The Market Model Patterns of Change - Research Paper Example

? The Market Model Patterns of Change Coca Cola Company was started in the late 19th century. It is the largest soft drink companyin the world and has for the past few years come up with new products. These products are like new coke, coca cola black and coca cola orange. In the very beginning, coca cola was a monopoly. This was eventually disrupted by the introduction of Pepsi into the market. The market became an oligopoly type of market. Coca Cola and Pepsi are the major soft drinks manufacturers in the world. Other companies have come into existence such as RC Cola which is the third largest soft drink manufacturer in the world (Bodden, 2009). The introduction of Pepsi and other competitors into a market changed Coca cola’s business operations. Among these was the adoption of increased advertisement to popularize the brand. In addition, it introduced new incentives to the market like sports sponsorship and holiday campaigns. The company has also introduced new products like bottled water. The company entered new markets and increased the number of outlets in the globe (Petretti, 2008). In the short run a business seeks to maximize on the profits by increasing production, decreasing production and continue producing. Coke started operating aggressively in France in 1999. Its primary concentration was customer satisfaction. This is evident through incentives offered to retailers and middlemen. This has made coke available to the customer. It has also acquired shelf spaces in areas that the customer can easily access the product. Coca cola aims to reduce it cost of production in the long run. This could be achieved through the change in capacity levels in order to reach low cost, which is evident through its plan to increase production in china. It would be achieved through introduction of new production line. If coca cola could remain consistent in the market and reduce the amount of dividends payoff, it can increase its revenue (Landsburg, 2011). The company competitive ability has been undermined by a number of factors. The French government refused the company to purchase Orangina. Oringina is a French soft drink company. In addition, Coca cola was forced to scale back its acquisition of Schweppes. This immensely affected its competitiveness in the European market. Needless to say, the company was sued by its distributors as it sought to expand its market of powdered sport drinks. This created a bad reputation to the Coca Cola Company. It however created a problem within its distribution channel. Coca cola has faced tough economic conditions. According to Gill (2008), these conditions have led to low consumption of the beverages. It has encountered high ingredients cost and a decline in sales. In countries such as India the company has received criticism from activists. It has been accused of depleting underground water where the bottling plants are located. The company has to improve on its corporate social responsibilities in order to remain competitive in the industry. Competitors are forging partnerships that are aimed at increasing their market share in certain markets (Gill, 2008). Pepsi and Tingyi holding corporation established an alliance that aims to exploit the China market. Coca cola moved in to increase its production in the market by building new production lines. On the other hand, Pepsi has been able to improve its market share to almost 20 percent as compared to coca colas’ 17 percent. Coca cola has experienced a decline in profit levels. In Europe it registered a 4 percent decline in sales. This is due to the economic crises facing the continent (Gill, 2008). Pepsi produces soft drinks as well as snacks. Coca cola has been able to improve on its products as well as come up with bottled water. This indicates that the competition is stiff. Petretti (2008) denotes that these companies are innovating new ideas to remain relevant in the market. Pepsi has been reported to have spent around 3.5 billion dollars in marketing its products. Pepsi has recently realized 20 billion dollars in revenue as compared against coca colas' 13 billion dollars in the first quarter of the year. Coke has over the years increased its marketing budget allocation. In 2006, Coca Cola Company allocated 2.5 billion dollars to advertising. There are a large number of coke and Pepsi bottles that are sold every day. Notably, Coke has registered about 1.8 billion bottles being sold in the world (Gill, 2008). Pepsi as a close competitor of coke has been able to cut on its products prices. It offers350ml bottle to a consumer at the same price compared to coke’s 300ml bottle. Rc Cola also prices its products slightly higher or lower as compared to cokes prices. This is referred to as price skimming. The company set the prices higher than the competitors pricing and rapidly lowering it after a short period of time. If the competitors lower their prices the company could adopt psychological pricing hence attract a great number of customers. Coke priced its two liter coke at $2.49, which is lower than previous price of $2.50, creating the urgency on its customers to buy the product due to lower prices (Petretti, 2008). Psychological pricing has proved effective in increasing the profits in the short run. Coca Cola Company could adopt promotional pricing where customers increase their urge to buy the product. On the other hand, segmented pricing sets prices for different sizes of the product (Landsburg, 2011). It maximizes the profits of a company. Monopolies in various markets derive their profits from equating marginal costs to marginal revenue. This is the equilibrium output level that would derive maximum profits for the monopoly. In setting prices for products manager experience differences in terms of creating increased demand for the product and lowering the product value. Customers might perceive low priced products to be of low value hence they cease to buy the product. Managers adopt a threshold that would set prices in a way that it would increase on the demand (Landsburg, 2011). Managerial economics is science that deals with scientific theories and principles. On the other hand, globalization is the integration in world cultures and views. Managerial economics deal with topics such as strategic planning, market structure and conditions, pricing decisions and policies, demand analysis and forecasting, impacts of liberalization and capital management. Globalization would compare these topics with politics, religion and economics of the world. In reference to Hirschey (2009), globalization has led to the increase in interdependence in world economies. It has been made possible by cross boarder movement of goods, capital and technology (Hirschey, 2009). References Bodden, V. (2009). The story of Coca-Cola. Mankato, MN: Creative Education. Petretti, A. (2008). Petretti's Coca-Cola collectibles price guide. Iola, WI: Krause Publications. Gill, M., & Gill, C. (2008). Coke or Pepsi? 3. Longwood, Fla: Fine Print Publishing. Landsburg, S. E. (2011). Price theory and applications. Australia: South-Western/Cengage Learning. Hirschey, M. (2009). Managerial economics. Mason, OH: South-Western Cengage Learning. Larsson, T. (2001). The race to the top: The real story of globalization. Washington, DC: Cato Inst. Read More