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Demand and Supply in a Product Market

Free «Demand and Supply in a Product Market» Essay Sample

Demand and supply are the fundamental backbones of the market economy. Demand is defined as the quantity of product desired by consumers. On the other hand, supply is the amount of a product the producers are willing to inject into the market. In real market situations, the forces behind the demand and supply will allocate the resources in the most appropriate for the participants of the process way. Demand and supply tendencies are influenced by numerous factors other than the price of the commodity. Competition among market participants has a function of controlling  the prices of the products and services, thereby affecting the demand or supply of a particular sort of product. This paper aims to consider the Coca-Cola product brand within the whole beverage industry to unearth the essential aspects of its demand and supply trends in real life situations.

The Aspects of Demand Side

Coca-Cola has over 500 different non-alcoholic brands under its umbrella. The drink is popular around the world largely due to the firm’s marketing strategies. Coca-Cola commands a substantial market segment both in the local and international markets. Due to numerous brands under the Coca-Cola brand name, the beverage is popular among huge numbers of people irregardless of age and gender. This is because the company provides at least a brand popular and seemingly significant for each category of individuals. Such brands include energy drinks, water and soy-based beverages. However, middle-class teens are the believed to be leading consumers of the beverage around the world. The most popular drink among the teens is Coke. In addition, the product surpasses the people of all racial backgrounds, subsequently contributing to its popular image. The key markets for the beverages are the United States, China, Mexico, Japan, and Brazil. The United States, for instance, accounts for over 19% of the total sales of the brand (Llanas 56).

Coca-Cola customer base is comprised of predominantly the middle class to high-class individuals. The customers in these categories are mostly the working group and render a ready market for the products. The product has the following in both the local and international markets. The Coca-Cola company has established its distribution centers in over 120 countries worldwide. If the statistics are anything to trust, 1.7 billion units of Coca-Cola products are consumed daily around the world (Llanas 58). Therefore, the company makes as much revenue from the international markets as it does in its local market.

The main substitute of the Coca-Cola brand is the Pepsi brand. The brand has been on the market for over 50 years and continues to command a significant portion of the beverage industry. Pepsi is most common among low-income earners and the people of Caucasian origin. However, it occurs in every market sector with distribution points around the world. The main Pepsi brands that command a substantial market share in the United States are the Pepsi-Cola, Mountain Dew and the Diet-Pepsi. Each of these has over 4% of the market in the United States.

The main complementary product of Coca-cola is the Monster beverages. The company manufactures energy drinks, fruit and natural drinks. The natural drinks are represented by 12 different flavors to serve the market demand. In addition, the company offers drinks to all age groups and the people of all social classes. Most of the company’s beverages utilize the same ingredients for the manufacturing process of the whole scope of Coca-Cola products.

Macroeconomic conditions affect significantly the profitability of any company. The conditions such as inflation in the marketplaces cause the rise of products prices, thereby leading to a considerable reduction of a profit margin. However, the Coca-Cola sales volume remains relatively high because of the high consumer preference. Therefore, a good number of consumers are willing to continue enjoying the products even with the increase in prices. Because the products are available in many countries, harsh macroeconomic conditions of one country have little effect on the operations of the entire brand in the beverage market.

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The merger of the Coca-Cola Company and the Monster beverage company is likely to elevate the market to a new level. It is likely to increase the number of brands in the market while exploiting new venues for trading the products. The approach is likely to propel the company into gaining a competitive advantage over Pepsi and other companies selling similar produce.

The Aspects of Supply Side

The manufacture of the Coca-Cola drinks is expected to upsurge in the future due to the availability of raw materials. For instance, the suppliers are willing to render to the company sweeteners, juices, concentrators, and carbon dioxide essential for the production of soft and energy drinks. The raw materials are readily available from the multiple suppliers who are ready to provide the products at the current prices. The main component of the drinks is water, which is naturally available. The production costs, therefore, are low due to the availability of the resources mentioned at low costs. Therefore, the company is likely to remain in operation because the factors on the supply side are favorable for the company activities.

The company operates a chain of distribution points around the globe. The advance is a calculated move to reduce the transportation costs. Additionally, the presence of modern forms of transportation such as rail, air and roads will supposedly reduce the transportation expenditures by a significant margin, thereby ensuring the company continues to operate effectively. The availability of logistic and chain suppliers in every country of operation is a definite advance towards the profitable activities of the Coca-Cola Company. The logistical and chain providers act as distribution agents in over 120 countries the company is functioning in. Nevertheless, the increased competition among the providers is a benefit as the company can afford the services of the distributors at reduced prices.

The increase in globalization has made the world uniform; furthermore, the governments have relaxed their policies concerning external investments. The foreign governments are now offering subsidies and incentives to foreign companies to foster the economic growth (Moon 34). The mitigated government policies are to work to the advantage of the enterprise in promoting the opening of new branches. The marketing outlets such as radios, social media, and TVs, both in the United States and abroad, are a great support to the enterprise.

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The current market is totally favorable for the company operations. The extensive marketing activities in the foreign countries have enhanced the sales operations by creating an enormous market niche for its products. Moreover, the consumers have developed tastes and preferences on the product creating the optimistic future for the company. Although there are no barriers to entry in the beverages market, the appearance of new firms is not predicted to affect the performance of the Coca-Cola company because it has an already established market segment. For instance, Pepsi has not been able to penetrate and acquire any substantial market segment in some of the countries where Coca-Cola products have a significant influence despite fierce competition between the companies. Therefore, inferring from the Pepsi scenario, the emergence of new firms is will not destabilize the beverage market or cause the loss of Coca-Cola market share.

Conclusion

Demand and supply are the fundamental mainstay of the market economy. The forces that determine the demand and supply act in a manner to favor the operation of a company. The aspects of demand and supply are currently beneficial to the operations of a Coca-Cola Company. From the discussion above, it can be implied that the beverage market provides a ready niche for over 500 brands while the suppliers aim to replenish the company with raw materials. Therefore, these factors will act to sustain the economy in general.

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