(Tiểu luận) microeconomics assignmentfinal group projectcoca cola

National Economics University … 0O0… MICROECONOMICS ASSIGNMENT FINAL GROUP PROJECT COCA-COLA Class: EBBA 14.1 TEAM Phan Thi Mai Anh Nguyen Khanh Linh Tran Huyen Nga Ho Thu Nga Nguyen Ha Phuong Ha Noi - 12/2022 INDEX INTRODUCTION CONTENT I The soft drink indusstry is oligopoly A few large firms dominate the market Firms are interdependent/interrelation .4 Products differentiation Substantial barriers to entry .6 Imperfect information II Factor that affect demand and suppy over last year Demand 1.1 Price 1.2 Prices of related goods (complementary/ subtitutes) 1.3 Hobby, tastes, and preferences 1.4 New slogan .10 1.5 Marketing strategy 10 1.6 New products 11 1.7 The recovery after Covid 19 11 Supply 11 2.1 Technology 11 2.2 Costs of production (Input prices) 12 2.3 Government policies .12 2.4 Number of producers 13 CONCLUSION .14 REFERENCES 15 INTRODUCTION Soft drinks are defined as water-based flavored drinks usually with added carbon dioxide and with nutritive, nonnutritive, and/or intense sweeteners with other permitted food additives They first appeared in 1884 It was believed that a drugstore owner in Lisbon Falls, America, produced the product under the brand name Moxie Soon after, comparable products like Pepsi-Cola and CocoCola debuted Soft drinks have advanced significantly over the previous century, going from being a product available only at neighborhood pharmacies to a $60 billion industry that produces 10 billion ounces annually This development is the result of breakthroughs in marketing and manufacturing technology In this post-industrial period, soft drinks are one of the important beverage goods, and in recent decades their sales have been rapidly increasing The market for soft drinks is growing day by day due to the focus on health and wellbeing The global soft drinks market size was valued at USD 416.19 Billion in 2021 and is expected to expand at a CAGR of 5.2% from 2022 to 2028 Rising disposal incomes, changing lifestyle, and a growing population is expected to promote market growth over the next few years The growing demand for cleanlabel, gluten-free, low-calorie, and low-carb products drives the global soft drinks market Additionally, rising popularity among the millennials and increasing investments in R&D in the food and beverage sector are expected to drive the industry demand [2] Coca-Cola is the most famous and best-selling soft drink in history CocaCola, or Coke, is a carbonated soft drink manufactured by the Coca-Cola Company It was created by John Stith Pemberton in Atlanta, Georgia, in the late 19th century with the intention of being a patent medicine In 1888, Pemberton sold Coca-Cola's ownership rights to Asa Griggs Candler Coca-Cola was registered as a trademark in 1893 and began selling in every state of United States by 1895 in 1906, the business started to spread internationally Through Candler's innovative marketing strategies, Coca-Cola went on to dominate the world market for soft drinks in the 20th and 21st centuries On the 50th anniversary of Coke, it became the national symbol of America In 2020, CocaCola ranked as the sixth most valuable brand in the world according to Interbrand's "best global brand" research Coca-Cola ranked No 87 in the 2018 Fortune 500 list of the largest United States corporations by total revenue CONTENT I The soft drink indusstry is oligopoly A few large firms dominate the market The soda market is a large sector of the economy There are many carbonated beverages available in real life, which means that there is competition However, in the practice, Pepsi Co and Coca-Cola Co domained the carbonated beverage market for decades Coca-Cola Company is one of the most influential beverages and soft drinks corporations with global influence and the largest market share So, the soft drink industry becomes oligopoly Therefore, a smaller company like F&N in the beverage business has a small share of sales and cannot be compared to the sales of Coca-Cola and Pepsi Due to the factor of economies of scale, the market can be categorized into six main groups These are Coca-Cola, PepsiCo, Dr Pepper, National Beverage, Cheerwine and others The respective market shares for 2021 are 46.3%, 25.6%, 21.7%, 0.5%, 0.2%, and 5.6% (M Ridder 2022) It can be seen that Coca-Cola takes up almost half of the market share and its main competitor’s share twice as little The carbonated beverage business is an oligopoly market rather