A PROJECT REPORT ON

MICROECONOMIC ANALYSIS
OF COCA COLA
By
Sonali Dhimmar
Priyanka Dhimmar
Rubal Garg
MBA Batch (2018-20)
Under the Supervision of
Dr. Vipin Agarwal
 ACKNOWLEDGEMENT

We would like to express our greatest gratitude to the people who have helped & supported
us for this project and gives their guidance to complete our thesis work effectively and
moreover on time throughout our project.

We would like to express our sincere respect and deep gratitude to our module leader
Dr.Vipin Agarwal who has given his valuable support cooperation and suggestion from time
to time in successfully completing this project work.

I am thank full to all the students of Auro University first year MBA, for their co-operation
during the study without whom the study could not be possible. I am grateful to Auro
University for guiding us ahead with our difficulties and being encouragement and support
thought.

Thank you.

Yours sincerely,

Rubal Garg

Sonali Dhimmar

Priyanka Dhimmar

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 ABSTRACT
Background: Coca-Cola is a leading beverage manufacturing company in the world. The
company is of American origin and deals in the business of manufacturing, retailing,
distributing and marketing a wide range of beverage concentrates (non-alcoholic), syrups and
mineral water. The company headquarters in Atlanta, US.

Objective: The purpose of the study is to analyze the microeconomics analysis of coca cola in
India, emphasizing on factors include demand, supply, market structure and pricing of coca
cola in India.

Method: The nature of the topic is theoretical and descriptive. In the study secondary data are
used. The secondary data collected from records of the company, online source, published
articles of the company. The data of past research have been collected.

Results: The demand of Coca-Cola is highly influenced by factors such as income, relative
goods and consumer preference. While its supply is determined by its cost of production, the
technology used and then amount of consumer. Both of these curves are elastic, despite the
fact that it has high brand loyalty.

Key words: Demand, Supply, Market Structure, Pricing Strategy

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 Table of Contents
chapter – 1 .............................................................................................................................................. 5
Introduction ............................................................................................................................................ 5
Background Of The Study .................................................................... Error! Bookmark not defined.
Statement Of The Problem ................................................................................................................. 7
Scope Of The Study ............................................................................................................................. 7
Objectives ........................................................................................................................................... 7
Chapter – 2 .............................................................................................................................................. 8
Literature Review .................................................................................................................................... 8
Chapter – 3 ............................................................................................................................................ 11
Research Methodology ......................................................................................................................... 11
Research Design ................................................................................................................................ 12
Research Instruments ....................................................................................................................... 12
Chapter – 4 ............................................................................................................................................ 13
Analysis/Discussion ............................................................................................................................... 13
Demand Analysis ............................................................................................................................... 14
Supply Analysis..................................................................................... Error! Bookmark not defined.
Market Structure.................................................................................. Error! Bookmark not defined.
Impact Of New Companies Entering The Market ............................................................................. 18
Pricing Strategy ................................................................................................................................. 19
Chapter – 5 ............................................................................................................................................ 21
Conclusion And Recommendation........................................................................................................ 21
Conclusion ......................................................................................................................................... 22
Recommendation.............................................................................................................................. 22
Limitation ............................................................................................. Error! Bookmark not defined.
References ............................................................................................................................................ 23

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CHAPTER – 1
Introduction

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Background of the Study
Coca-Cola is a leading beverage manufacturing company in the world. The company is of
American origin and deals in the business of manufacturing, retailing, distributing and
marketing a wide range of beverage concentrates (non-alcoholic), syrups and mineral water.
The company headquarters in Atlanta, US. The company is well-known for its flagship
beverage product, Coca-Cola. The formula of Coca-Cola was invented by pharmacist John
Stith Pemberon in the year 1886. The Coca-Cola formula as well as the brand was bought by
Asa Griggs Chandler in 1889 after which he incorporated the company in the year 1892.
Currently, the Coca-Cola Company operates as the largest beverage manufacturing and
distributing company in the world with a globally networked franchised distribution system.
The company works in close collaboration with the bottling companies as the business
partners across the globe. Also, the beverage manufacture owns an anchor bottling business
in North America. This anchor bottling business is known as Coca-Cola Refreshments. The
beverages of the company are sold in more than 200 countries across the world. The stocks of
Coca-Cola Company are listed in the New York Stock Exchange and also form significant
components of various stock indices like the Coca-Cola is a carbonated soft drink sold in
stores, restaurants, and vending machines internationally. The Coca-Cola Company claims
that the beverage is sold in more than 200 countries. It is referred to simply as Coke,
originally intended as a patent medicine when it was invented in the late 19th century by John
Pemberton, Coca-Cola was bought out by business man Asa Griggs Candler, whose
marketing tactics led Coketo its dominance of the world soft-drink market throughout the
20th century.

