1.

1 Introduction of the company

Keretapi Tanah Melayu Berhad (KTMB) is the major rail operator in West Malaysia.
KTMB renders train services such as Electronic Train Service (ETS), KTM Intercity, KTM
Komuter, Skypark Link, KTM Kargo and others.

The history of KTMB has started from 1885 when the British were still ruling Peninsular
Malaysia. British need to build railway track in order to carry natural resources such as tin ore
and timbers. Therefore, in 1885, the first railway road was opened from Taiping to Port Weld by
Sir Hugh Low to carry tin ore. Soon, many railway tracks were built. For example, tracks
between Kuala Lumpur and Klang, Seremban and Port Dickson, Teluk Anson, and Tapah Road.
These tracks were owned and administered by different companies. Under the order of Frank
Swettenham, who was the first British Resident General, these companies were combined into a
company named Federated Malay States Railways (FMSR) in the year 1901. From 1941 to 1945,
FMSR belonged to Japan when they ruled Singapore and Malaya. After Japan’s surrender,
Peninsular Malaysia was under the occupation of the British again. The name of FMSR was
altered to Malayan Railway Administration (MRA) when Malayan Union was shifted to the
Federation of Malaya. Malaysia gained independence from Britain in 1957, and MRA was
translated into Malay, which is Keretapi Tanah Melayu (KTM) in 1962. In 1992, the name was
altered to Keretapi Tanah Melayu Berhad (KTMB). KTMB was privatized to lessen the
government’s financial oppression. It was held by Jasa Meta Sdn Bhd, DRB-Hicom, Bolton Bhd,
and Renong. However, Renong, which was the main holder of KTMB, owed a large amount of
debt and the government called off the privatization plan. Now, KTMB is fully held by the
Ministry of Finance Incorporated. From 1885 to 1957, steam was used to move the train. From
1957 to 1995, diesel was being used to drive the train. Besides, KTMB uses electrical force to
move the train from 1995 until now. Initially, the trains were used to carry goods and natural
resources, but now, the trains of KTMB are being used to carry passengers.

Today, KTMB has three subsidiaries, which are KTM Distribution, KTM Parking, and
Multimodal Freight. KTM Distribution deals with the distribution of parcels and documents,
shipment of motorcycles, flowers, as well as things that will be spoilt easily while KTM Parking
administers’ car parks at KTMB rail terminals. The Multimodal Freight serves as logistics and
gives goods carriage service inside and outside Malaysia.

1
1.2 Introduction of the product / service

Keretapi Tanah Melayu Berhad (KTMB) is giving a few train services such as Electronic
Train Service (ETS), KTM Intercity, KTM Komuter, Skypark Link, and KTM Kargo.

Firstly, Electronic Train Service (ETS) is a city-to-city train service started from 12th August
2010, while this service was opened from Kuala Lumpur to Ipoh. In July 2015, ETS service was
developed up to Padang Besar. These routes have shortened the duration of journeys between
Kuala Lumpur and Gemas, as well as between Kuala Lumpur and Padang Besar. It is the most
rapid train in Malaysia with a maximum speed of 140 km/h, which is 87 mph. In addition, ETS
travels 36 trips per day on weekdays, 40 trips per day on weekends, and fetches at least 10,900
passengers per day.

Secondly, KTM Intercity is the trademark for a group of interurban rail services in West
Malaysia, Southern Region, Singapore and Thailand. These trains are driven by diesel. The four
most crucial terminals along the tracks linking South and East Coast Sector are JB Sentral
(Johor), Tumpat (Kelantan), Gemas (Negeri Sembilan) and Woodland(Singapore).

Besides, KTM Komuter is a commuter train service launched on 11 August 1995. It offers
train services in Kuala Lumpur and outskirts regions in Klang Valley. In 2010, KTM Komuter
opened Ladies Coach and this particular coaches are specially for ladies. The KTM Komuter
service was also developed to Kedah, Perak, and Pulau Pinang in 2015. Due to the systematic
schedule and convenience to reach shopping malls and leisure canters, KTM Komuter is
reputable and has approximately 37.235 million of ridership.

