...Demand Definition of 'Law Of Demand' Law of demand states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa Meaning It is the amount of a particular economic good or service that a consumer or group of consumers will want to purchase at a given price. The demand curve is usually downward sloping, since consumers will want to buy more as price decreases. Demand for a good or service is determined by many different factors other than price, such as the price of substitute goods and complementary goods. In extreme cases, demand may be completely unrelated to price, or nearly infinite at a given price. Along with supply, demand is one of the two key determinants of the market price. Concept of demand Demand for product implies: a) Desires to acquire it, b) Willingness to pay for it, and c) Ability to pay for it. All three must be checked to identify and establish demand. For example : A poor man’s desires to stay in a five-star hotel room and his willingness to pay rent for that room is not ‘demand’, because he lacks the necessary purchasing power; so it is merely his wishful thinking. Similarly, a miser’s desire for and his ability to pay for a car is not ‘demand’, because he does not have the necessary willingness to pay for a car. One may also come across a well-established person who processes both the willingness and the ability to pay for higher education. But...
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...Despite flattening demand for carbonated beverages such as Coke and Pepsi, the increased popularity of noncarbonated beverages, greater demand from emerging markets, and Coke and Pepsi's absolute and comparative advantages over competition, each continues to produce profits that meet and exceed industry expectations. In 2012, Coke and Pepsi posted profits margins of 18.78% and 9.42% (Cho, 2013), respectively, clearly utilizing their advantages over other players in the sector . Coca-Cola and Pepsi have developed a wide range of products that can be used to penetrate emerging markets. They each sell the classic brands as well as geographically specific beverages. Populations from around the world continue to have more disposable income and are spending that income on luxury items such as Coke and Pepsi products. “Emerging markets are extremely important for Coke and Pepsi. Overseas sales account for roughly half of Pepsi's revenue, and more than 60% of Coke's.” (DuBois, 2013). In attached Exhibits 1 and 2, it is clear that the push into these markets is ensuring continued profitability for Coke and Pepsi. Contributing to continued profitability is the emergence of the product lines for Coke and Pepsi of noncarbonated and healthier alternatives to sugary drinks, and acquisition of complementary products; e.g., Quaker and Lays. This has translated into continued growth in market share and revenues. In the fourth quarter of 2012, Coca Cola’s “profit rose 13 percent as sales...
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...affecting the demand for Pepsi The question is telling us to discuss the whether price is the main factor which would affect the demand (the quantity of Pepsi consumers are willing to buy each month or so) for the product in this case Pepsi, this basically means to analyse the alternate factors (non price) which would also alter the demand for the product for example: price of substitute, the quality of substitute, the number of substitute, the quality, the customers income, trend of the time and also factors such as the price of the complement (a product bought with my product i.e. an association). Which in this case would be a complementary food item, like a chocolate bar or sandwich, as Pepsi may be part of a meal deal involving these category of items. The factors which will affect the demand can most generally be categorised into two groups ‘price’ and ‘non-price’ factors, and can most simply be categorised into having two affects on demand these being a direct affect (if this goes up or down the demand will move in sync) which are always non-price as price is an inverse factor which means if it rises or falls the demand will move in the opposite direction. In sum an increase in demand is caused by either an increase in a direct factor, examples: quality, income, advertising and price of substitutes, and a decrease in an inverse factor, examples: quality of substitute, price of complements. And a decrease is caused by the opposite. My product, Pepsi is around £1...
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...Pepsi, A reflection on its price & income elasticity Laura-Ashley Williams Colorado Technical University Author Note This paper was prepared for [ECON212], [CS13-01], taught by [Professor James Pirner] on [July 23, 2014]. Introduction The product chosen was Pepsi. It is a product produced by PepsiCo, which is one of the world's top marketer of premium juices and soft drinks. PepsiCo offers products to over 200 countries and territories, and our Global Brands are our biggest sellers. Pepsi is a carbonated soft drink sold in stores, restaurants, and vending machines internationally. Pepsi-Cola was created in the late 1890s by Caleb Bradham, a New Bern, N.C. pharmacist. Pepsi is one of the world’s most iconic and recognized consumer brands globally. Today, the Pepsi portfolio includes three products - Pepsi, Diet Pepsi and Pepsi MAX — that each generates more than $1 billion in annual retail sales. Today, more than ever, consumers are seeking new options for their snacking and beverage occasions. And now, more than ever, PepsiCo is strongly committed to providing a wide range of foods and beverages, from treats to healthy eats. In order to understand how Pepsi remains a product that meets or exceeds the customers’ expectations, I will describe the price and income elasticity of the product. Also, explaining any cross-elasticities that are involved. Pepsi's Price Elasticity The elasticity of demand for a commodity is the rate...