The Coca-Cola Company entered India through its wholly owned subsidiary, Coca-Cola
India Private Limited and re-launched Coca-Cola in 1993 after the opening up of the Indian
economy to foreign investments in 1991.Since then its operations have grown rapidly through
a model that supports bottling operations, both company owned as well as locally owned and
includes over 7,000 Indian distributors and more than 1.3 million retailers. Today, our brands
are the leading brands in most beverage segments. The Coca-Cola Company’s brands in India
include Coca-Cola, Fanta Orange, Fanta Apple, Limca, Sprite, Thums Up, Burn, Kinley,
Maaza, Maaza Milky Delite, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh and
Nestea Iced tea, the Georgia Gold range of teas and coffees and Vitingo (a beverage fortified
with micro-nutrients). In India, the Coca-Cola system comprises of a wholly owned
subsidiary of The Coca-Cola Company namely Coca-Cola India Pvt. Ltd. which
manufactures and sells concentrate and beverage bases and powdered beverage mixes, a
Company-owned bottling entity, namely, Hindustan Coca-Cola Beverages Pvt Ltd; thirteen
authorized bottling partners of The Coca-Cola Company, who are authorized to prepare,
package, sell and distribute beverages under certain specified trademarks of The Coca-Cola
Company; and an extensive distribution system comprising of our customers, distributors and
retailers.

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Statement of the Problem
The purpose of the study is to analyze the microeconomics analysis of coca cola in India,
emphasizing on factors include demand, supply, market structure and pricing of coca cola in
India.

Scope of the study

To know the behaviour of consumer when the price of a product increases or decreases

To analyse the change in demand and supply due to some forces in the market

Objectives
To Analyze Demand of Coca-Cola

To Analyze Supply of Coca-Cola

To Examine the Market Structure of Coca-Cola

To Examine the Pricing Strategy of Coca-Cola

To Find Out the Consumer Preferences of Coco-Cola Products

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 CHAPTER – 2
Literature Review

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Thomas (1980) Impact of Media on Consumers' Brand Preference A Study on Carbonated
Beverage Market with Reference to Coca– Cola. The collected data from the survey shows
that brand preference exists in the carbonated beverage market and the media efforts affects
consumer preferences and their brand choice. Out of 8 different carbonated beverage brands
which featured in this study, Coca-Cola topped the brand preference table in carbonated
beverage industry. Hence it is clear that Coca-Cola is the favorite carbonated beverage among
consumers. Based on this study, advertisement and taste are the major factors responsible for
the success of Coca-Cola. The implication of this is that, other variables does not influence
much when brand is supported by heavy advertisements and appeals to consumers' taste buds
which persuades them to continue buying. Majority of the respondents claimed to have
known Coca-Cola over 15 years and Coca-cola having been in existence for more than 20
years still remain the delight of many consumers of carbonated beverage. It is evident that the
brand has enjoyed a relatively prolonged life cycle. The study also showed that advertisement
is the major source of awareness of Coca-Cola and Television is the most effective medium
as cited by most of the respondents.

Lawrance (1984) in his study on “Effective publicity how to reach the public people”
concluded that as Coco-cola occupied that the major soft drinks market position in rural area.
Consumer mind would obviously tilt towards Coco-cola so by correct product positioning in
the market 7-up could differentiate it from other Coco-cola brands and could sell more. 7-up
did so positioning itself as an alternative to Coca-cola. They suggested that most of the rural
area people would buy coco-cola may be disappointed and it offered Pepsi consumers have
strong brand preference for fast moving products power of relations.

