The Competitive Strategies Of Coca Cola Economics Essay

The Competitive Strategies Of coca skunk Economics endeavorThis paper is discussing about the economic foodstuff structure, especially for imperfect ambition foodstuff which be noncompetitive rivalry trade and oligopoly trade. at that place impart be explanations about definition, characteristics, and examples of monopolistic contestation grocery and oligopoly securities indus furnish. thither is Dunkin Donuts Inc. for the monopolistic argument market and coca plant booby Co. for the oligopoly market. This paper also pull up stakes discuss about competitive strategies of coca plant Cola.IntroductionIn economy cogitation, people drive in that thither be view types of market in the existence. These market types ar differentiated according to material body / dispersion of true(s) in the market. According to Sloman Norris (2002), there ar four types of market structures in the pattern, which be perfect rivalry, monopoly and monopolistic competition, oligop oly markets. complete(a) competition market is a market with the most sellers and buyers in transaction. In this type of market, the increases that provided be mostly homogenous. To ingest in into this market, there ar no barriers. Both of the buyers and sellers is outlay taker (OSullivan et al, 2008), so in this market price is non the factor that could affect the sales, kind of of it service is much much attractive.Monopoly market is a market with a single self-colored that provide return that has no close-substitutes. This condition distinctly shows that this type of menage has power that exit allow them as the price maker, since there are no close-substitutes that suffer be chosen by consumer to replace the drill of the service or goods provided by the firm. In this monopoly market there is entry barriers much(prenominal)(prenominal) as patent, goernment policy, etc.Perfect competition and monopoly market are the extreme condition in market. The an a nonher(pren ominal)(prenominal) twain market structures which are monopolistic competition and oligopoly market is more common type of market that we smoke see in the concrete life situation if they are correspondd to perfect competition and monopoly market.This paper exit discuss more on imperfect competition market that are the including the monopolistic competition market and the oligopoly market, which are more relevance to the practice with the relevance and appropriate examples.ContentsTheory noncompetitive Competition grocery storeMonopolistic competition was create by an American economist named Edward Chamberlin in 1930s (Sloman Norris 2002). Monopolistic is a type of monopoly market there are quite number of firms racecourse in the industry, but they produce a differential product which distinguish them from other.In monopolistic market, a firm is independence means that firm in this market are scarce affected with their competitors act or decision, or vice versa (Sloman No rris 2002). Firms in the monopolistic market are offering their products through different things from their competitors appearance, levels, technology, quality, price, etc. These differentiations of product are also kn testify as Product differentiation (Parkin,2000).There are no entry barriers to sterilize in into this monopolistic competition market. Barrier such as patent or government principle is not applicable in this market (OSullivan et al, 2008). According to Parkin (2000), firms break the innocuous entry and exit in monopolistic market. Normally if the condition of this market is highly profitable there will be a substantiative signal that invite numbers of firm to come in and the distribution of profit will be divided to the firms in market, but when they motion of market is low, there will be number of firm as healthy leaving this market. The below tables show monopolistic market in profit and loss time (Case Fair, 2008)However, in the extensive run there will be no super abnormal profit for firms in monopolistic market, since because of the signaling, firms are freely enter and exit from the market. Here is the long call condition graph (Case Fair, 2008)Oligopoly grocery storeOligopoly is a term that derived from the term of the Greeks which are oligos meaning little or fewer and polein meaning to sell. Oligopoly refers to a market where there are wholly few firm running the agate line in the field. (Tucker, 2005). non the same with monopolistic, to enter into oligopoly market is not easy to be d whizz, since oligopoly market has the entry barrier as monopoly market (Sloman Norris 2002). According to OSullivan et al (2008), government has intervention in this market, making true there is no bunch of firms run(a) in the oligopoly industry by issuing controller such as patent and stock licenses. the likes ofwise that, firms in oligopoly market are majority competing also by announce scat. The expenditure budget for advertize ment in this market is very high.Not similar with monopolistic competition market, oligopoly market is interdependent. The decision that made by firm that operating in oligopoly will affect the other firms that operating in the same market. In this market there will be no firm that does not consider the action taken by their rival. Most of the companies in oligopoly firm compete through non-price competition. By practicing non-price competition, severally oligopolist create barrier for competitors to combat an important product im foldment. Here are some examples of non-price competition (Riley, 2006)Free deliveries and installationExtended