than a monopolistic competition market due to the number of firms in the market, the tendency for firms to enter the market, and the branding and advertisement effort Firms are interdependent/interrelation Definition: Firms always consider rival’s response when they make decisions The firms in the soft drink industry are mutually interdependent and each firm is affected by the actions of the competitors The sales of Coca Cola Company may end up being affected in case Pepsi changes its product specification or even the price of the product The competitors often act by changing their advertising, specification, and price In 2003 Coke-Cola introduced it`s affordable pricing strategy, sharply lowered its prices to 0.06$ A change in price can result in a significantly larger change in quantity demanded An increase in demand can help Coke achieve large-scale production and consequently reduce average total costs in the long run due to benefits of economies of scale Consumers would prefer Coca-Cola rather than Pepsi because it’s cheaper than Pepsi in this segment Pepsi - the main rival of Coca-Cola was obliged to reduce its price to a minimum of 0.097$ to maintain its market share The longer Pepsi allows Coke to retain a price advantage over it, the more customers it would lose in the long run However, these two businesses found it difficult to run operation at such low prices, therefore they both abandoned their reduced pricing strategy Products differentiation Definition: Product differentiation is the characteristic or characteristics that make your product or service stand out to your target audience It’s how you distinguish what you sell from what your competitors do, and it increases brand loyalty, sales, and growth Coca-Cola Company is in an oligopoly type of market structure because the firms in this industry produce products that are differentiated The competition depends on the way the brand of the firm markets its products because they have similar taste How then does Coca-Cola differentiate itself from the Pepsi drinks? - Coca-Cola Company uses diverse competitive strategies to sustain their leading position in the industry of soft drink It is vital for the company to sustain a brand image that mainly looks more diverse than Pepsi - Coke has a raisin-vanilla flavor and high salt nutritional value The corporation has been able to distinguish its offers to the various customer segments through its several brands, such as Lemon Coke, Diet Coca-Cola, Cherry, and Vanilla Coke - The special of Coke that makes strong impression is different packaging used for its different brands Coca-Cola sets itself apart from Pepsi through its packaging: the classic Coke with the red color, Diet Coke is black Coca-Cola frequently releases new looks for its products of each line - In addition to the packaging, Coca-Cola ensures that consumers can get these different brands in different quantities The plastic bottles come in sizes of 0.5, 1, 1.5, and liters, the cans in 0.25 or 0.33 liters, and the glass bottles in 0.25, 0.5, and liter It guarantees the recyclable and environmentally friendly nature of the packing materials In 2021, Coca-Cola reveiled PlantBottle - the world’s first fully recyclable PET plastic bottle made from 30% plant-based material In this way, Coca-Cola has differentiated its drinks from that of Pepsi to make sure it better meets the needs of its consumers - Most of Coca-Cola’s adverts are keen on emphasizing family, friendship, happiness The global brand platform of Coca-Cola is “Real Magic” which invites everyone to celebrate the real magic of humanity and coveys the message: Magic exists in unexpected moments of connection that transform the ordinary into the exceptional - The two competitors produce products that are almost similar, yet their practices of marketing have largely managed to generate a high brand loyalty level for every product Coca Cola maintains its discrepancy from other soft drinks by spending more than 20% of its advertisement budget to only differentiate its products Substantial barriers to entry It is difficult to enter an oligopoly industry and compete as a small startup company Oligopoly firms are large and benefit from economies of scale It takes considerable know-how and capital to compete in this industry Coca-Cola Company operates in an oligopoly market structure Its only real competitor is PepsiCo Together Coca-Cola and Pepsi’s dominate the industry and their size in the market create barriers