ECO 561 week 3

Introduction

As a consultant for Coca-Cola Company, it is evident that the company needs advice on improvements to its operations. Although the company is the leading regarding sales of soft drinks, the business is under threat of changing consumer tastes and preferences. Consumers are now moving to more health-conscious products hence affecting Coca-Cola products that have been labeled as having too much sugar. These changes are a major concern for the stakeholders in the company and these needs to be changed to ensure that the company operates through profitability over time. While the company has been recognized as a leader among the soft drink players, accusations of price fixing, focus on profitability more than ethics, misleading advertisements and monopolistic competition have been common.

Market Structure

Coca-Cola can be identified as a company that operates under an oligopolistic market structure. While its main competitor is Pepsi, it is evident that the company is so dominant in the marketplace that any changes in the pricing of the products can lead to changes from other competitors. The market share for Coca-Cola alone is 48.6 percent, which means that the company has a vast market power that is easily recognizable. This single market dominant has led to Coca-Cola being considered as a monopoly with a capacity to control markets through its dominant means. Because of the focused differentiation strategy, new players in the market cannot effectively compete with Coca-Cola since the company has been accused of failing the marketplace. The company needs to diversify into other product lines to ensure that no single market player can blame the company of market dominance (Tremblay, 2017).

Macro-Economic Indicators

Coca-Cola is a company that has come out of recession and is likely in the peak of its business cycle. Since the company has a huge capital base, there is a need to develop market-based strategies aimed at boosting its profitability. The indicators that show that the company is at a high prosperity phase is due to the rising levels of interest rates, the increasing inflationary levels, the overall optimism of the business and the increasing income and employment rates. These indicators demonstrate that Coca-Cola is a company that has been outperforming the market expectations in the last three financial years.

Chart 1 is the graph that shows the current performance of Coca-Cola in the business cycle.

Chart 1

Since Coca-Cola is at the peak of its business cycle, the company can remain at that position for many years to come through the reinvention of its strategy. The company can adopt a focused differentiation strategy with the aim of ensuring that it has marketed its different products in a unique manner. Coca-Cola is expected enhance the segmented pricing strategy to ensure that the company has remained on top of its game. This will improve the company’s performance over a long time (Hilderbrand, 2016).

Industry Trends

In 2017, Coca-Cola was voted among the most valuable brands in the industry, because of adapting to the latest trends and demands in the industry. For instance, the invention of diet coke as a means of consuming a healthy drink made Coca-Cola still a sustainable business. Another focus of the company is in the engagement of social responsibility. Since the company believes in sharing its profits among the consumers, it is evident that Coca-Cola accounted as one of the companies that are keen on sharing their profitability with the consumers. Concerning analyzing the demand and supply of its products, Coca-Cola has been identified as one of those companies that often use equilibrium pricing as its best strategy. The company beats competition from its rivals through its traditional pricing strategy that is aimed at providing convenience to the consumer. The use of focused differentiation has also been a positive tool for Coca-Cola. The company can charge different prices to the consumers depending on their economic welfare.

Current Information on Substitutes

Coca-Cola Company has many substitutes in the marketplace. Pepsi products are the primary substitutes for Coca-Cola products. The company has in the past three years benefited from the shifting of the demand curve in its favor. The changes in the real interest rates and spending in the economy have always helped Coca-Cola a great deal. Because of these changes, many consumers are likely to purchase their products, especially during festivals. Coca-Cola has an efficient price elasticity that ensures that its products have been purchased easily by the consumers (Tremblay, 2017).

Concepts of Variable and Fixed Costs

Government policies have always affected the variable costs of Coca-Cola. For example, the minimum wage laws have forced the company to comply and change its labor pricing. It is evident that a big chunk of Coca-Colas finances usually goes to its variable costs. These have a significant impact on the financing model for the company. There is a need to identify the fixed costs of the company to ensure that Coca-Cola has well-financed models. The high inflationary levels have also made the raw materials to become more expensive for the company to afford. Sometimes the budget for research and development in Coca-Cola is always cut to accommodate the economic changes in the country. There is a need for the government to have a predictable policy that will ensure that costs are fixed over time (Stoneman & Bartoloni, 2018).

Conclusion

To sum it up, Coca-Cola should adopt several business strategies aimed at boosting its revenue over the years to come. The company should put more emphasis on its core business model which involves the sale and marketing of soft drinks. To drive more revenues and sales growth, Coca-Cola should be focused on marketing different products aimed at ensuring that the company is more successful in its dealings. The company can be more successful through the adoption of the segmented pricing. One of the major areas where the business of Coca-Cola succeeds is in the use of the focused differentiation strategy. However, the mix of this strategy with the segmented pricing can act as a tool for ensuring that Coca-Cola has succeeded in its core business hence providing that the company is more successful in its dealings.

References

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Stoneman, P., & Bartoloni, E. (2018). The microeconomics of product innovation. Armonk: Sharpe

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Tremblay, V. J. (2017). Industry and firm studies. Armonk, NY: Sharpe.

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Hildebrand, D. (2016). The role of economic analysis in the EC competition rules. Austin: Wolters Kluwer Bottom of Form

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