Address the given topics in your analysis:
1. Introduction
A. Market structure
B. Impact of new companies entering the market
C. Prices
D. Technology -
E. Productivity (consider the law of diminishing marginal productivity) -
F. Cost structure
i) Wages and benefits
ii) Fixed and variable costs
G. Price elasticity of demand
H. Competitors
I. Supply and demand analysis
J. Impact of government regulations
2. Conclusion
Current Market Conditions: Coca-Cola Company
Introduction
Market Structure
“Market structure refers to the physical characteristics of the market within which firms interact (Colendar, 2008).” In an oligopoly market structure there are only a few firms in the market with similar products and the firms take into account responses from other firms in the market. Coca Cola is duopoly type oligopoly market structure which consists of only two competing businesses within the market, Coca Cola and Pepsi. The best outcome of a duopoly market structure is the cooperation and agreement to restrict output to the monopoly quantity, where price is greater than marginal cost and profit is maximized (Basic Economics, 2007-2009). A duopoly market structure is formed from an informal collusion whereas firms agree to share output and share price setting within the market. Companies in a duopoly market increases production when prices are greater than the marginal cost to maximize profits.
Impact of new companies entering the market:
As the number of new companies entering the oligopoly market structure increases, this tends to move the market into a perfectly competitive outcome. The possibility of competition from new firms entering into the market limits duopoly or oligopoly firms from acting as a cartel. If the new firm entering the market is a larger competitor the threat increases and would be more effective than the existing firms in the oligopoly market structure. Since Coca Cola and Pepsi are the two largest soft drink manufactures in the industry increased competition is less likely with both companies expanding product lines to include waters, energy drinks and juices. Since any other firms entering the market would be small competitors, Coca Cola and Pepsi would remain the driving force around pricing and production levels of products.
Prices:
Since the beginning Coca Cola Company’s establishment it has grown into one of the largest beverage company in the United States as well as global. Marketing effectively has been a vita part to Coca Cola Company’s success and longevity in the competitive market. Though out the years it has employed thousands of workers to help meet the consumer’s high demand of its products. Boretz (2009) states “ The juggernaut that is Coca-Cola Enterprises (CCE) boasts 35,000 workers in 390 warehouses across North America— each with a sales and delivery volume ranging from 1 million cases to 35 million cases per year” (p.36). In order to stay ahead of other soft drink manufactures and distributors Coca Cola has kept its prices competitive as well as implemented new technology to achieve its goals in the beverage industry.
Technology:
Coca-Cola used many technologies to achieve its rise to the top of the soft drink industry. It has created and started many technological innovations that has been sold though out the United States such as the new plastic bottle made from plants. Packaging Digest (2009) states “Coca-Cola Co. has unveiled a new plastic bottle made partially from plants. Coca-Cola North America will pilot the "PlantBottle" with several water brands in select markets this year” (p. 56). Many of Coca- Cola Co innovations has been market successful in which has made the company millions. However, in this time of economy recession Coca Cola Co has felt the impact in its sales decline. In 2009 the company stock price decreased. Pressman states (2009) “Investors also dumped Coca Cola, down 4%, and Dr Pepper Snapple Group, down 2%. All three have seen profits decline amid slowing consumer spending and higher costs for ingredients” (p.65). Even though the recession has decline the stock price for its coke product in the United States as well as in other countries stock prices for its noncarbonated drinks as increased. Kwon (2008) states “ In recent years the industry has seen more rapid growth in still beverages than in carbonated soft drinks [CSDs] as consumers seek healthier alternatives” (p.12). Regardless of the decline in its stock prices and innovation errors; Coca Cola Company has remain successful in a competitive market because of its ability to produce quality products that satisfied the consumer’s market appetite for years.
Productivity (consider the law of diminishing marginal productivity)
Cost structure:
1) Wages and benefits
2) Fixed and variable costs
Price elasticity of demand
Competitors
Supply and demand analysis
Impact of government regulations