Furthermore, Skypark Link is a rail service that can bring passengers to the Skypark Terminal
Subang Airport. The two main railways are between KL Sentral and Skypark Terminal and
between Subang Jaya and Skypark Terminal. It travels at least 30 trips daily at an hour interval.
Its fastest pace is 100 km/h.

Other than that, KTM Kargo offers freight services. It has a large network and can reach
harbours, cities, and countrysides easily. It supplies insurance protection on the goods carried by
them; hence, it is applicable in transporting high-risk goods. KTM Kargo also provides
Landbridge Service that helps to send goods from Setia Jaya (Selangor) to Bangsue (Thailand).

2
1.3 Explain types of barriers to entry that prevents a business from entering a
market and competing with other businesses.

The first barrier is Keretapi Tanah Melayu required a very huge amount of money to
enter the business market. It is very costly to purchase the equipment. There are usually
divided into four main categories such as civil engineering, signal & telecommunication, station
equipment, and traction & rolling stock. Based on the information from KTMB, the cost of
building a railway track is RM1 million per kilometer. In addition, it is not only required to
purchase the equipment but also needs a large area of land to build the railway line. According to
the report, the latest proposal shows that it costs RM20 billion compared with the RM60 to
RM70 billion for the HSR project involves adding a single rail line next to KTMB’s existing
double track, allowing it to cater to “standard-gauge” trains. Besides, the KTMB Company has a
key resource that is providing railway transportation services in the whole of Malaysia.
Therefore, it is tough to produce the same services with KTMB.

The second barrier is the government has the power to block the entry of more than
one firm into this market by issuing a license or copyright to the monopoly company. KTMB
has a high barrier to entry which is blocked, so it may not have any other companies to compete
with KTMB. For example, our government has issued the license to KTMB Company to prevent
any competitors from other firms. Consequently, they are not allowed to compete with KTMB
due to the copyright, which is the legal restriction that grants exclusive use. Furthermore, KTMB
has owned the whole supply of input and the power to control this industry because it has the
strength of ownership of scarce raw materials caused by the directive from the government. It
means that the only railways in Malayan are owned by KTMB. By doing this, the monopoly
company can prevent other firms or competitors from entering this market to produce the same
goods or services. However, the KTMB's top brass said KTMB is not afraid of new firms or
competitors to develop in the rail transport industry and even welcomed the potential
competition. Although the KTMB's top brass said like that, no one of the firms and competitors
can grow in this business because it was a blocked entry.

Last but not least, the economies of scale of KTMB are big compared to other market
structures. Economies of scale are the benefits as well as advantages a firm enjoys as it grows
larger. The monopolist enjoys it as they have a large size of the firm which can have the

3
advantage of the lower average cost in production to reap supernormal profit which is hardly
found in new entrants. It is because the more output is produced, the lower the cost per unit.
Moreover, this industry also required specialized techniques and skills which potential new
entrants are not able to provide. The efficiency of capital such as the use of machines and
technological improvements in KTMB which the other companies cannot be exceeded. Besides,
large advertising budgets can also act as a way of discouraging the competition. A firmly
established brand name of KTMB can be difficult to dislodge if it spends more the promotional
budgets than the other companies. Hence, the small company who is trying to enter these
markets will not be able to afford the high cost, so they will be forced to leave this market.

4
1.4 With the relevant diagram explain the existing profit possibilities for the chosen
monopoly firm above.

