Demand and Supply in a Product Market essay

Demand and supply are two important elements of the product market. They both significantly influence everything that happens in the market, for example, the price setting, after which consumers and sellers change their behaviors. The interplay of demand and supply defines the product market, and the behavior of buyers and sellers creates the product market structures. For instance, the Coca-Cola Company dominates in the market, thus, it is a monopoly. It controls the largest share of the market worldwide, that is why it sets the price.

Aspects of the Demand Side of the Product Market

Coca-Cola is a product brand of a carbonated soft drink, and the demand for it is always high. The prices are relatively the same everywhere. Price discrimination occurs depending on the area, where the product is sold. Its consumers are of different race, age, gender, and ethnicity,. The demand for this brand slightly varies with age, since young population consumers like the beverage more. Some religious groups discourage consumption of Coke because of the health reasons. The demand for the brand alters with the changes in the consumers’ income (when it increases, the demand for the beverage also rises, and vice versa). This is the real situation that happens in the product market.

 

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Coca-Cola practices the market segmentation. The target markets are the domestic and global ones. The level of demand in the developing countries is lower compared to that of developed countries. Therefore, Coke is more consumed in the latter. The demand is also high in the hot regions, where people need to quench their thirst more often.

Coca-Cola experiences competition with Pepsi, which is a good substitute for it. Pepsi products are more sensitive to consumers’ health. Company produces products with no sugar, which is good for health. There exists such a notion as complement products, i.e. products that are consumed together. For example, Coke as a beverage has  beer as a complement one (McCalley 62).

Impact of Macro Condition

The entirety of what happens in the economy affects the demand for products either negatively, or positively. Coca-Cola is a monopoly, but different factors still affect its market. The rising of Value Added Tax (VAT), fat tax, and sugar tax affects the demand. There is also concern about health and wellness, which causes fear that majority of consumers would stop consuming the beverage completely because of the information they get from the media.

Aspects of the Supply Side of the Product Market

Production, Resource Costs, and Availability. In line with the supply to meet the consumers’ demand, the Coca-Cola Company ensures enough products. The beverage production requires a lot of water, which is why the company invests much money to replenish the amount of water used.

Transportation and Distribution. The products are usually transported using the trucks, rail transport, and sometimes ships. Unfortunately, shipping is rather costly and impacts the prices. The company has got a proper distribution channel: it sells to distributors, wholesalers, retailers, restaurants, supermarkets, and even the developed Automated Teller Machines (ATM).

Testing of the Product. Before being released to the market, the Coca-Cola products undergo series of tests to ensure that both the product and the containers used for packaging are of high quality and safe for consumers as required by the government policy.

Marketing and Marketing environment. Cola intends to reach all the markets and satisfy all the customers. They create advertisements in the Internet, printed media, on television, radio, using celebrities, sponsor trainings, and even events. Some brands are meant to target certain markets. College students consume a lot of the products, and they are the aim of Coke’s marketing. Certain regions having a hot climate like the Middle East are the aim as well. Pepsi  competes with Coca-Cola making the company diversify its production and marketing, for instance, telling the calorie level on the container. New companies producing beverages are making attempts to enter the market, but they cannot compete. Coke has recently started making other products that are health friendly, such as Diet Coke, Coca-Cola Zero, Minute Maid, Dasani, and others.

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In conclusion, demand and supply are very significant in the product market, as they are connected to the production and consumption of a certain product at the same time. The Coca-Cola Company is a monopoly firm that enjoys large market, but is experiencing competition with other beverage companies, such as Pepsi.