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...Chain of Pepsi co. 1.1 Understanding Supply Chain of Pepsi co. 1.2 Supply Chain Strategy or Design In order to ensure a good supply chain strategy, Pepsi co. plans two years in advance. It has several contracts with manufacturers, and receives raw material on a convenient basis. The company also decides where production plants are to be placed. The production process is 65% automated. The company has to provide and manage transport for the delivery of products as well as the arrangement of third party services for the procurement of products. The shipping department handles orders and the transport department decides the vehicles for safe delivery. Material planning and sourcing is carried out as well. Sources of supply of raw material both local and foreign are identified and terms and conditions are negotiated. Capacity planning is also done at this stage. Sales forecasting and production planning depends upon the capacity of the organization with respect to: 1. Production 2. Storage: Raw and packing 3. Storage: Finished goods The supplier is audited by the most cost efficient quality control department. Distributors are also decided by the company, keeping in mind past performances. 1.3 Supply Chain Planning The goal of planning is to maximize the supply chain surplus. Planning establishes parameters within which a supply chain will function over a 1| Page period of time. Companies start the planning phase with a forecast for the coming year of demand. Pepsi carries out...
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...Fatima Ritza A. Abualas Jainab K. Anawari Mynna Marie M. Barrientos Roxanne A. Berhay Michelle Anne W.S. Pamaran Kier Luanne T. Sudiacal PEPSI GROWS POTATOES Case Analysis I. Problem Statement: -What should Pepsi do to ensure the supply of quality of potatoes in the production of its chips given its growing demand? II. Objectives The main objective is to make the company less susceptible to supply fluctuations given the growing demand of potatoes in the market. In order to achieve this goal, the company must also look into some other objectives: a. Pepsi must explore ways to ensure a supply that can meet the growing demand of potatoes for the production of its chips, b. Pepsi must effectively and efficiently maximize its limited resources (growing a potato farm, and involving local farmers) III. Areas of Consideration In this case study, there are certain factors that need to be considered. First, the Chinese government had banned the import of potatoes and potato seeds so they cannot rely on the same suppliers they had in the US. Second, the potatoes bought at the local market were of poor quality and did not meet Lay’s standard. Third, as a US company, PepsiCo does not have a good knowledge about Chinese culture and natural environment in China thus brought about the need to employ local workers. Chinese farmers were reluctant to invest and become Pepsi’s supplier because hold-up risk is high due to thin market for high quality potatoes...
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...Pepsi – An Introduction Introduction PepsiCo, Inc., major producer of carbonated soft drinks, other beverages, and snack foods. Its beverage division, Pepsi-Cola Company, bottles and markets several popular brands of soft drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay Company, the leading snack-food maker in the United States. PepsiCo is based in Purchase, New York. PepsiCo’s soft drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other beverages include Lipton Brisk and Lipton’s Brew iced teas, All Sport athletic drink, and Aquafina bottled water. Frito-Lay products include Lay’s and Ruffles Potato Chips, Fritos and Doritos Corn Chips, Chee-tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels, and Grandma’s Cookies. Early History PepsiCo traces its origins to 1898 when Caleb Bradham, a pharmacist in New Bern, North Carolina, created a curative drink for dyspepsia called Pepsi-Cola. Pepsi-Cola, later referred to simply as Pepsi, was a mixture of carbonated water, cane-sugar syrup, and an extract from tropical kola nuts. To sell his product, Bradham formed the Pepsi-Cola Company in 1903. In addition to selling the drink at drugstore counters, Bradham bottled Pepsi for sale on store shelves. At this time, bottling was a new innovation in food packaging. However, due to major increases in the price of sugar, Bradham began to lose money on Pepsi, and in 1923 he filed for bankruptcy. The Craven Holding Company of Craven County...