The graph shows that Keretapi Tanah Melayu Berhad (KTM) gain profit in the year 2016. The
annual report for the year ended 31 December 2016 of KTM show that company profit in 2016 is
RM63.22 million. The total revenue and total cost are RM 610.68 million and RM547.46 million
respectively. Freight and haulage comprise the largest portion of KTM`s operations revenue. In
the year 2016, freight and haulage represent 34.1% (RM208.21 million) in the revenue.
Moreover, the other portion of revenue such as intercity represent 6.6% (RM40.4 million),
commuter represent 24.8% (RM151.57 million), Electric Train Services represent 23.8%
(RM145.53 million), Parcel & Mail represent 3.7% (RM22.5 million), car parking service 0.5%
(RM2.8 million) and compensation from Government represent 6.5% (RM39.68 million) .
According to the research, we can notice that the car parking service started in 2016 and this
increase the company revenue. Even though KTM’s revenue had increased by 44% from 2010 to
2016, in every year from 2010 to 2015, the cost of services exceeded revenue. However, in the
year 2016, the revenue exceed the cost of services largely due to its electric train service (ETS).
From the research, the revenue of ETS has increased from 1.5% in 2010 to 23.8% in 2016. Chief
executive officer (CEO) Mohd Rani Hisham Samsudin forecasts that the profitable ETS, as well
as shuttle services between Johor Bahru and Woodlands in Singapura, will ensure that KTM
remains profitable year-on-year.

5
1.5 Examine the use of price discrimination in the chosen monopoly firm above.

Price discrimination is a price strategic for companies to maximize economic profit by

offering distinct prices to distinct people for identical products and services. There is some
examples of price discrimination such as monopoly power, market segregation, and no resale. 

Monopoly Power  

Firstly, KTMB has monopoly power. KTMB has been operating for more than 50 years
and does not have any competitors to compete with it in the market. In Malaysia, Mass Rapid
Transit Corporation Sdn. Bhd. (MRT Corp) and Express Rail Link Sdn. Bhd. (ERL) only provide
train service in the Klang Valley area, and are not the competitor of KTMB. KTMB is the only
railway service that links almost the whole of Peninsular Malaysia. For example, it has many
stations in different states such as Kelantan, Selangor, Penang, Johor and so on. It also has
stations in Singapore. Hence, KTMB stays as a monopoly and has strong monopoly power.
Besides, it is fully controlled by the Malaysia government, which is the Ministry of Finance
Incorporated. KTMB has a direct relationship with the government and so that it will be financed
and supported. Therefore, the government can prevent other companies to enter the railway
network market if they want to maintain monopoly power and avoid competition to occur. This
can ensure their consumers do not switch to other rival companies that can replace KTMB.

Market Segregation

Furthermore, KTMB also can apply market segregation. The reason is that it costs
different prices in different categories of the population. There are some differences among the
ticket price of an adult, children, senior citizens, disabled persons and pensioners of the
Malaysian government. For example, the normal ticket price from Butterworth to KL Sentral
which is from 7.00 a.m. to 11.59 a.m., costs RM59 for a normal price. However, students have to
pay RM35.40 only per ticket after a 40% discount, while children, senior citizens, pensioners,
and disabled persons have to pay RM 29.50 for each ticket purchased with a 50% discount.
Nevertheless, KTMB has created some terms and conditions to enjoy those discounts. For
instance, students who own a KTMB i-card can enjoy the 40% discount on the ticket purchased
and a 50% discount is given to senior citizens who are 60-year-old and above when they show
their identity card to the cashier. Moreover, KTMB also offers a half-price discount on a

6
disabling person who is Malaysian with a disability registered with the Social Welfare
Department (JKM) under some categories. They are required to submit a copy of the identity
card and JKM (OKU) card for verification purposes. Other than that, the child fare for
passengers who ages 4 to 12 years enjoy a discount of 50% of the adult travel fare while the 3-
year-old child and below may travel free of charge, seated together with an adult.

No Resale

For price discrimination to work, the consumers who buy a product at a discount must
have difficulty or too costly in reselling the product to others being charged more. If not,
consumers will buy as much as they can in order to earn a profit with their discount given.
Purchasers should not use their discount to have any benefits with reselling the ticket at a higher
price. For example, the price of ETS Gold and ETS Platinum is slightly different but it provides
the same services to the consumers. Someone will purchase an ETS Gold ticket and resale it to
the others with the higher price which is the same as the ETS Platinum when others need it as an
emergency. So, the resale action has occurred but this is not allowed to be done.

