Eco Cia
Eco Cia
Eco Cia
A soft drink is a drink that usually contains carbonated water (although some lemonades are not
carbonated), a sweetener, and a natural or artificial flavoring. The sweetener may be
a sugar, high-fructose corn syrup, fruit juice, a sugar substitute (in the case of diet drinks), or
some combination of these. Soft drinks may also contain caffeine, colorings, preservatives,
and/or other ingredients.
Soft drinks are called "soft" in contrast with "hard" alcoholic drinks. Small amounts
of alcohol may be present in a soft drink, but the alcohol content must be less than 0.5% of the
total volume of the drink in many countries and localities if the drink is to be considered non-
alcoholic. Fruit punch, tea (even kombucha), and other such non-alcoholic drinks are technically
soft drinks by this definition, but are not generally referred to as such. Unsweetened sparkling
water may be consumed as an alternative to soft drinks.
2. Coco-cola: The Coca-Cola Company, one of the world’s largest soft drink companies,
is the home to some of the top soft drink brands including Coca-Cola, Fanta, Sprite, and
Diet Coke. Other most-recognized brands include vitamin water, Minute Maid, and
Powerade. The Coco-Cola company owns and sells more than 500 beverage brands with
products sold under several categories including waters, energy and sports drinks, juice
drinks, ready-to-drink teas and coffees, and mainly sparkling drinks. The company’s
products are sold to customers across 200 countries worldwide. The non-alcoholic
beverage brand acquired a 16.7 % stake in one of the leading energy drink companies,
Monster Beverage Corp.
Oligopoly in soft drink industry
Two firms control 74 % of soft drink sales:
42.8% coca-cola’s 25 brands and 139 varieties.
31.1% Pepsi’s 18 brands and 163 varieties.
Coca-cola and Pepsi are in an oligopoly market. They are mutually and strategically
interdependent, as a decision made by one firm invariably affects the other. They are selling the
homogeneous product so they can control over price.
Salient Features of Oligopoly Market:
1. Interdependence:
The foremost characteristic of oligopoly is interdependence of the various firms in the decision
making.
This fact is recognized by all the firms in an oligopolistic industry. If a small number of sizeable
firms constitute an industry and one of these firms starts advertising campaign on a big scale or
designs a new model of the product which immediately captures the market, it will surely
provoke countermoves on the part of rival firms in the industry.
Thus, different firms are closely inter dependent on each other.
2. Advertising:
Under oligopoly a major policy change on the part of a firm is likely to have immediate effects
on other firms in the industry. Therefore, the rival firms remain all the time vigilant about the
moves of the firm which takes initiative and makes policy changes. Thus, advertising is a
powerful instrument in the hands of an oligopolist. A firm under oligopoly can start an
aggressive advertising campaign with the intention of capturing a large part of the market. Other
firms in the industry will obviously resist its defensive advertising.
Under perfect competition advertising is unnecessary while a monopolist may find some
advertising to be profitable when his product is new or when there exist a large number of
potential consumers who have never tried his product earlier. But according to Prof. Baumol,
“under oligopoly, advertising can become a life-and-death matter where a firm which fails to
keep up with the advertising budget of its competitors may find its customers drifting off to rival
products.”
3. Group behavior:
In oligopoly, the most relevant aspect is the behavior of the group. There can be two firms in the
group, or three or five or even fifteen, but not a few hundred. Whatever the number, it is quite
small so that each firm knows that its actions will have some effect on other firms in the group.
In contrast, under perfect competition there are a large number of firms each attempting to
maximize its profits.
Similar is the situation under monopolistic competition. Under monopoly, there is just one profit
maximizing firm. Whether one considers monopoly or a competitive market, the behavior of a
firm is generally predictable.
In oligopoly, however, this is not possible due to various reasons:
(i) The firms constituting the group may not have a common goal
(ii) The group may or may not have a formal or informal organization with accepted rules of
conduct
(iii) The group may be dominated by a leader but other firms in the group may not follow him in
a uniform manner.
4. Competition:
This leads to another feature of the oligopolistic market, the presence of competition. Since
under oligopoly, there are a few sellers, a move by one seller immediately affects the rivals. So
each seller is always on the alert and keeps a close watch over the moves of its rivals in order to
have a counter-move. This is true competition, “True competition consists of the life of constant
struggle, rival against rival, whom one can only find under oligopoly.”
6. Lack of Uniformity:
Another feature of oligopoly market is the lack of uniformity in the size of firms. Firms differ
considerably in size. Some may be small, others very large. Such a situation is asymmetrical.
This is very common in the American economy. A symmetrical situation with firms of a uniform
size is rare.
7. Existence of Price Rigidity:
In oligopoly situation, each firm has to stick to its price. If any firm tries to reduce its price, the
rival firms will retaliate by a higher reduction in their prices. This will lead to a situation of price
war which benefits none. On the other hand, if any firm increases its price with a view to
increase its profits; the other rival firms will not follow the same. Hence, no firm would like to
reduce the price or to increase the price. The price rigidity will take place.