that deter new companies from trying to compete on the international level High barriers to entry prevent smaller firms from making a large impact This allows the two firms to compete on areas other than price in an attempt to maximize profit Producing soft drinks for a wide market would require a significant investment in production equipment, brand material, and advertising The high cost and captital of operating in this industry prevent many companies from entering the competitive arena According to O’Sullivan et al (2008), the government has intervention in this market, making sure there is no bunch of firms operating in the oligopoly industry by issuing controllers such as patent and business licenses There aren’t many barriers to entry in the soft drink industry, it can be easy for any firm to begin their company and sell soft drinks to their customers However, mostly it can be very hard to be noticeable since there are already numerous diverse products and brands of soft drinks out there for consumers to select from According to Doyle (1990), the per capita beverage rate of consumption is the highest for Coca-Cola Company consolidated in the world Additionally, Coca-Cola Company has the highest number of consumers in the world and has created a high barrier to entry in soft drink market through its Document continues below Discover more from: Microeconomics Đại học Kinh tế Quốc… 648 documents Go to course 53 379 89 Premium 16 bo de trac nghiem kinh te vi mo co dap an Microeconomics 100% (62) Premium Giao trinh kinh te vi mo Lecture notes Full lectures Microeconomics 97% (79) Premium Test Bank for Microeconomics Microeconomics 100% (14) Premium Microeconomics midtermEXAM 1đề Lẻ Microeconomics 100% (13) Premium Midterm vi mô - Đề mid term thầy Bảo số Microeconomics 100% (10) Premium Giao trinh kinh te hoc Microeconomics increasing advertising To be precise, building a brand is the biggest barrier to entry in the soft drink industry 122 Economies of scale is a important element that should be took into account: - Focusing on economies of scale, which basically refers to the manner an organization can focus on the reduction of the average per unit cost of its services or goods by basically increasing the production scale for a single type of product For Coca-Cola, economics of scale are mostly at work when the corporation lowers the manufacturing or production cost by increasing its level of output - Coca-Cola is considered a billion-dollar brand in 19 countries It also owns 16 other billion-dollar brands and 20 more sparkling and still brands, which each produce around $500 million-$1 billion in revenue annually The company has the leadership position in the American soda industry, with a 46.3% market share PepsiCo ranks second, accounting for 25.6% of the soda market - Furthermore, Coca-Cola has a strong global distribution system in 200 countries, possessing more vehicles than both UPS and FedEx combined Thus, Coca-Cola has a huge moat with great economies of scale that no competitors could easily copy or beat That provides an extremely strong foundation for the business future growth Imperfect information Definition: Imperfect information occurs when the economic agents lack information about a good or any other information relevant to the transaction In this case, for example, the consumers may have partial information about the product quality, which would make it difficult to make a rational choice upon purchase Until 2019, Coca-Cola did not mention its sugar content publicly Because the consumers were unaware of the high sugar content and the possible risks associated with the product, they consumed it disproportionately This over-consumption has made the public overweight, which puts a significant strain on the healthcare system and the Government brought in the Sugar Sweetened Drinks Tax (SSDT) in 2018 100% (7) II Factor that affect demand and suppy over last year Demand 1.1 Price The price of Coca-Cola in USA is 0.76$ (while in VietNam is 0.38$) The average price for 92 countries is 0.94$ Recently, Coca-Cola has raised its price by 12% mainly due to food inflation Despite the increase in price of Coke and global recession, the demand for Coca-Cola doesn’t change much The company's second quarter data showed that net revenue increased 12% to reach $11.3 billion, exceeding analyst estimates However, Coca-Cola executives warned that there are already signs of inflation and an economic recesssion having a bad impact on