7
1.1 Introduction of the company

The Coca-Cola company was first created in 1886 by a man named John S. Pemberton.
Coca-Cola is one of the world's leading non-alcoholic soft drink manufacturers. Its products can
be found in over 200 countries around the world and product portfolio consists of roughly more
than 400 brands. It includes soft drinks, energy drinks, bottled water and as well as juice
products. The company is most well-known for its soft drink, coke. Since Coca-Cola exists, the
company has used extensive and diverse advertisements to increase its market share, so this has
led it to become one of the most recognized name brands in the world. The Coca-Cola brand is
globally valued and recognized. The Coca-Cola Company is the world's largest beverage
company and the leading producer and marketer of soft drinks. Today, Coca-Cola is consumed
throughout the world at the rate of more than 600 million times per day and this figure is
continuing to rise. However, Coca-Cola is not the sort of company to live on its past glories, so it
looks to the future as a challenge and seeks new markets constantly.

Besides, the Coca-Cola company also interpret ways to increase its market share in areas
where it currently has a strong presence. It is the world's largest producer and distributor of
syrups and concentrates for soft drinks. Products developed by the Company are sold through
bottlers, fountain wholesalers and distributors around the globe. The Coca-Cola company
accounts for about 75 % of the company's unit sales volume of soft drinks, while the remaining
25 % consists of well-known soft drinks such as Sprite, Pepsi, Fanta, Fresca, Mello Yell known
soft drinks such as Sprite, Pepsi, Fanta, Fresca, Mello Yello, Surge, Barqs Root Beer and many
other brands. The Coca-Cola company manages their soft drink operations in 6 groups, which are
North America, Latin America, Africa, Greater Europe, Middle/Far East and The Minute Maid
Company (the world's leading marketer of fruit juices and fruit drinks). Just a few years ago,
Coca-Cola attracted frequent headlines as consumers in China, India, Eastern Europe or Russia
tasted Coca-Cola for the first time.

Now, Coca-Cola has become a well-established soft drink product for billions of new
consumers throughout the world. Today, the Coca-Cola Company establishes successful patterns
of distribution to its global consumers. This case study, therefore, focuses on how high-quality
relationships have been established with bottling franchisees across the globe to make sure that
consumers' needs and wants can be met most effectively.

8
1.2 Introduction of the product

Coca-Cola was invented in May 1886 in Atlanta, Georgia, to a pharmacist known as John
Pemberton. He realized he made a sort of unique beverage, which is a mix of liquid caramel after
testing and sampling. His bookkeeper Frank Robinson named the drink like Coca-Cola as well as
inscribing the trademark Coca-Cola writing that is still the same today. The popular products of
Coca-Cola company are Coca-Cola, Fanta and Dasani Water. They can satisfy the consumer's
wants and needs by differentiating their product. It is because a typical customer is not going to
drink only one type of beverage. So, the more choice they have provided, the higher the
percentage that the customer will consider to purchase their products. This also allows the
franchise to target several different markets. For example, the young generation is more inclined
towards beverages such as Coca-Cola and Sprite, whereas the old generation may only drink
such beverages on occasion or prefer water. It also allows Coca-Cola to target consumers who
may not be able to drink normal coke due to diabetes. This area is covered by the product known
as ‘Coke Zero' which claims to have no sugar in the drinks but still contains the taste of Coke.

The Coca-Cola Franchise also distributes its products in different sizes. For example,
1500 ml bottles, 600 ml bottles, and 320 ml cans. So, it allows consumers to purchase the
product on different occasions. For example, the bigger bottles are more for celebratory events or
for the whole family at home. However, the cans and smaller bottles are designed for daily
consumption. It is easier for a person to consume because it is small in size and convenience to
hold and carry. The cans are also sold in six-packs, which is cheaper than buying separately.

