Economics

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Economics

Coca - Cola

On the 14th of June Coca-Cola's soft drinks were banned from the markets in Belgium and later also in Luxemburg and France. Two failures in the bottling system were the cause for the nausea that the people suffered. According to the article it would have been better if they would have acted fast and told the whole truth. Coca- Cola is in an ologopolistic market and therefore branding plays a great role. It is possible that the company ha lost market shares, due to this accident. In the ologopolistic market the firms don't compete with price, but rather with advertising and other non-price strategies. Therefore one can predict that this scandal has shifted the demand curve to the left. This accident can be seen as a negative externality. The government should make Coca Cola increase their health controls (internalise their externalities), if scandals of this sort happen again. They can enforce this by either subsidies (reward) of in this case taxation (punishment). People who would usually only buy Coca Cola due to the heavy advertising might try a substitute during the time of the ban. This can be seen as a sort of free promotion for the others in the market. According to the zero sum game, the lose that Coca Cola is making right now is directly proportional to the profits the other firms are making in the respected market. Coca Cola will need to take further actions to restore their brand name that they have established throughout all these years. This will significantly influences their total added costs. A strong brand has very few goods substitutes and it is very difficult for competitors to challenge the supremacy of the brand. This health scandal might have opened the doors fro new competitors. In the long run this can lead to Coca Cola's costs for advertising to increase or furthermore they could lose control of the market and fall into a disequilibrium. The accelerator theory suggests that the level of planned investments varies with the rate of change of income or output rather than with the rate of interest. It will be hard for the big American company to fulfil their expectations of expansion in Europe with no investors being pleased with their progress.

Best Foot forward at Reebok

On October 18th Reebok published a 41 page report on how it is dealing with its workers in Indonesia. Its report was a critical analysis done by an independent firm. Consumers want low prices, the shareholders are looking for high profits and capital gain, but at the same time non government organisations protest against exploitation. It is however a very difficult task to please the consumer with low prices and at the same time to keep the costs of production at a low level without exploiting the workers. In my opinion the prices won't affect Reebok significantly because they are in an ologopolistic market. Firms like Nike are in the same situation and therefore will have higher costs of production as well. They will have to use non pricing strategies to compete with each other. Through advertising they can try to differentiate their product, making it seem more favourable to the customer. The Firms could stay at the same price and lose profits or they could charge the customer more. They would have to find the right balance. Also if Reebok would stop exploiting the Indonesian suppliers, they would help strengthen their economy and therefore creating a new potential market. Reebok would inject money into the circular flow of money in Indonesia if the would raise the wages. This would raise the employment and help to stabilize the prices. If the labour earns more then their buying power will increase and therefore they would ...

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Keywords: economics for business and management, economics for business and management pdf, economics in one lesson, economics news, economics ia example, economics nobel prize, economics key concepts ib, economics calculator

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