consumer buying power, particularly Europe A consumer is more likely to buy larger quantities of Coca-Cola if the price is lower Thus, that price plays a significant role in determining demand 1.2 Prices of related goods (complementary/ subtitutes) - Subtitutes: The biggest substitute good is Pepsi Coca cola’s price is higher than Pepsi ($0.04) However, thanks to good quality and special flavor, Coca is still trusted by a large number of consumers Coke knows people are willing to pay a little more to get its products However, during the Covid 19, Coca-Cola’s price has rised, consumers want to put aside as much as possible, so they tend to choose cheaper products from small or private brands instead of Coca-Cola Since the price of coca is slightly more expensive than Pepsi, the demand for coca will decrease slightly because of its popularity among consumers and the demand curve will shift to the left - Complementary: Coca-Cola has contracted with many restaurants as well as famous food&beverage brands such as: McDonald’s, Popeyes, Burger King, Domino's Pizza, Dunkin’s Donut So, the demand for coco cola would decline if the cost of complementary products (Mc Donald’s, Burger King, KFC ) rises This shifts the demand curve to the left - The number of consumers: 1.9 billion Coca-Cola products will be sold around the world each day Coca-Cola operates in more than 200 countries around the world and has traditionally—like many global corporations—operated with a complex network of marketing and advertising partners throughout its worldwide business (J Beer 2022) Due to the impact of the covid epidemic in recent years, the number of consumers is also lower than before the epidemic, causing the demand curve to shift to the left Demand curve when shifting to the left (demand decreases) The Coca-Cola Company’s operational structure is composed of four geographic operating segments: Europe, Middle East & Africa; Latin America; North America; and Asia Pacific 1.3 Hobby, tastes, and preferences The most longlasting and biggest rival of Coca-Cola is Pepsi.They have some difference of flavor if sipping slowly According to Business Insider, author Malcolm Gladwell notably summarized the differentiations in his book "Blink," stating that Pepsi has a "citrusy flavor burst, unlike the more raisinyvanilla taste of Coke” It can be saw clearly in the nutrients fact that Pepsi’s ingredients include citrid acid and Coke lacks it in the category Pepsi has a higher amount of sugar as well as calories and caffeine: Pepsi has more grams of sugar than Coke in a 12-ounce can (41 grams and 39 grams) That’s why Pepsi is sweeter than Coca - the biggest difference between them Moreover, Coca Cola has a higher amount of sodium as well as more aggressive fizz Many surveys show that the majority of consumers prefer Coca Cola to Pepsi That’s why even if the price of Coca-Cola is more expensive than Pepsi or increases, the demand for Coca still remains In annual net income, Coke has beat out Pepsi every year since 2004 just except in 2006 1.4 New slogan In 29/09/2021, Coca-cola introduced a new global brand platfrom “Real Magic” replacing “Taste the Feeling” since 2016 and revealed a new logo “Hug” The "One Coke Away From Each Other" campaign is the "Real Magic" platform's initial creative experience Consequently, according to the second quarter business statistics published in early July, the brand’s sales increased by 18%, revenue increased by 42%, and profit margins improved dramatically That means the demand curve shifted the the right 1.5 Marketing strategy Coca-Cola's unique and creative marketing strategy is what makes it one of the most successful beverage companies in history Since 2015, Coca-Cola has spent an average of billion dollars a year on advertising worldwide, aside from 2020, with only about 2.8 billion USD because of Covid 19 In 2021, the brand has doubled its marketing budget and recorded many positive results This increases the demand of customers and shiffs the demand curve to the right In the second quarter of 2021, the company's net revenue grew 42% to $10.1 billion, while net income increased from $1.78 billion in 2020 to $2.64 billion Some striking marketing strategies of Coca-Cola in over last year: The first Christmas campaign after announcing the new global brand strategy Real Magic in September 2021 - "Real Magic at Christmas"; “Believing is Magic” global campaign in World Cup 2022 In the last month of 2022, Coca-Cola Viet Nam welcomes New