Coca-Cola Amatil Downsizes Cans to Increase Sales - Case Study Example

Section one The main issue presented in the news story The issue in the article “Coca-Cola Amatil downsizes cans to increase sales ” is that, coca cola company intends to reduce it packaging bottle to 200 ml. this is due to increase in competition from rival company companies such as the swecheppes. In recent months, coca cola production and sales has been declining and consequently, this has made the company to re-package their can in smaller in order to encourage efficiency and effectiveness in carrying and using the coca cola can. The head of CCA and its marketing partner coca cola south pacific are of the opinion that repacking the can of coca cola sprite and fanta into a smaller size will increase give a boost to the sales level as well as the growth by appealing the client. Possible impact Reducing the size of the can will increase the volume of coca cola product being produced implying that there will be a change in the selling price. This would lead to increase in supply while demand increase. The business will report a huge profit from the sales since, the increase in demand will be higher than the level of sales hence forcing the company produce more coca cola products at a smaller can with less price that is easily affordable by all consumers ion the market. The emergence of competition will as well be eminent and thus healthy competition will lead to quality product as well as economic growth. The ACCC should ensure that there is free and fare competition in order to get rid of monopoly market as well as enhance growth in and innovation. The net effect is that it will affect the economy of the country and thus the per capita income and living standard of individual will enhance. Key stakeholders that are impacted by the issue The stockholders to be impacted are the direct consumers of the coca cola product, the suppliers, as well as the competition commission of Australia since they are the direct shareholders and bears direct impact of any economic change. The net effect is that an increase in the level of Coca-Cola supply in the market would lead to a reduction the level of income because the new can will be sold at lower prices. The consumer will benefit from the lower prices and thus the retailers and outlets will majorly benefit from reduction in selling prices since they will make supernormal profit from investment. To avoid consumer exploitation. The consumer right is keen on ensuring that there is free and fare competition in the market as well as getting rid of the monopoly. The risk to retailers is that since the price is affordable, they will increase the level of their demand leading to huge stock in soft and thus facing the possibility of incurring financial loss. In general, reducing the price and value of the by coca cola company is a big boost to the consumers since they can afford it but the major impact is on the coca cola company in case the anticipated sales strategy fails to pick and recover the operating cost. This will be a huge loss to the company consequential from poor marketing strategy that might not consider other external factors. Economic theories/concepts/diagrams that can be applied to this news story. Coca-Cola company anticipate to reduce the size and price of their packaging can. This will lead to increase in the level of sales due to low prices of the new product. Excess supply of the product in the market will lead to surplus existence where there is no proportion between the quantities of goods demanded with the supply. There is huge supply of good in the market while there demand is minim al hence leading to surplus. The graph below depicts the effect of reducing the value of the can and the selling price. Price Supply {QS>Qd} P A P2 P3 Demand Q1 Q2 Q3 Quantity From the above demand supply curve, it can be observed that the surplus unit of the coca cola product is at point A where Qs=Qd. This would lead to market disequilibrium and market inefficiency. To get rid of this, an equilibrium market where Qd=Qs is necessary. Equilibrium point is ideal since, surplus leads to appearance of wasted output while shortage will create discontent by the customers. The equilibrium demand and supply curve Price Supply P Q Demand At equilibrium, quantity demanded equally quantity demanded. [Qd=Qs}.the coca cola company intends to cause disequilibrium in the Market if they are going to reduce the selling price and the size of the company. This will lead to emergence of cartel and thus a manly of its kind will be observed in the beverage company in Australia. Manly market will lead to stunted economic growth due to little innovation. This will lead to rival and fierce market competition that might harm other competitors. To get rid of this, ACCC ensures that there is healthy competition with consumer protection as well as ensuring that there is growth in the economy Other issues Coca-Cola Company should consider the effect of external parties such as the consumer right as well as the right of other competition in ensuring that there is healthy competition. The company is making a forecast of reducing the size of the can without considering the external factor that might affect its achievement. Inflation is junkwoman might an effect a company budget and forecast and thus the effect of inflation must be considered in the marketing strategy adopte4d by the business. The government regulation might hinder the achievement of the coca cola marketing strategy. This is because; the company might set out new legislation that might affect the company’s production and operation if it is going to add anew-marketing strategy into their existing production system. Section 2 (http://www.abc.net.au/pm/content/2015/s4179039.htm) Rio tinto one of Australia largest mining company double its profit by 78% reporting a net profit of $ 6.5 billion. The increase in net profit is attributed by factors