The Coca-Cola brand and products are endorsed by iconic figures such as football stars.
For example, Wayne Rooney used to be on the image of Coca-Cola to promote the product to the
whole world. Everyone who knows football will admire the well-known soccer player, who is
Wayne Rooney very much. The consumers who see it on the cans or bottles will buy it due to the
design. Moreover, children who love football want to be like him when they grow up. Therefore,
by having such an icon endorse your product, it guarantees sales to people located all across the
world, especially during big events such as the World Cup.

9
1.3 Explain by applying the characteristics to prove that the particular firm falls under the
monopolistic competition market structure.

Monopolistic competition is one of four common market structures. The other three are
perfect competition, monopoly, and oligopoly. Monopolistic competition is a market structure
that combines elements of monopoly and competitive markets. Essentially a monopolistic
competitive market is one with freedom of entry and exit, but firms can differentiate their
products. Therefore, they have an inelastic demand curve and so they can set prices. However,
because there is freedom of entry, supernormal profits will encourage more firms to enter the
market leading to normal profits in the long term.

The characteristic shows that monopolistic competition has many sellers offer products

or services that are similar, but not perfect substitutes. In fact, Coca Cola has been bought or sold
in many countries, there are just two countries in the world where Coca-Cola cannot be bought
or sold which are Cuba and North Korea. In Malaysia, Coca Cola has been sold by many sellers
in many places from the grocery store to the hypermarket. In short, consumers have many
options to buy Coca-Cola products. The second characteristic of monopolistic competition is the
price maker. Coca-Cola firms can control their price-output policy to some extent. Based on
research, Coca-Cola is a price maker because there are three pricing strategies used by the Coca-
Cola Company. The first price strategy used by the Coca-Cola Company is price skimming,
Coca-Cola charging premium prices initially to earn maximum revenue. Another pricing strategy
used by Coca Cola is the market price. The company set a price as going market rate by
competitors. For example, Coca-Cola will set a similar price with Pepsi as a competition.
Besides that, the pricing strategy used by Coca-Cola is market penetration, it is charging the
lowest price to achieve the highest possible sales and attract consumers from competitors.
Therefore, in reality, there are differences in prices among all the sellers in ranging.

There is product differentiation, which means that Coca-Cola companies try to

distinguish or differentiate their products from other competitors such as Pepsi in the market so
that their product is more enticing to customers. One of the product differentiation is physical
differentiation included volume, size, flavour, and design. For example, the Coca-Cola company
makes its product in different volumes such as 1500ml, 1250ml, 1000ml, 500ml, 355ml, 330ml,
250ml and so on. To suit to taste of the public, the Coca Cola Company introduces its product in

10
many flavours such as original, no sugar, stevia, light, vanilla and many other else. Other than
that, on Oct. 14 in 2019, The Ferrero Group is proud to launch on the market Tic Tac Coca-Cola,
the result of a unique collaboration between two iconic brands of the FMCG sector. Thanks to
this collaboration Tic Tac brings Coca-Cola into the Sweet Packaged Food market, creating the
first mint with the refreshment of Coca-Cola. Besides that, like the perfect competition,
monopolistic competition also can be entered easily, even though there are many competitors in
the industry competing in it. There are smaller entry barriers to get in into the Coca-Cola market.
Barrier such as a patent or government regulation is not applicable in this market. When Coca
Cola Company is making a profit in the short run, new firms will have the incentive to enter the
market and increase the number of Coca-Cola sales. At the same time, each firm will face
decreasing in the demand and earn a lesser profit. Moreover, when the Coca-Cola Company is
making losses in the short run, existing firms will decrease and the company total sales will also
decrease.  