Year 2023 by launching “Tết thay đổi, điều kì diệu đây” campaign (Despite the changes of Tet, miracles are still here) Coca-Cola has has used multiple social media effectively to promote marketing strategies so they are increasingly successful and attract consumers This makes demand curve shift to the right 1.6 New products In 2022, the beverage giant releases some new flavors There are CocaCola with Coffee Mocha, and Coca-Cola Creations which has limited-edition flavors: Starlight, Byte, Marshmello's Limited Edition, Dreamwork Coca-Cola also annouces a new, mordern packaging style for its Coca-Cola Flavors lineup That has provoked the curiosity and discovery of consumer and tend to shift the demand curve to the right 10 1.7 The recovery after Covid 19 In 2020, during the pandemic, Coca-Cola struggled as people spent more time at home and many of the places serving soda shut down 50% of Coca Cola's business revenue comes from amusement parks such as cinemas, restaurants, and sporting events When public spaces like this were closed in March 2020, the financial burden was put on this brand Since the end of 2021, the infection and severity of Covid 19 has declined People tend to go to restaurants, cinemas, amusement parks…The demand curve shifts to the right This benefits Coca-Cola beacause as the beverage giant has a large market share in external consumption channels and Coca-Cola’s price at outside locations is higher than at grocery stores where sell Coke for home consumption For the full year of 2021, the company's revenue grew 17% to $38.7 billion while EPS Demand curve shifts to the right (demand increases) grew 26% to $2.25 Supply 2.1 Technology Coca-Cola is making investments in advanced technology, modernizing and digitizing many of its supply chain procedures Coca-Cola utilizes new and different technologies and processes that will optimize its infrastructure and turn its current facilities into productive mega-plants that can efficiently supply an 11 entire nation or area To promote product innovation, Coca-Cola also updated its production lines For instance, Coca-Cola invested in a new premium glass packaging line for FUZETEA in the Czech Republic and Romania and for Coca-Cola Energy in Hungary Coca-Cola recently made investments in additional production capabilities for various package sizes in Italy At our Nogara facility, we provided an aseptic PET line and new TriBlock technology to a PET line at Marcianise plant Moreover, Coca-Cola proceeded to invest in automation for its high-capacity warehouses There will be a rightward shift in supply curve Supply curve shifts to the right (supply increases) 2.2 Costs of production (Input prices) For Coca-Cola, the costs of production include raw materials, transportation and delivery and packaging Because of the economic recession and inflation, the input prices have increased This led to the increase in price of Coca-cola and a slightly decrease in supply Coca-Cola has moved to produce big size products which makes it receive less profit 2.3 Government policies 12 Government policies, such as taxes, restrictions, and subsidies, can have an impact on the cost of manufacturing For example, in May 2018, the Government introduced the Sugar Sweetened Drinks Tax (SSDT) Since the tax rate on Coca-Cola Original Taste was so high, they passed the whole tax on to retailers, as the government had expected producers to This was accomplished on certain packs by combining decreased pack sizes and higher costs As a result of the tax, Coca-Cola had to exchange 1.75L bottle with a 1.5L one and they have decided to raise the capacity of the 1.75L Coca-Cola Zero Sugar and Diet Coke bottles to 2L, making zero sugar alternatives even more affordable [13] For the year ended September 30, 2022, Coca-Cola paid $2.181 billion in income taxes, a 27.25% decrease from the previous year The company must deal with harsh taxation policies in some countries to set up its branches The government policies in many countries have significantly come up with policies for price control The companies must control their prices according to the country’s policies [14] It seems that policies of government have minimal impact on the supply of Coca The supply curve may shift to the left Supply curve shifts to the left (Supply decreases) 2.4 Number of producers There are thousands of soft drink brands all over the world (There are 376 soda production businesses in the USA in 2022) but Coca-Cola is one of two powerhouses