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...Cola vs. Pepsi: Competitive Strategies Christoper Gilchrist BUS 508 7/28/2013 Coca Cola and Pepsi marketing are a consumer products company operating in highly competitive markets. They heavily rely on continued demand for products. To generate profit and bonus, they both must sell products that appeal to our customers and to consumers. Any significant changes in consumer preferences or any inability on the part to anticipate or react to such changes could result in reduced demand for our products and erosion of our competitive and financial position (Dyer, Jeffrey H., page 3). The achievements of Pepsi and Coca Cola relies on being able to answer to daily needs of buyers, concerning health and wellness, obesity, product attributes and ingredients, and to broaden into similar categories. Changes in product category consumption or consumer demographics could indicate a deductible demand for the good that’s produced. Consumer preferences could change for many reasons, such as generations being affected by the age (Hoffman, Benjamin, page 17). Socializing has also expanded and became very diverse. Traveling, vacation or leisure activity patterns, weather, seasonal consumption cycles, negative publicity resulting from regulatory action or litigation against companies in our industry, a downturn in economic conditions or taxes specifically targeting the consumption of our products. Any of these changes may reduce consumers’ willingness to purchase the goods of Pepsi Cola and...
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...Introduction Advertising is an essential part of market management and it greatly influences the demand of products. This essay focuses on how advertising will change price elasticity of demand and the reason for that. Beyond which, the essay will discuss and compare social welfare in competitive market and monopolistically competitive market. There are many reasons why firms advertise. For example, they want to make their brand well-known. The real purpose of this behavior, however, is to sell as many products as possible at a high price to make profit. So one influence of a successful advertisement is to shift demand curve to the right(from D to D1) and vice versa. However, after advertising for a certain product, the cost of producing products will increase. According to the demand curve, as price increasing, demand will decrease, which is the reason firms are trying to figure out whether setting a higher price and the related lower demand will lead to profit loss. If a product has an elastic demand, an increase in price will lead to a loss in total revenue. On the contrary, if the product has an inelastic demand, an increase in price will lead to a gain in total revenue. A successful promotion advertisement should be able to make the product less price elastic, and vice versa (BAJADA, 2006). Mainly, advertising can change price elasticity of demand in two ways. First, substitute. One aim of advertising is to convince consumers that the produce is unique and reduce consumers’...
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...Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non CDS? Despite flattening demand for carbonated beverages and the growing demand for non-carbonated beverages, Coke and Pepsi which happen to be the two heavy weights in the industry will continue to make profits. In 2012, Coke and Pepsi posted profits margins of 18.78% and 9.42% (Cho, 2013) respectively, clearly utilizing their advantages over other players in the sector. Coca cola and Pepsi have developed a wide range of products such as diet and flavored varieties and brand extensions which have fueled their growth and these products have also been used to penetrate emerging markets. They each sell the classic brands as well as geographically specific beverages. Overseas sales account for roughly half of Pepsi’s revenue and more than 60% of Coke’s (DuBois, 2013). Therefore it is clear that the push into these markets is ensuring continued profits for Coke and Pepsi. Pepsi and Coke will also continue to sustain their profit because of market share, availability and emergence of non- carbonated and healthier alternatives to sugary drinks, and acquisitions of complementary products. Coke and Pepsi hold a more diversified portfolio of products which include alternative and non CSD beverages which are all widely available and conveniently packaged. All of these have translated into continued growth in market share and revenue. Coke and Pepsi have created an oligopoly that...
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...[pic] ACKNOWLEDGEMNT Perseverance Inspiration and motivation have always played a key role in the success of any venture. So hereby, it is our pleasure to record thanks and gratitude to the people involved. Firstly, we thank DR. R.K OJHA, for his continuous support in the project. DR. R.K OJHA was always there to listen and to give advice. He is responsible for involving us in the project on soft drink Industry in the first place. He showed us different ways to approach a research problem and the need to be persistent to accomplish any goal. Without his encouragement and constant guidance we could not able to finish the project. He was always there to meet and talk about any query. Last, but not least, we would like to thank all class mates and hostel mates who support us throughout the project. Introduction to Soft Drink Industry The main production of soft drink was stored in 1830’s & since then from those experimental beginning there was an evolution until in 1781, when the worlds first cola flavored beverage was introduced. These drinks were called soft drinks, only to separate them from hard alcoholic drinks. The drinks do not contains alcohol & broadly specifying this beverages, includes a variety of regulated companies that manufacture carbonated soft drinks, diet & caffeine free drinks, bottled water juices, juice drinks, sport drinks & even ready to drink tea/coffee packs. So we can say that soft drinks mean carbonated drinks. Today, soft drink...