warranties for consumers and credit facilities continuing opening hours (e.g. supermarkets and petrol stations)Branding of products and heavy spending on advertising and tradeExtensive after-sales serviceExpanding into reinvigorated markets or diversification of the product rangeIn oligopoly market, the graph of charter will shows a kinked cu rve. The kinked demand curve model happen because of two assumptions that made in oligopoly market, which areIf a firm rising the selling price, the other firms remain (not delineate to increase the price)If a firm cutting the selling price, the other firms will follow to cut down their selling price as wellKinked demand curve in monopolistic market (Anonymous, n.d)Oligopoly market has a tendency to thinks what is their competitor reaction to their new policies. To examine this oligopolist air can be d iodin with the indorse Theory. Game Theory is a study to analyze the strategic behavior depends on the reaction of the competitor into the new policies (Sloman Norris 2002). As outlined by Samuelson and Nordhaus (2005), some general findings of game theoriser in the area of imperfect competition areAs the number of non-cooperative oligopolists pay offs large, industry price and quantity tend toward the perfectly competitive outcome.If firms conciliate to collude rather than com pete, the market price and quantity will be close to those generated by monopoly. But experiments suggest that as the number of firms increases, calculative agreements become more delicate to police and the frequency of cheating and non-cooperative behavior increases.In many situations, there is no stable equilibrium for oligopoly. strategic interplay may lead to unstable outcomes as firms threaten, bluff, start price wars, give oneself up to stronger firms, punish weal opponents, signals their intentions, or simply exit from the market.In this Game Theory, there is also a term called Prisoners dilemma that illustrate the difficulties in maintaining a cooperation (Mankiw, 2004). According to Parkin (2000), there are 3 things that requisite to be paid attention in Game Theory, which are rules, strategies and payoffs. The game conjecture will be illustrated as followingA and B are caught stealing a car, two of them were interrogated by the polices and they will decry for 2 di visions in prison. The police suspect that A and B is refer in recent robbery, but they hurl no evidence to prove it.Rules A and B were put in different cabin, each told they are suspected involve in robbery. If both of them confess they did it, they will sentence into 3 years prison, however if one of them confess and the other one does not, the first one will only sentence for 1 year prison and the other one 10 years.Strategies the possible action that can be taken by A and B are , cede or denied they involved in the robbery.Payoffs because there are two players and two strategies, there are four possible outcomes, which are Both confess, both denied, A confesses B denies, and B confesses A denies.10 geezerhood1 Year2 Years2 Years3 Years3 Years1 Year10 YearsPrisoners Dilemma Payoffs Matrix (Parkin 2000) company in Monopolistic Competition and Oligopoly MarketMonopolistic competition market can be entered easily, even though there are many competitors in the industry competin g in it. Food and potable industry is also included in monopolistic competition market. In example Starbucks, McD, KFC, and Dunkin anchor rings are well known in the franchise business in food and drink industry.Dunkin donuts is a beverage industry firm that provides donuts and the unremitting coffee. Founded in 1950, today Dunkin Donuts is the No. 1 retailer of anxious and iced regular coffee-by-the-cup in America (Miranda, n.d.). In beverage industry like Dunkin donuts we can see there is quite numbers of firms are operating in the same industry such as Krispy Kreme, Starbucks, etc. each(prenominal) of these companies has their own characteristic that differentiate them with their competitors such as Krispy Kreme is more concentrating in the production of donuts, while Starbucks are providing more various blended coffee. However, Dunkins donut also has its own characteristic which is providing the regular coffee with the delicious donuts or cakes.According to Miranda (n.d.), Dunkin Donuts in Florida are doing very well and doing better than the other franchises in other states. Dunkin Donuts sells 52 different donuts and more than a dozen coffee beverages as well as bagels, breakfast sandwiches, and other bake beverages. Dunkin donuts is having a powerful market position. It has become the No.1 in regular furious coffee sales, No.1 in bagels, No.1 in donuts and No.3 in breakfast sandwiches, and Dunkin donut is developed with a strong and profitable franchise business model (Goumas, 2006). There is no entry barrier for those firms that wanted to come into beverage market, such as J.Co in Malaysia its a new comer in the beverage industry.For Oligopoly market there is Coca Cola Co. which is leading in the carbonate beverage industry for years. There are only a few producers in carbonated beverage, this makes carbonated beverage industry included in oligopoly market.Coca Cola Co. are included in oligopoly market, even though in the real life there is qu ite a chew carbonated drinks available (which can be categorized into monopolistic competition), such as FN in Malaysia. But in the practice, these carbonated beverages industries were dominated by Coca Cola Co. and Pepsi Co. for decades, this beverage industry become oligopoly. Thus, for the smaller firm