The Coca-Cola Company is a manufacturer, distributor and marketer of non-alcoholic beverage concentrates and syrups. The company is well known globally for its flagship product Coca-Cola. It was first invented by a pharmacist named John Stith Pemberton in 1886. It is a US based company with headquarters in Atlanta, Georgia. Current statistics estimate that Coca-Cola offers more than 400 brands in over 200 countries or territories and serves 1.6 billion servings each day.
With the help of fundamental economic theories and concepts this paper provides valuable insight into the factors behind the century long success of Coca-Cola. .
Coca-Cola and Market Structure .
Coca-Cola, the global soft-drinks giant, is operating under oligopoly market structure. Oligopoly is a form of imperfect market structure with few large firms dominating the industry. One of the important features of the oligopolistic market that differentiates from monopolistic competition is interdependence of firms. The strategic actions of one firm will have significant impact on other firms' price and output decision. Besides, oligopoly firms will engage in non price competitions like advertising, licensing and product advance to grab larger market share. .
Nature of Competition.
Since Coca-Cola is operating under imperfect competition (oligopoly), there are few but large firms dominating the whole industry. The main rival of Coca-Cola is another giant Pepsi. They are the leading competitors in the market for Cola products. The struggle between two soft drink giants in order to grab the larger market share has a decade's long history. In 1960, Coca-Cola introduced Sprite, which today is the worldwide leader in the lemon lime soft drink market and ranks fourth among all soft drinks worldwide.
The Concept of Price Elasticity.
The elasticity of soft drinks as a whole is inelastic but demand for Coca-Cola is elastic in nature. Coca-Cola is relatively elastic in demand due to many substitutes.