India respectively. (Trefis Team, 2013)
The Coca-Cola Company is operating as a differentiated Oligopoly and is gaining strength in foreign markets.
Perfect competition describes a market structure where competition is at its greatest possible level. To make it more clear, a market which exhibits the following characteristics in its structure is said to show perfect competition.
First, numerous small firms and customers is defined as competitive markets contain so many buyers and sellers that each one constitutes a negligible portion of the whole- so small, in fact, that each player’s decisions have no effect on price (Baumol and Blinder, 200). In other words, although there are many buyers in the market, they cannot control the prices because prices are fixed through the forces of supply and demand. The more buyers and sellers there are, the less bargaining authority they both have. So no matter how much is purchased, the price stays constants. Moreover, buyers are said to be price takers. However, in the housing market, there are a variety of houses to choose from; for example, some buyers will consider how big, the location, and the price of the house they want to buy. In this particular economic setting, the housi...
A market is a group of good and service for buyers and seller in economic industry (Mankiw, 2011). The buyers were included by group of demand for the product, and the sellers were included by group of supply of the product (Mankiw, 2011). A market is only for group of economic agents, which is firms and individuals, for who were interact with each other in buyer-seller relationship (Wilkinson, 2005). In general, market structure can beclassified into four major characteristics: monopoly, perfect competition, monopolistic competition and oligopoly.
There are four basic market structures: perfect competition, monopoly, monopolistic competition and oligopoly (Sheeba, 2012). First, let’s look at the two extreme ends of the spectrum. A perfect competition market exists, when there are several firms that are present in a market who all produce identical products and are all sold at market price. None of the producers in the market can control the price and the demand curve is perfectly elastic. The entry
The soft drink industry in the United States is a highly profitably, but competitive market. In 2000 alone, consumers on average drank 53 gallons of soft drinks per person a year. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the United States. They are the Coca Cola Company with 44.1% market share, followed by The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/Seven Up, Inc. with 14.7% market share. Each company respectively has numerous brands that it sales. These top brands account for almost 73% of soft drink sales in the United States. Dr. Pepper/Seven Up, Inc. owns two of the top ten brands sold. Colas are the dominant flavor in the U.S carbonated soft drink industry; however, popularity for flavored soft drinks has grown in recent years. The changing demographics of the U.S population have been an important factor in the growing popularity of these flavored soft drinks. The possible impact of this factor will be addressed later in the case.
People can afford to buy more soft drinks under current economic situation. Recessions do not seem to affect sales of CSD. Although produced by main market players soft carbonated drinks cost more than similar products of local and private label manufacturers, consumers are willing to pay an extra price for the name, particular taste, and image. Fierce competition in CSD industry forces Coca-Cola and PepsiCo to expand into new and emerging markets which present high potential for the company’s development. However, some foreign markets proved to be highly competitive. Coca-Cola Company’s operation in China faced antitrust regulations, advertising restrictions, and foreign exchange control.
In the business world, the perfectly competitive firm is considered the price taker, whereas the monopolistic firm is the price maker, meaning they have control over the price. Pure monopoly does exist in today’s business world; we all have had the opportunity to have personal dealings with such companies. This assignment has discussed the various degrees of “monopolies” and attempted to provide accurate examples, which has allowed me to share my understanding of the competitive business market.
The CSD (carbonated soft drink) industry is one that is very competitive. A few firms dominate this industry, most notably Coca Cola and Pepsi Cola. This is due to substantial barriers to entry. Cadbury-Schweppes, producer of products such as 7up and Dr. Pepper is the third leading company in this industry. Due to the dominance of Coca Cola and Pepsi, Cadbury-Schweppes faces the daunting task of having to fight for market share and survive in this fiercely competitive industry. Using economic analysis for support, Cadbury-Schweppes will need to use its strengths in the non-cola categories to compete in this CSD industry.
The perfect competition, is considered as a rare phenomenon in the real business world. The actual markets that approximate to the conditions of a perfectly competitive market includes markets for stocks and bonds, and agriculture market. Despite its limited scope, perfect competition model has been widely used in economic theories due to its analytical value.
There are three market types know as Perfect Competition, Monopolistic Competition, and a Monopoly. In the market structure of Perfect Competition there is a large number of producers that produce standardize objects, but they have no power, low barriers to entry, and have a lot of competition. Moreover, the market structure of Monopolistic Competition also has a large number of producers and low barriers to entry, like “Perfect Competition”; nonetheless the product is differentiated, so therefore they have some power, and competition. And lastly the market structure of Monopoly has only one producer that produces a unique product, so they will therefore have a lot of power, no competition, and very high barriers to entry. An example of this can be Bob’s Coffee shop. In Bob’s case he has a coffee shop located in a location where there are no coffee shops around. As a result, his business becomes a Monopoly, so therefore he chooses whatever price he wants, and in this case he charges $2.00. For all that, Tom finds out that Bob is making a positive economic profit. He therefore starts his own coffee shop, which causes Bob and Tom to have a Monopolistic competition. Because they are in a Monopolistic Competition, they will compete against who has the better price and try to have differentiated product. So therefore they
As the world 's largest manufacturer and distributor of non-alcoholic beverages, Coca-Cola is certainly no stranger to global marketing. Established in the US, Coca-Cola initiated its global expansion in 1919 and now markets to more than 200 countries worldwide. It is one of the most recognizable brands on the planet and also owns a large portfolio of other soft drink brands including Schweppes, Oasis, 5 alive, Kea Oar, Fanta, Lilt, Dr Pepper, Sprite and PowerAde. Despite this, Coca-Cola often struggles to maintain its market share over its main rival PepsiCo in some overseas markets, particularly Asian countries.
Perfect Competition Market is a form of market with a large number of buyers and sellers of the commodity. They provide homogenous goods. The industry has characterized free entry and exit to the firms. These markets have a small share in market.
Reasoning and analyzing a common and a well known form of a modern day market, OLIGOPOLY. Adjudging the ways of their profit maximization and equilibrium attained via cooperation and competition.
According to Sloman (2013), perfect competition is the most extreme market structure. The conditions include there being many firms, freedom of entry into the industry and the firm producing homogeneous products; each frim selling identical products e.g. milk (Griffiths,
Learning from experience Coca-Cola has had some fierce competition over the years but nothing in the form of an entire health market shift like now. As well as mounting political persecution of its products like they are facing today. They must rely on past experiences to get through but likely will need to start studying the new trends to stay relevant.