such as FN in beverage industry has their sales in a little share and cannot be compared to the sales of Coca Cola and Pepsi. The main rival of Coca Cola is Pepsi Co., which has been decades competing in the Coke industry. In the carbonated soft drink industry today, Coco-Cola dominated 43.7% of the market, followed by PepsiCo. employed 31.6% and Cadbury-Schweppes 15.8% (In January 1999, the smallest oligopolist Cadbury Schweppes PLC, sold part of its international business to Coca-Cola Co.) ( oligopolywatch.com, 2005).The branding and advertisement case for Coca Cola and Pepsi are also competitive and they have their own characteristic. For Pepsi, they always hire well-known ar tist such as Britney Spears, Beyonce and knock to advertise their Pepsi Coke. In the other side, Coca Cola always use a creative advertisement. They never s sack their advertisement, even though they know that both of them is the leader in the industry, because they never want to lose to one another.From the number of firms in the market, the tendency that firms can go in into market and the branding advertisement cloak-and-dagger road, makes the carbonated beverage industry become an oligopoly market rather than monopolistic competition market.Competitive Strategies of Coca Cola Co. advertizement and SponsorshipConsider the long-running Coke-Pepsi feud, both Coca-Cola Co. and PepsiCo. are trying to made a utile foil for advertising, and company created product distinctions during the competition. During the Beijing Olympic in 2008, once more Coca Cola has been the official partner for this event in one-time(prenominal) 80 years. For Coca Cola there is never too archean to do promotion, it proven by the launching of limited edition Coca Cola Olympic edition with various languages (Baar, 2008). In December 2008, Coca Cola running a new mobile marketing campaign in Germany and also they did advertise in television that showing the Coca-Cola truck driving through a snowy landscape. (Khan, 2008).Expand in Market and Product RangeRecently, Coca Cola put more effort in expanding their production in China. Coca Cola Co. has built 2 production plant in the less developed central and tungsten China (The Coca Cola Company Press, 2009). Since Pepsi sales compare to Coca Cola sales in China is larger, Coca Cola does not stop expanding their target which is China market.Coca Cola Co. has variety products which have been introduced as the needs of the customer. As stated in The Coca Cola Company Press (2009), Coca Cola has more than 3,000 beverages, from diet and regular sparkling beverages to still beverages such as 100 percent fruit juices and fruit drinks, water s, sports and energy drinks, teas and coffees, and milk-and soy-based beverages, our variety spans the globe.Keep Innovative and Efficient over the Long RunOligopolistic competition is proved to be beneficial, because it provides continuous improvement, and ensures that managements would have got their organizations innovative and efficient over the long run. Argued by Zachary (1999), market leaders need challengers to respect them on their toes.According to Weier (2009), Coca Cola Company plant to lunch out Freestyle drink dispenser, in the US nationwide. This dispenser have the concept of fulfill customer choice to new heights, the most arouse aspect is the technology its built on.Cutting PriceBy doing founding such as lunch out Freestyle drink dispenser, it will alleviate Coca Cola Company to do price cutting. Freestyle will become Cokes front-line robotic army for business intelligence, sending massive amounts of consumption data masking to the beverage companys Atlanta he adquarters. The dispensers collect data on what customers are inebriety and how much, and transmit that information each night over a private network to data warehouse system in Atlanta. Unique spin-off of this BI enabled dispenser is that Coke can try out new flavors and get back almost real time feedback on the viability of its success. It will no longer have to ensemble Customer focus group and try it out in a lab. The real world becomes the lab and the marketing department at Coke can watch consumers vote yea or nay on the viability of new product instantaneously. This not only improves the speed of feedback but also makes the entire test marketing dish out cheaper.ConclusionThere is perfect competition market and imperfect competition market. Perfect competition markets are including perfect competition and monopoly market. However, imperfect competition markets are monopolistic competition market and oligopoly. From the overall analysis, it shows that the oligopoly is the m ost difficult competitive structure to evaluate than other market structures, because the intensity of competition is high whereby oligopolists battle for market share. Each and every move by a player attracts retaliation. And many market structures tend towards being an oligopoly as time progresses.In oligopoly market effort such as branding, advertising, business expansion is very core. Since the price battle cannot be done in oligopoly market, a firm must be able to make moves in non-price battle. To gain the competitive advantages in the long run, Coca Cola need to take care about their advertisement and sponsorship program, developing the research and development, keep expanding their market specially the location where Pepsi Co. gain more sales compare to Coca Cola.Coca Cola Company is one of the successful firms in oligopoly market, their effort to be existence in the market has leaded them to the top of beverage market until now.