The Demand Of Coca-Cola

availability of substitutes, and justify how you determine the price elasticity of demand for your firm’s product. b) Explain the factors that affect consumer responsiveness to price changes for this product, using the concept of price

If the product coast a large percentage of the average consumer’s income, people will pay more attention to sale prices because they may be afraid of a fact that if the price keeps rising, they can’t afford it because it is expensive and costs most of their income. It is common that we spend more than $200 on one pair of Nike shoes, which are quite expensive. However, the price of bread is low. Furthermore, one pair of Nike shoes costs more percentage of clients’ income than a piece of bread. If the price declines, people would like to buy more Nike shoes because they can’t afford it in normal time. However, people won’t buy too much bread than before because the bread may go rancid quickly. So people are more sensitive to the price of Nike shoes. As a consequence, all Nike shoes sold in Canada have more elasticity than all bread sold in Canada.

Supply and demand lies in the heart and soul of economics. The concept is perhaps the single most driving force in an economy, specifically a capitalist economy. Supply and demand is based on two concepts: The law of demand and the law of supply. The law of demand states that the demand of a product rises as its price falls, therefore the demand of a product falls as its price rises. A good example of this occurs in grocery stores. If the price of a case of Coca-cola drops from $6.99 to $2.99 the demand for the product will rise because more people are willing to pay $2.99 rather than $6.99. Not only will typical consumer of Coca-cola purchase more but consumers who are not normally willing to pay $6.99 will make the purchase. Substitution also plays a role in the equation. Substitution occurs when consumers substitute one good for another based on price levels. In the Coca-cola scenario, some Pepsi drinkers will purchase the Coca-cola given the case of Pepsi is price higher.

The law of demand is graphically demonstrated by a(n) a.perfectly vertical demand curve.b.perfectly horizontal demand curve.c.downward-sloping demand curve.d.upward-sloping demand curve.e.curved demand line. ANS

Demand for the product is determined by many factors, like pricing, quality, advertising and distribution.

The political situation of a country affects its economic settings and economic environment affect the business performances. Coca-Cola sales are impacted by a set of economic factors that beyond are beyond the company’s control. These factors include the level of economic growth in the country and in the industry, tax rates and currency exchange rates, interest rates, labor costs and others. The global economic and financial crisis of 2007 – 2009 is a relevant example of an economic factor that greatly impacted the majority of businesses around the globe. However, the crisis has impacted Coca-Cola to a lesser extent compared to many other businesses. Its’ operating margin remained at industry-front 22% despite the crisis, although dividend yield was reduced to 2.6 % Quarts. (Timmons, H. (2014). Economic factors relate to goods, services, and money. Despite directly affecting businesses, these variables refer to financial state of the economy on a greater level –whether it be local or global, inflation increases cost of production. Consequently, Coca-Cola had to face the uncontrollable problem of increasing their pricing. With this increase they risk losing customers who cannot afford their products because it is a desired product not a necessity. Due to inflation in 11 years the price of an identical bottle of Coca Cola has doubled in price. Alternatively, Coca Cola could be forced to lower their prices to facilitate an increase in consumption

Understanding the fundamental concepts of economics allows us to analyze laws that have a direct bearing on the economy. These laws and theories are essentially the backbone of how economics is used and studied. The law of demand can be expressed by stating that as long as all other factors remain constant, as prices rise, the quantity of demand for that product falls. Conversely, as the price falls, the quantity of demand for that product rises (Colander, 2006, p 91). Price is the tool used that controls how much consumers want based on how much they demand. At any given price a certain quantity of a product is demanded by consumers. As the price decreases, the quantity of the products demanded will increase. This indicates that more individuals demand the good or service as the price is lowered. This can be illustrated using the demand curve. The demand curve is a downward sloping line that illustrates the inversely related relationship of price and quantity demanded.

The demand curve shows what happens to the quantity demanded of a good when its price varies, holding constant all the other variables that influence buyers. When one or more of these other variables changes, the demand curve shifts leading to an increase or decrease in demand. The table below lists all the variables that influence how much consumers choose to buy cigarettes.4

Another important weakness is that the company’s products are seen as a major cause of obesity. (Melser, 2013) The beverage sales are affected by various factors including change in trends and preferences. Recently, beverage sales have fallen because of people’s increased preference for the health drinks. Around the world, obesity is a major problem and the Coca Cola products are seen as a major cause of obesity. As people are getting health conscious they are moving towards low calorie healthy drinks. This affects coca cola’s profitability and popularity. However, the brand can overcome this situation by increasing the number of low calorie products in its brand portfolio. It will need to add more healthy choices for its customers in its product portfolio.

Price elasticity of demand is an economic measure that is used to measure the degree of responsiveness of the quantity demanded of a good to change in its price, when all other influences on buyers remain the same.

This relationship interprets that, given an upward in proportionate in the income of the consumer, the demand of the quantity demand of the product will consequently increase (1.62) percent. There is an indication from the market that if the company notices the consumer demand is higher due to increased income, the price of the product will tend to be increased.

Increase in cost of energy(electricity, natural gas etc) and raw materials(high fructose corn syrup, sucrose etc) can have a negative impact on the product’s profits (The Coca Cola Company 2007, 2006 Annual Report on Form 10-K).

Coca-Cola is a well-known global soft drink brand that has been around for over 130 years. Its distinguished taste, unique ingredients, and famous contour bottle is not recognized internationally but throughout various countries around the world. The company’s business level strategy is differentiation/ low cost strategy. This strategy is important for the long term success of the company because it allows for the company improve to adapting to environmental changes, learn and teach new skills, and gain leverage over core competencies which in turns increases its value. Coca-Cola does not have an issue with introducing and innovating products to its

When the consumers decide to purchase a good, they have considered several different aspects of it. Normally when the prices are low, consumer’s demand will increase in buying the good. Though price is the dominating contributing factor of consumer’s choice, they also considered all aspects, before making a purchase. The demand curve starts to shift to the right; it represents the product is becoming more in demand. If the prices are the low but the demand is not increasing for quality as an issue, it will shift to the left on the demand curve. There are some consumers who want cheaply made goods this will only effective if that demand was in demand. Consumer also influence the supply of a good. If the demand is high enough to create a

The Coca-Cola Company has the largest global market share so far (Yoffie and Wang 17). Though Pepsi market shareholding in the international market is growing fast, Coca-Cola remains the leader company in the beverage industry. Such strengths give the company the capability to optimize its opportunities. Global market leadership reflects product marketability and financial stability. Consequently, the company has perfect capacities to advance competitiveness both locally and globally. The company has gained customer loyalty over time and thus secured a proportion of its market share. Increasing customer loyalty reflects the degree of meeting the company’s customer satisfaction. Again, the company utilizes fantastic marketing strategies. The company focuses on meeting the needs of customers and ensuring continued delight in consumption of its products. As well, the company has secured a