Last of the characteristic of monopolistic competition is needed for advertising. Various

types of media are used to advertise the Coca-Cola brand in general, and Coca-Cola drinks in
particular. Newspapers are one of the most popular forms of media advertising that is widely
used by Coca-Cola. Coca-Cola Company is one of the companies that has starred media
advertisement in its earlier stages, and by now the company has been engaged in media
advertising for more than 100 years. Besides that, Coca-Cola has been advertised through
television in many countries. Coca-Cola features different advertising in different countries.
These advertising are prepared considering the local culture to avoid any misunderstandings due
to the differences in the culture of different countries. Coca-Cola is also advertised in cinema and
this is undertaken in two ways. Firstly, Coca-Cola video advertisements are played in cinemas
before the movie starts. Secondly, Coca-Cola is advertised through product placement in movies,
wherein the drink is featured somewhere during the movie and the efficiency of the product
placement is maximized by showing the drink being consumed by the lead role.

11
1.4 Why is perfect competition not found in real markets? Explain

Actually, perfect competition is an imaginary and unrealistic market structure. Perfect

competition assumes that the product is homogeneous but we do find differentiated product.
Various brands of products are available in the market such as coffee, burger, television,
smartphones, toilet paper and other products. For example, fast food restaurants like McDonald's
and Burger King. Although they are in direct competition, but they offer similar products that
cannot be substituted such as Big Mac vs. Whopper. The firm produces the differentiated
products by charging a higher price in order to yield profits for the firm and attract more buyers.
In other words, although there are many competitors in the market, but each one makes and sells
a slightly different product to earn more profit.

Secondly, the perfect competition assumes that there is free entry and exit of firms in the
industry. However, in reality there are many barriers to entry and exit the firm. We can see that
government intervention in the form of licensing policy and the establishment cost of firms is
such limitations that restrictions are in existence. The firms need the expensive set-up costs or
require large amounts of capital especially for the technology firms. The scarce funding methods
and price cutting from competitors are including in the barriers of entry. In addition, the exit
costs also may be substantially high, which will force the firms to stay in the industry to avoid
terribly loss. Therefore, the firms are difficult to exit from the market. Hence, this assumption of
perfect competition is a myth.

Last but not least, the perfect competition assumes that large number of sellers and
buyers in the market. However, there are lack of seller and buyer in the reality market. In some
markets, there is a large number of buyers and a small number of sellers while certain markets
may have a lot of sellers but not enough buyers to purchase all the products. There are so many
discrepancies in the certain market because of lacking the information and pricing. They are also
in a position to influence the prices. Oil companies, grocery stores, cellphone companies, and tire
manufacturers are the examples of markets that large number of buyers but small number of
sellers. So, the small number of sellers has the power to control the market by setting the high
prices for products and services collectively. Thus, the number of sellers and buyers are not
equal in the reality market.

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1.5 If The Coca-Cola Company becomes an oligopoly, identify 3 benefits generated by the
oligopoly that would be difficult to gain from a monopolistic competition market structure.

First, The Coca-Cola Company becomes an oligopoly, it can improve their company by
enhancing its products from time to time to compete with other companies in the market.
Companies in monopolistic competition very seldom observe and forecast their rivals’ actions,
instead, they only focus on introducing new products and strategies that they want. For an
oligopoly, the company will always observe the movements of its rivals such as PepsiCo, Fraser
and Neave, Limited (F&N), Red Bull and more. Moreover, the company will also constantly
anticipate its rivals’ next movement so that it can make long-term and short-term strategies to
surpass its rivals. In this case, it will always come out with new business strategies, introduce
new products, and do some improvement in its products that are better than its rivals. These
actions can enhance the company’s business and the quality of its products.

Besides, The Coca-Cola Company will have fewer competitors in the market if it is an
oligopoly. For the monopolistic competition, the barrier of entering the market is very low,
everyone can easily enter the market if they wish to do so. In this case, many people or
companies will join the market that can earn high profits. This causes the market to be very
competitive since some new companies will come out with good products that attract many
consumers, and cause some older companies to lose their original customers. On the other hand,
oligopoly has a very high barrier to enter due to government authorization and high start-up
costs. Therefore, there will be fewer parties that can meet the requirement to enter the oligopoly
market. In this situation, The Coca-Cola Company which is in the oligopoly market will receive
less threat of losing its original clients.