Tepper and Amy (1998) In their study on “Consumer Acceptance of Coco-cola Drinks in
Rural Area (Taste (or) health)” concluded that the relative contributions of taste and health
considerations on consumer liking and purchase intent of Coco-cola drinks. Eight types of
commercial Coco-cola drinks were evaluated by 305 adult consumers who also completed
brief questionnaire on food habits. These variables emerged as the first factor in the analysis,
suggesting that consumers perceive these characteristics as being most important in their
choice of Coco-cola drinks. The second factor described a health dimension and was related
to respondent’s attitudes towards fat in the diet. The factory three comprised two remaining
sensory attributes (colour and crunchiness) which apparently were of minor importance to the
respondents.

Vimal (1998) In his research work “Competitive Analysis of Soil drinks in Tourists
Sport - (Kodaikanal, Palani, Madurai, Raneswaram and Kanyakumari)” described
the distribution system adopted for Coco-cola as the best compared to Pepsi, and
stated that average sale per month of Coco-cola was higher than that of Pepsi. Further,
most of the retail outlets had come forward to maintain adequate stock of Coco-cola instead
of Pepsi.

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Peppas and Ohnson (2003) Concluded that the Coco-cola comp. has been a standard bearer of
management and leadership practices against which other companies have been measured.
The Coco-cola brand has become a symbol of globalization the second most recognized
phrase World Wide. It also enjoyed unpatrolled loyalty and commitment from employees,
customers and stockholders. The company had a reputation for doing the right thing and for
doing thing right.

Guthery (2005) Concluded that sale of soft drink have grown globally an average of 5% a
year. The company’s “Global soft drinks report 2002” state that in 2001 consumer around the
world drink 4,12,000 million liters of soft drinks which represents 67.5 liters per capital.
Coco-cola Company has resigned as the supreme soft drink market leader. The company sells
its products in more than 200 countries. In the U.S. Coco-Cola and Pepsi hold, respectively,
(44%) and (31%) market shares. The Coco-Cola brand was the leader in the Brazilian soft
drink market with 35.6% of market share. It was a major investment destination of global
companies, particularly manufacturers of mass consumer goods.

Adriant and Beverly (1998) Said that the relative contributions of taste and health
considerations on consumer liking and purchase intent of cola drink. Eight types of
commercial cola drinks were evaluated by 305 adult consumers who also completed a brief
questionnaire on food habits. Data were analyzed using factor analysis. These data suggest
that in spite of current concern about reducing dietary fat, health remain secondary to taste in
the selection of cola drinks for consumers in this population.

Banumathy and Hemameena (2006) While studying consumer brand preferences with respect
to soft drinks, found that after globalization most of the consumers like the international
brands such as Pepsi and coca-cola. Consumers preferred a certain brand or a particular drink
mainly because of its taste and refreshing ability.

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 CHAPTER – 3
Research Methodology

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A research methodology is the systematic plan in order to conduct the research.

Research Design
For the purpose of this study, qualitative research design will be used. Qualitative research
design is used on secondary studies to allow the researcher to gather information summarize
and interpret for the purpose of clarification. The nature of the topic is qualitative and
descriptive. So the conduct the research study the type of research suitable is descriptive
research only.

Research Instruments
For the study purpose secondary data are used. The secondary data collected from records of
the company, online source, published articles of the company. The data of past research
have been collected.

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 CHAPTER – 4
Analysis/Discussion

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 DEMAND ANALYSIS
DEMAND

Demand for a commodity refers to the quantity of the commodity which an individual
household is willing to purchase per unit of time at a particular price.

DEMAND CURVES

Demand curve refers to the quantity of the good that a customer is willing to buy and able to
Purchase over a period of time, at a certain price is known as the quantity demanded of that
good.

LAW OF DEMAND:

It is normally depicted as an inverse relation of quantity demanded and price; the higher the
price of the product, the less the consumer will demand.