controlling the soft drink industry Since 2004, Coca-Cola Company has been the market leader Despite a 13% drop in brand value in 2021, Coca-Cola maintained its position as the most valuable soft drink brand in the world with $33.2 billion, according to Brand Finance Nearly 60% of all non-alcoholic beverage production in the world is under the control of CocaCola and Pepsi (Maverick, 2022) In 2021, about 46% of the market is dominated by Coca-Cola [3] 13 CONCLUSION The soft drink industry is oligopoly which is closer to monopoly than pure comeptition It has features of oligopoly market: a few big bussiness control the market, interdependent firms, the difference of products, quite high barriers to enter or exit, imperfect information Coca-Cola is the top brand in this market With all these factors above, in 2022 Coca-Cola’s financial report has gone beyond expectations and raised growth forecast despite global recession Coca-Cola's revenue for the year ended September 30, 2022, was $42.343 billion, up 12.01% from the previous year [15] According to the report of CocaCola’s third-quarter 2022 results: Net revenues increased by 10% to $11.1 billion, and organic revenues (non-GAAP) increased by 16%; Operating Income increased by 7%, Comparable Currency Neutral Operating Income (NonGAAP) grew 18%; Operating Margin was 27.9% compared to 28.9% the year before, while comparable operating margin (non-GAAP) was 29.5% compared to 30.0%; EPS rised by 14% to $0.65 while comparable EPS (non-GAAP) increased by 7% to $0.69 Reuters reports that Coca-third-quarter Cola's revenue and earnings above expectations, which led to a 2.3% increase in the company's stock price The company expects net sales to increase 14–15% in 2022, which is 2% more than its earlier prediction of 12–13% Coca-Cola increased its prior prediction for full-year earnings per share growth from 5-6% to 6-7% In 2022, Coca-Cola’s brand is valued at 97.9 billion U.S dollars Moreover, following the Brand Finance Food & Drink 2022, Coca-Cola dominates the non-alcoholic beverage industry with a global market value of US$35.4 billion; Coca-Cola also has an outstanding AAA+ rating, making it the most powerful non-alcoholic beverage brand In general, Coca-Cola is the top brand in the soft drink industry with 46.3% market shares 14 REFERENCES L.J Mohan Rao, K Ramalakshmi (2011), Recent Trends in Soft Beverages [2] Soft Drinks Market Size, Share & Trends Analysis Report By Product, https://www.grandviewresearch.com/industry-analysis/soft-drinks-market-report M Ridder (2022), Leading carbonated soft drink (CSD) companies in the United States in 2021, based on volume share Coca Cola market structure Analytical Essay (2021) D Saxena (2018), Product Differentiation is the Secret Ingredient (Pepsi vs Coca-Cola), https://www.superheuristics.com/product-differentiation-pepsi-vscoca-cola/ Level Strategic Pricing Between Coca Cola Company and PepsiCo Journal of Economics & Management Strategy, 905-931 Doyle, P (1990), Building successful brands: the strategic options Journal of consumer Marketing, 5-20 UKEssays (2018), The Competitive Strategies Of Coca Cola Economics Essay, https://www.ukessays.com/essays/economics/the-competitive-strategiesof-coca-cola-economics-essay.php?vref=1 K Martin (2022), Why Coca-Cola Is Planning To Keep Raising Its Prices, https://www.tastingtable.com/943054/why-coca-cola-is-planning-to-keepraising-its-prices/ 10 J Beer (2022), Coca-Cola has an ambitious plan to double its number of customers in the next few years 11 M Ridder (2022), Coca-Cola Company's advertising expense from 2014 to 2021, 12 Supply Chain Overview, https://www.coca-colahellenic.com/en/about-us/ what-we-do/supply-chain 15 [13] The Sugar Tax, https://www.coca-cola.co.uk/ingredients/reducingsugar/lets-talk-about-soft-drinks-tax [14] Flood P (2000), Managing Strategy Implementation, an Organizational Behavior Perspective 14 J Gelski (2021), Food Business News, State of the Beverage Industry 15 CocaCola Revenue 2010-2022, Macrotrends 16 J.B Maverick, Coke vs Pepsi: Who Controls the Market Share? https://www.investopedia.com/ask/answers/060415/how-much-global-beverage -industry-controlled-coca-cola-and-pepsi.asp#citation-1 17 Coca-Cola Reports Third Quarter 2022 Results and Raises Full-Year Guidance, https://investors.coca-colacompany.com/news-events/press-releases/ detail/1071/coca-cola-reports-third-quarter-2022-results-and-raises 18 Brand Finance Food & Drink 2022, https://brandirectory.com/rankings/food/ 16