The Competitive Strategies Of Coca Cola Economics Essay

The Competitive Strategies Of coca plant dope Economics EssayThis musical composition is discussing ab off the economical mart structure, especially for im better disceptation commercialise place which ar noncompetitive challenger market and oligopoly market. There allow for be explanations ab show up definition, characteristics, and examples of monopolistic contest market and oligopoly market. There is Dunkin Donuts Inc. for the monopolistic competition market and Coca Cola Co. for the oligopoly market. This paper likewise will discuss about competitive strategies of Coca Cola. introductionIn economy study, people know that there are view types of market in the existence. These market types are differentiated according to number / diffusion of unfaltering(s) in the market. According to Sloman Norris (2002), there are four types of market structures in the physical exercise, which are perfect competition, monopoly and monopolistic competition, oligopoly markets.Perfec t competition market is a market with the most sellers and buyers in transaction. In this type of market, the harvest-festivals that provided are mostly homogenous. To necessitate in into this market, there are no obstacles. twain of the buyers and sellers is price taker (OSullivan et al, 2008), so in this market price is not the factor that could affect the gross revenue, instead of it service is much more attractive.Monopoly market is a market with a single solid that provide product that has no close-substitutes. This measure up clearly shows that this type of upstanding has power that will allow them as the price maker, since there are no close-substitutes that can be chosen by consumer to replace the use of the service or goods provided by the sure. In this monopoly market there is entry barriers such as patent, government policy, etc.Perfect competition and monopoly market are the extreme condition in market. The otherwise two market structures which are monopolistic competition and oligopoly market is more common type of market that we can see in the real life situation if they are compared to perfect competition and monopoly market.This paper will 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.ContentsTheoryMonopolistic Competition MarketMonopolistic competition was developed by an American economist named Edward Chamberlin in thirties (Sloman Norris 2002). Monopolistic is a type of monopoly market there are quite number of firms tally in the constancy, 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 hardly affected with their competitors act or decision, or vice versa (Sloman Norris 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 known as Product differentiation (Parkin,2000).There are no entry barriers to get in into this monopolistic competition market. Barrier such as patent or government regulation is not applicable in this market (OSullivan et al, 2008). According to Parkin (2000), firms have the free entry and exit in monopolistic market. Normally if the condition of this market is highly profitable there will be a positive signal that invite numbers of firm to come in and the dispersal of profit will be divided to the firms in market, but when they performance of market is low, there will be number of firm as hale leaving this market. The below tables show monopolistic market in profit and loss time (Case Fair, 2008)However, in the long 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 term condition interpret (Case Fair, 2008)Oligopoly MarketOligopoly is a term that derived from the term of the Greeks which are oligos meaning little or few and polein meaning to sell. Oligopoly refers to a market where there are yet few firm running the business in the field. (Tucker, 2005). Not the same with monopolistic, to enter into oligopoly market is not easy to be done, 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 sure there is no bunch of firms operating in the oligopoly industry by issuing controller such as patent and business licenses. Besides that, firms in oligopoly market are majority competing also by publicizing campaign. The expenditure budget for advertising in this market is very high.Not similar with monopolistic competition market, oligopoly market is interdependent. The decision that made by f irm 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, each oligopolist create barrier for competitors to invade an important product improvement. Here are some examples of non-price competition (Riley, 2006)Free deliveries and installationExtended warranties for consumers and credit facilities largeer opening hours (e.g. supermarkets and petrol stations)Branding of products and obese spending on advertising and marketingExtensive after-sales serviceExpanding into new markets or diversification of the product rangeIn oligopoly market, the graph of demand will shows a kinked curve. 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 b ear (not follow to increase the price)If a firm cutting the selling price, the other firms will follow to cut down their selling price as goodKinked 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 behavior can be done with the Game 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 adumbrate by Samuelson and Nordhaus (2005), some general findings of game theorist in the area of imperfect competition areAs the number of non-cooperative oligopolists becomes large, industry price and quantity tend toward the perfectly competitive outcome.If firms decide to collude rather than compete, the market price and quantity will be close to those generated by monopoly. But experiments pop the question that as the number of firms increases, collusive agreements become more difficult to police and the frequency of cheating and non-cooperative behavior increases.In many situations, there is no still equilibrium for oligopoly. Strategic interplay may lead to unstable outcomes as firms threaten, bluff, start price wars, capitulate to unattackableer 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 main(prenominal)taining a cooperation (Mankiw, 2004). According to Parkin (2000), there are 3 things that need to be paid attention in Game Theory, which are rules, strategies and payoffs. The game theory will be illustrated as followingA and B are caught larceny a car, both of them were interrogated by the polices and they will sentence for 2 years in prison. The police suspect that A and B is involved in late(a) robbery, but they have no evidence to prove it.Rules A and B were put in different cabin, each t old 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 notwithstanding sentence for 1 year prison and the other one 10 years.Strategies the possible action that can be taken by A and B are , Confess 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 old age1 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 competing in it. Food and boozing industry is also included in monopolistic competition market. In example Starbucks, McD, KFC, and Dunkin donuts are well known in t he franchise business in food and beverage industry.Dunkin donuts is a beverage industry firm that provides donuts and the tied(p) coffee. Founded in 1950, today Dunkin Donuts is the No. 1 retailer of hot 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 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 unify 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 a s well as bagels, breakfast sandwiches, and other baked beverages. Dunkin donuts is having a powerful market position. It has become the No.1 in regular hot 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 carbonated 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 quite a lot carbonated drinks available (which can be categorized into monopolistic competition), such as FN in Malaysia. But in the practice, these carbonated beverages industries were dominat ed 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. occupied 31.6% and Cadbury-Schweppes 15.8% (In January 1999, the smallest oligopolist Cadbury Schweppes PLC, sold kick downstairs of its international business to Coca-Cola Co.) ( oligopolywatch.com, 2005).The branding and advertisement effort for Coca Cola and Pepsi are also competitive and they have their own characteristic. For Pepsi, they always hire known artist such as Britney Spears, Beyonce and Pink to advertise their Pepsi Coke. In the other side, Coca Cola always use a creative advertisement. They never closing their advertisement, e ven 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 effort, makes the carbonated beverage industry become an oligopoly market rather than monopolistic competition market.Competitive Strategies of Coca Cola Co.Advertisement and SponsorshipConsider the long-running Coke-Pepsi feud, both Coca-Cola Co. and PepsiCo. are trying to made a useful 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 past 80 years. For Coca Cola there is never too early 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 adver tise 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 west 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 transformation 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, waters, 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 nourishment their organizations innovative and efficient over the long run. Argued by Zachary (1999), market leaders need challengers to keep 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 interesting aspect is the technology its built on.Cutting PriceBy doing innovation such as lunch out Freestyle drink dispenser, it will help Coca Cola Company to do price cutting. Freestyle will become Cokes front-line robotic army for business intelligence, sending massive amounts of habit data back to the beverage companys Atlanta headquarters. The dispensers collect data on what customers are drinking and how much, and transmit that information each night over a private network to data warehouse system in Atlanta. Unique byproduct 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 process 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 most difficult competitive structure to evaluate than other market structures, because the intensity of competition is high whereby oligopolists battle for market share. Each and each move by a player attracts retaliation. And many mar ket 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.