The demand curve of Coca-Cola as any other normal goods’ demand curve is downward
slopping from left to right, showing the inverse relationship between the price of Coca-Cola
and the quantity demanded of Coca-Cola over a given time period. This relationship can be
explained by the law of demand which states that as price of a good increases (or decreases),
the quantity demanded of that good falls (or rises), all other things being equal.

The demand curve demonstrates how many items of a product or service a consumer would
like to purchase at different prices. Therefore, the lower the price of Coca-Cola, the more a
consumer is likely to buy. Hence, it can be concluded that price is major determinant of
demand. The effect of a change in price is illustrated by a movement along the demand curve
and is referred to as a change in quantity demanded.

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It can be seen from Figure that when the price of Coca-Cola falls from $2.00 to $1.50, the
quantity of Coca-Cola bottles demanded rises from 4 to 6.

However, price is not the only factor that determines how much of a good people will buy.
There are other factors affecting demand and any change in any other determinants other than
price causes a change in demand and a shift in the demand curve.

Figure shows how any change in one of the other determinants causes demand to rise or to
fall by shifting the whole curve to the right or the left. It also shows that at each price on the
demand curve D2 (or D3), more (or less) will be demanded than what was demanded on the
original demand curve D1.

The other determinants of demand are:

Income: For Coca-Cola, there is a positive (direct) relationship between a consumer's income
and the amount of the Coca-Cola that person is willing and able to buy. This is because Coca-
Cola is a normal good. Therefore, when income rises the demand for Coca-Cola will
increase; and vice-versa.

The number and price of substitute’s products: Coca-Cola has numerous substitutes available
on the market, Pepsi being its almost perfect substitute. Therefore, if the price of Coca-Cola
increases, this may make Pepsi relatively more attractive to the consumers. The Law of
Demand tells us that fewer people will buy Coke; some of these people may decide to switch
to Pepsi instead. Hence, it can be concluded that there is a positive relationship between the
price of one good, Coca-Cola in this case and the demand for the other good, Pepsi.

The number and price of complementary goods: Coca-Cola is often complementary to

various fast foods such as KFC or McDonald. Hence, if the price of these fast foods
increases, the Law of Demand tells us that fewer people will be willing and able to buy fast
foods and hence, causing a decrease in the demand for Coca-Cola as well. Therefore, it can
be concluded that there is an inverse relationship between the price of one complement, the

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fast food products in this case and the demand of the other complementary goods, Coca-Cola
here.

Tastes and consumer preferences: It is logical that the more a product is found desirable by
the people, the more the product will be demanded. Consumer preferences are highly
influenced by advertising, fashion and by observing other consumers. Coca-Cola had
understood this right from the beginning, which is why it used advertising extensively. Coca-
Cola made full use of slogans in advertising so that it does not reflect the brand only but also
the time, the people, the fashion trends, the celebrity craze, traditions but also the need for
newness, freedom and uniqueness. One such example would be when the 1906 slogan, "The
Great National Temperance Beverage”. It reflected a time period where the United States was
trying to veer away from alcoholic beverages and Coca-Cola provided a nice alternative.

Government Policies

As the study shows, there was a steep reduction in the demand of coca cola when the
pesticides were found in few samples of coca cola. As a result consumer was shifting from
coca cola to other natural drinks so therefore the demand for coca cola decreased.

Time

Time is an important factor that affects the demand of coca cola e.g. the demand for coca cola
goes up during festive seasons and during summers.

SUPPLY ANALYSIS
SUPPLY

Supply is the willingness and ability of producers to make a specific quantity of output
available to consumers at a particular price over a given period of time.

LAW OF SUPPLY

When there is a rise in price of the commodity, quantity supplied increases and when there is
a fall in price, quantity supplied decreases. So there is a direct relation between the price of
the commodity and the quantity supplied. The law shows that there is a positive relationship
between price and quantity supply.