Lastly, The Coca-Cola Company can earn profits as an oligopoly. If it is in the long run
in the monopolistic competition, it will only earn a normal profit (zero economic profit), where it
does not receive loss or profit. However, if it is a long run in an oligopoly, it has a chance to earn
a profit. It can utilize the extra profits in the research and development (R&D) process to
produce innovative products that can fulfill clients in various ways. For instance, this company
can research the current needs and preferences of consumers in the market and then come out
with new products that can attract more customers across the world. Furthermore, it can also use

13
the profits to make advertisements to let more people to know its brand and to promote its
products.

Types of soft drinks Coca-Cola Pepsi Kickapoo

Price RM2.71 RM2.44 RM2.50
Volume 500ml 500ml 500ml
Net Weight 500g 500g 500g
Advertisement Television Print Advertisement Wall
Radio Outdoor Poster
Advertisement
Cinema Broadcast
Poster Advertisement

Ingredients Carbonated water Carbonated water Carbonated water

Caramel Caramel Caffeine
Caffeine Caffeine Citric Acid
Sucrose Citric Acid Gum Arabic
Natural flavouring Flavouring Natural flavouring
Phosphoric Acid Phosphoric Acid Preservatives
Acesulfame Potassium Pure Cane Sugar
Aspartame Rosin Caffeine
Sodium Citrate Sodium Benzoate
Sodium Benzoate Sodium Citrate
2.1 Compare the price and other relevant information of the product with its close
substitutions within the same place.

The table above shows that the characteristics of three carbonated drinks, which are
Coca-Cola, Pepsi, and Kickapoo. These beverages have different prices. For example, Coca-Cola
costs RM2.71 per bottle, Pepsi costs RM2.44 per bottle, and Kickapoo costs RM2.50 per bottle.
Besides, the volume and net weight of each of the products are the same, which is 500g and
500ml respectively. The Coca-Cola company uses various types of advertisement to promote
their products. For example, television, radio, cinema, and poster. However, the PepsiCo
company which produces Pepsi, uses print advertisements, outdoor advertisements, and

14
broadcast advertisements to attract more customers. The advertisement of painting on wall and
poster are used by the Monarch Beverage Company to popularise its product, Kickapoo. Lastly,
the common ingredients among the three products are carbonated water, caramel, and sucrose.

2.2 State 3 reasons why the firm can sell at a higher price / same price / lower price
compared to its competitors.

Coca-Cola has many competitors such as Pepsi and Kickapoo. They are from different
companies, so their prices also different. The 500ml of Coca-Cola sells a higher price than 500ml
of Pepsi and 500ml of Kickapoo. The price of Coca-Cola is RM2.71 while the price of Pepsi and
the price of Kickapoo are RM2.44 and RM2.50 per bottle.

Coca-Cola has a higher price compare to Pepsi and Kickapoo because these two
drinks are strong competitors. Based on the financial analysis of Coca-Cola and Pepsi, from the
year 2014 to the year 2016, the gross profit of Coca-Cola decreases from 61.11% to 60.67%
while the gross profit of Pepsi increases from 53.15% to 55.08. In case, Kickapoo earns around
25 to 32 billion in the year 2015 while Coca-Cola earns around 41.8 billion in the year 2015. To
earn more profit, Coca-Cola raises its price to win these competitors. 

Besides, Coca-Cola can sell a higher price compared to Pepsi and Kickapoo because
its advertisement is in a wide market. The company of Coca-Cola promotes their products by
using television, radio, cinema, and poster which can be seen by many people while the PepsiCo
Company only promote Pepsi by print advertisements, outdoor advertisement, and broadcast
advertisement. In addition, the Monarch Beverage Company painting on walls and posters to
popularise its products. These two competitors cannot compete with Coca-Cola because their
ways to promote cannot be known by everyone easily. So, Coca-Cola Company has the power to
sell at a higher price compared to Pepsi and Kickapoo.