such as the cost cutting as well as increase in the level of supply despite then a slump in the price of iron ore and coal. This is a major boost to the company since, the shareholders wealth is maximized and thus business growth and dividend per share is going to increase. The slump in market price of iron ore is due to rival competition from BHP Billiton as well as Brazil’s vale that have increased the production cost since the big company want to kill the small company. The decreasing in production cost is attributed by lying off 4,000 workers, effecting the production operation, as well as increasing the level of employment. Possible impact The reduction in number of employees by 4,000 is a huge number it really affect the living standard of people working with the company, this will lead to stunted economic growth since the per capita income of individual who were relying on Rio Tinto will decline implying that the income and expenditure will reduce. The company will benefit very much from reduction in production and operation efficiency since, increasing the level of supply together with cost reduction will lead to increased reported net profit to the business and thus shareholders of the busies will benefit from the supernormal growth, Key shareholders that will be impacted The increase in supply will, lead to reduction in selling price and thus direct consumer or users of the iron ore and coal will benefit. The surplus will lead to a reduction in production since the product will be sold at a lower price to maintain such, business will tend to control prices, which cannot be executed by hoarding. The ACCC is a protector of consumer and the country’s economy from exploitation by private enterprises. The body ensures that there is free and fare competition, non-existence of monopoly and eradicating illegal scheme in order to enhance the wellbeing of the customers as well as an ideal business environment. The shortage will lead to an increase price level and thus will strain the consumers. Impulse buying at lower prices will lead to financial loss since; everybody will be having the product at their disposal at lower price. In order to ensure that no shareholder is negatively impacted more as others. Market equilibrium is necessary since it will create equality in the market regarding the demand and supply. Economic theory that can be applied Rio tinto claimed tom report a higher net profit in the fiscal year 2014.Tis is attributed to lower production cost with increase in the level of supply in the market. The increase in supply will lead to surplus hence causing market disequilibrium. Where the quantity demanded is lower the quantity supplied, surplus of product exist in the market. The effect would be a reduction in selling price, financial loss and hoarding of goods with an intention that shortages will lead to an increase in price level. The surplus profit Price Supply {QS>Qd} P A P2 P3 Demand Q1 Q2 Q3 Quantity At point A, Quantity demanded is less than quantity demanded supplied leading to surplus of the product in the market. The excess of the output will lead to a reduction the selling price and thus it might lead to financial loss and thus other companies practice hoarding in order to save the business from running at a loss. Hoarding is an artificial shortage created by company in order to create scarcity of the product with the mindset that the price will go up due to high demand of the product in the market. The effect of hoarding is presented in the graph below Price Supply P P2 A P3 Demand {Qd>Qs} Q1 Q2 Q3 Quantity The effect of hoarding will lead to shortage where Quantity demanded is greater than Quantity supplied as depicted by the graph above. The effect of hoarding is that it will lead to shortages and consequently the price of the product will increase hence saving the enterprise from financial loss. The effect of surplus or shortages in the market will cause disequilibrium and thus create market inefficiency. At equilibrium, quantity demanded equals quantity supllied. Equilibrium market is ideal since, the effect of surplus will lead to appearance of wasted output and shortage brings dissatisfaction on consumers. The graph of equilibrium market Price Supply Demand Existence of market equilibrium will eradicate hoarding, consumer exploitation as well as the market inefficiencies. there will exist free and fare market competition, non-existence of monopoly and thus the economic growth will be eminent due to innovation and creation from numerous companies who compete healthy with other companies in the market. Other issues Other issues that need to be checked on are the effect of global financial crisis that affect the price of iron ore and coal even much worsen. The current laying off 4,000 employees could even increase much if the business will continue facing fierce competition from rival companies such as the NHP Billiton and Brazil’s vale. The company therefore should consider investing heavily in mining operation that will lead to efficiency in and effectiveness in production in order to minimize the production and operation cost as well as increase the level of output. This will lead to generation of profit despite a slump in price of iron ore and coal. The external parties such as the government and the national environment and safety board will affect the forecast since; increase in the level of output implies an increase in the size of the land that will be mined. The effect is that, a warning on environment safety standard will arise and if not careful considered, the government and other stakeholders of environment might affect the business strategy in imposing stringent rules and regulation governing the environment. In this regards, the company should consider both the internal and external factors that might the business forecast as well as incorporate them in their forecast in order to get rid of running at loss due to poor forest. Read More