The supply curve of Coca-Cola is that of a normal good which slopes upwards from left to
right, showing the relationship between the price of Coca-Cola and the quantity of Coca-Cola
supplied over a given period of time. The effect of a change in price is illustrated by a
movement along the supply curve which is often referred as a change in quantity demanded.

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Figure illustrates the movement along the supply curve as price rises from $ 2.00 to $2.50,
the quantity supplied increased from 3 to 4 bottles.

Similar to the demand curve, supply is not only determined by price. The other factors
influencing the supply of a product causes a shift in the supply curve leading to a change in
supply.

The principle here is the same as with demand curves; any change in the other determinants
will cause the whole supply curve to shift.

The other determinants of supply are:

Cost of Production: An increase in the input prices such as the prices of basic commodity
ingredients such as color, flavor, caffeine or sugar is likely to cause a rise in the cost of
production of Coca-Cola. An increase in its production cost will cause the supplier less
willing to supply at each quantity level.

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Technology: Any improvement in the techniques of production used by Coca-Cola would
lead to a decrease in its cost of production and hence suppliers would be willing to supply
more.

The number of consumers: Coca-Cola has a large number of consumers and high level of
brand loyalty, as a result suppliers are willing to supply more to cater for the need of its
customers.

MARKET STRUCTURE
Since Coca Cola exist in a duopoly type oligopoly market changes in current market trend
can be managed between the market leaders as to ensure market success. With Coca Cola
being the most widely sold and distributed carbonated drink throughout the world, sales and
marketing trends of the product can be analyzed and operations can be reformatted to meet
the current trends. Since 2008, Coca Cola has increased their worldwide unit case volume by
five percent for the year which has led to continue growth in unit case volume for products
sold around the world. The increase of case volume sold has impacted global gains in volume
and value share towards the overall growth that is in line with the firm’s long-term revenue
and profit goals. With the current economic environment the trend with consumers
consuming carbonated beverages has increased which has led to financial success of the
company.

Impact of New Companies Entering the Market:

“By 2012, it's estimated that an average 84.5 liters of soft drinks will be consumed per person
per year globally, with consumption rates in the global health and wellness drinks market
rising rapidly. (Bharat Book Bureau, 2007 )”4 To compete against Coca Cola and Pepsi
Company in the duopoly market structure, any new company entering the market will have to
excel in products that are healthier then soft drinks and reports overall wellness with
consumer consumption. For Coca-Cola to maintain market share against new competitors
entering the market the company must ensure products such as drinks like Vitamin water
meets the requirement of consumer with taste and health to compete in a more heath driven
society.

 The result is that the firms do not have stable demand curves. If Coke changes its
price, Pepsi’s demand curve shifts.
 As a result the method of finding the profit maximizing output by comparing the
firm’s costs to the firm’s demand curve is complicated or unworkable. Coke can
decide on its best price and output, but then Pepsi will react and change its price or
output. That will shift Coke’s demand curve, changing its best strategy and so one and
so on.
The ordinary model of the firm is less applicable, because the demand curve of one firm
depends on the behavior of other firms. If Coke introduces a price cut, the Pepsi will lose
large numbers of customers. The price of a substitute will have changed.

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If Pepsi raises its price, Coke’s demand curve shifts out. Coke won’t mind, but Pepsi will
very likely find the quantity it sells falls very sharply. If Pepsi lowers its price, it will likely
win many customers from Coke and have a very large increase in total revenue. Coke’s
demand curve will shift in sharply and Coke will be very unhappy.

MAIN POINTS:

 Oligopolistic behavior is complex – and lots of fun.

 Each firm behavior regarding price, quantity, advertising, or product development
influences the other firm’s profitability.
 As a result, firms cannot make a decision without influencing the demand curve of its
rivals. As a result, the rivals most desirable choice changes. They will respond,
perhaps retaliate is a better word.
 A firm must consider the reaction of its rivals when it chooses its behaviors.

PRICING STRATEGY
To first determine its price, we believe Coca-Cola used a cost-based pricing system for its
Original Coke. They first designed the product, the original coke, determined the costs for the
product (product costs, capital costs, and operational costs), set a price based on the cost of
Coke, and finally convinced the consumers of the soda's value. From there, we think that
Coke chose to use market-penetration pricing for its price. Here, they set low initial prices in
order to attract a large number of buyers quickly, to gain a large market share.