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...Market Structures Differentiating Between Market Structures The competition between Coca-Cola and Pepsi has been around longer than any other beverage in history. I will explain the differences between the two giant's soft drink companies on market structures and their competitive strategies. The impact cola drinks have on consumers within the United States and the rest of the world. Many arguments have started over which is the better product in taste, price, sales, and advertisement. The answers to the questions will never be settled upon, but I will keep a basis opinion since I am big Coca-Cola fan. Oligopoly Coca-Cola and Pepsi are the two dominated beverages in the soft drinks industry. Both soft drink companies has been competing against each other for years. The soft drinks are similar in color and taste that are perfect substitutes for each other. This type of market is considered an Oligopoly market where there are only a few companies that are completive in the market placed. In an oligopolistic market, both firms are dependent on each other for consumer’s profit, but also depend on each other. Coke and Pepsi have always have watched each other during the holidays and summer to compete on prices. The products for both companies fly off the sleeves on great price reduction. Coke reduces their price, Pepsi will reduce the price to stay in the game to make a profit. Even without the price reduction, there some consumers that are...
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...Specially during holidays like Christmas when they use low pricing to increase sales and profits. The oligopoly gives Pepsi and Coca-Cola the power to increase prices without worrying about losing their customers. The Oligopoly undermines new competitors from entering the market. What they are able to do is simply lower prices below the price of the new entrants. Making new companies unable to compete, running them out of business. After the threat of new competitors is no longer existent they rise back to their normal price. In the soft drink industry Coca-cola and Pepsi are perfect substitutes. They both have a very similar taste and pricing. Therefore we would expect that the demand for both Coke and Pepsi is similar. However, Coca-Cola has the lead in this industry, Coca-Cola outsells Pepsi Cola by around five to six times in the whole cola market. The two firms have had an interesting past and during the great depression from 1922 to 133 in three different occasions Coke has been offered the opportunity to buy Pepsi, but they have declined every time. However, since then there has existed a lot of competition between both kola producers. They compete by spending billions of dollars on advertising, celebrity endorsements, and slogan campaigns. Therefore, why is Coca-Cola the dominating brand on the soft...
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...Pepsi Sales Bubble with Limited Edition Soft Drinks Marketing 5000 Online Course Case Summary: Pepsi and its partner in the Japanese beverage market, Suntory, are using limited edition soft drinks to boost market share and increase sales gaining edge on its competition, Coca-Cola. Because the Japanese market is challenging, introducing a new product is very difficult. Consumers in the Japanese market would rather hunt limited-edition products made specifically for certain seasons, regions, or reasons. Others have been successful with this type of marketing their so Pepsi decided to launch its new strategy marketing limited-edition soft drinks. With its first launch the company sold out within weeks demonstrating its effectiveness. Various brand of the limited-edition beverages were launched including Pepsi Blue, Pepsi Red, Carnival, and Ice Cucumber, all were successful in the company’s new marketing strategy. Pepsi’s strategy is to create a unique flavor that will be approved by the mass and not to reintroduce it to the market, keeping the limited-edition precisely “limited.” Not only is this strategy effective in the Japanese market, it is as well in the U.S. The appeal to consumers is the value as a collector’s item, due to their novelty, rather than a beverage that is to be guzzled down. “Given the competitive environment, the pressure from retailers to make new products perform, the speed with which consumer tastes change, and the cost of launching a new soft drink, Pepsi...
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...Virtual Tutorial Task 1 – Pepsi – Introduction. This document will analyse the external marketing environment for Pepsi. It will specifically consider the following factors; Socio-cultural, Technological, Economic, Political/Legal and Ecological, and how each of these may influence the firm now and in the near future. Once analysed, this document will then categorize them according to whether they represent an opportunity or threat to the firm and give recommendations on how the firm could convert threats to opportunities and also how to capitalise on current opportunity. The soft drinks market is a market with an estimated worth of £13,376million, a figure up 4.3% since 2006. The market volume is currently at 14,240million litres, up 0.5% since 2006 (sourced – Source: The BSDA Soft Drinks Report 2010, British Soft Drinks Association, compiled by Zenith International/Key Note - http://www.keynote.co.uk/market-intelligence/view/product/10396/soft-drinks--carbonated-%26-concentrated?medium=html), a figure that suggests demand for soft-drinks is ever increasing. However, following a flurry of negative publicity for sugary drinks, one major factor for the market and Pepsi themselves to consider is the health implications. With sugary drinks being linked as a “root cause” for obesity, importantly, recent legislation has been introduced, for example, limiting advertising to children, a huge lucrative market segment that Pepsi and other companies in the market have traditionally...
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