Coca-Cola Uses The Following Pricing Strategies For Original Coke:

 “Coca-Cola uses the psychological pricing strategy for their Original Coke. For
instance, the price of a 2-liter bottle of Original Coke was 49. They set the price to
end in a 9, because this makes customers think the price is less than 50, to appeal to
the customer.
 Coke also uses the promotional pricing strategy. In store that sells Coca-Cola, prices
are often temporarily priced below the list price to increase short-run sales. It gives
the product a sense of urgency and customers purchase the product because of the
lower price.

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  Coke uses the segmented pricing strategy for its Original Coke. For instance, Coca-
Cola offers litre bottles, 6-pack cans, 6-pack bottles, and 12-pack cans of the same
product, all for separate prices. By their product in different sizes and at different
costs, they get to increase their revenue, because there is not much difference in the
costs required to produce the products.
 Coke also uses the international pricing strategy. For instance, the price of a 2-liter
bottle of Coke in the United States is different from the price of the same product in
China. This has to do with the difference in economic conditions, competitive
situations, and laws.”
We think Coca-Cola's pricing strategy is working well. Based on financial reports, Coca-Cola
has increased profits and income, which means that customers are purchasing more of the
products, and because of this, seem to be generally satisfied with the pricing. If they were not
satisfied, they would choose another brand over Coca-Cola.

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 CHAPTER – 5
Conclusion and
Recommendation

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 CONCLUSION
The Coca-Cola Company is truly global. It has been a success story for over 127 years. The
objective of this report was to apply the microeconomics concept in the coca-cola company.
The demand of Coca-Cola is highly influenced by factors such as income, relative goods and
consumer preference. While its supply is determined by its cost of production, the technology
used and then amount of consumer. Both of these curves are elastic, despite the fact that it
has high brand loyalty. Coca-Cola belongs to an oligopolistic market as it dominates the
industry with a 42% share market. Coca cola is still trying to gain grander in some region or
continent around the world even though they are tend to be leading non-alcoholic beverages
producer and manufacturer in the world, but they still a very strong competitor like Pepsi.
They need to improve more on the quality of service they give back to these regions,
encourage more low emission usage of power. Also they should implement system that will
give them more edge competitive edge over their competitors. Lastly it will be a good idea
for them to adopt a differentiation strategy plan which will bring new ideas within the team
towards the profit growth of the company.

RECOMMENDATION
The Coca-Cola Company is the 1 company within the non-alcoholic beverages industry.
They have years of standing of being the leader and investors know that the Coca-Cola
Company has an extraordinary reputation for maximizing shareholder value.

Opportunities that exist for the company in the future is expanding market share in the non-
carbonated beverages segment, a restructuring of their business model, and better consistency
of earnings results.

LIMITATIONS OF THE STUDY

Limited time for the study this make difficult to make study in depth
Economic and market conditions are very unpredictable (Present and future)
Since the research procedure was judgmental, the selected secondary area may not be true
representative of the material

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 REFERENCES
Tepper , B. J. (1998).

Adriant, & Beverly . (1998).

Arun, & k, J. (2002).

Banumathy, & Hemameena. (2006).

Guthery. (2005). “Coco-Cola’s marketing challenges in Brazil” .

Lawrance. (1984). “Effective Publicity How to Reach the Public People”,.

Parul, G. (2003).

Peppas, ohnson . (2003). “Crisis Management in Belgium the Case of Coca-cola”.

Tepper , J; Amy , C. (1998). “Consumer Acceptance of Coco-cola Drinks in Rural Area

(Taste (or) health)”,

Trail Journal of Food Science and Technology.

Thomas , M. (n.d.).

Vimal, P. (1998). “Competitive Analysis of Soft Drinks in Tourist Spot".

White. (1989). “Product Differentiation and Mergers in the Carbonated Soft Drink Industry”,
Journal of

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