Lastly, Coca-Cola can sell at a higher price because it has lesser chemical

compositions compared to Pepsi and Kickapoo. Coca-Cola only has 6 types of chemical
compositions whereas Pepsi and Kickapoo have 10 types of chemical compositions. For
example, Coca-Cola does not have citric acid while the other two beverages have citric acid.
Citric acid most commonly used as a food additive and a flavouring agent. Coca-Cola does not

15
have citric acid inside their drink which helps them to gain more profit because it is healthier for
people to consume.

3.1 From the viewpoint of the customer, discuss THREE (3) advantages and THREE (3)
disadvantages of buying the product/services under the monopolistic competition market
structure.

From the viewpoint of the consumer, the first advantage of buying the product under
the monopolistic competition market structure is consumer has the right to choose. This is
because, the characteristic of monopolistic competition is product differentiation. Differentiated
products ensure that consumers can choose a product they like and suitable for them from a
company. For example, consumers can choose the products under the monopolistic competition
base on its colour of packaging, size, flavour, product's volume and function of products. Besides
that, the second advantage for consumers in the monopolistic competition market structure is the
price of all varieties of the product will fall when the entry and exit market is easier. The
prices fall because trade allows a firm to produce further down its average cost curve, which
means that it lowers its per-unit cost of production. This implies that each product is being
produced more efficiently. The third advantage for consumers in monopolistic competition
is consumers can save time and money. This is because of the characteristics of the
monopolistic competition which is many sellers and price maker. Consumers can save petrol and
transportation fee to buy the product from the nearest shop. This means, consumers will have
many choices to buy their needs and it will save their cost to get their needs.

From the viewpoint of the consumer, the first disadvantage of buying the product under
the monopolistic competition market structure is consumers will pay a higher price when they
are in emergency meaning that sellers may charge more than the fair price to the consumers by
providing extra features or service. In other words, the characteristic of monopolistic competition
is the price maker. Therefore, there is no way to constant or to make the prices fixed in every
available store. Secondly, the disadvantage of consumers is consumers will get the wrong
information from the advertisement of companies’ products. This is because consumers will

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be attracted by advertising and buy the products. After using the products, they will realize the
different effects of advertising they saw. The third disadvantage for consumers in monopolistic
competition is consumers might purchase fake or copy original products without getting full
information about the product. Hence, this can cause consumers difficult to differentiate between
real and fake products. Consumers will also loss confident to sellers.

References :

https://www.ktmb.com.my/index.html

https://www.easybook.com/en-my/train/ktm

https://www.ktmb.com.my/About.html

https://penanginstitute.org/wp-

http://www.ktmd.com.my/

http://www.ktmparking.com.my/about-us/

http://www.multimodal.com.my/indexMMF8-AboutUs.html

http://www.ktmb.com.my/ETS.html

http://www.ktmb.com.my/Intercity.html

http://www.ktmb.com.my/Komuter.html

http://www.ktmb.com.my/Skypark.html

http://www.ktmb.com.my/Kargo.html

http://econsec1.blogspot.com/2012/11/ktm-malaya-railway-monopolist-in-malaya.html

https://www.thestar.com.my/news/nation/2015/05/26/ktm-welcomes-competition/

http://intranet4.ktmb.com.my/ktmb/uploads/files/pdf/komlink_concession.pdf

https://www.busonlineticket.com/wp-content/uploads/2017/05/KTMB-Terms-and-
Conditions.pdf

https://penanginstitute.org/wp-

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https://www.mymrt.com.my/public/travel-with-mrt/

https://www.kliaekspres.com/corporate/

https://connectusfund.org/oligopoly-advantages-and-disadvantages

https://bizfluent.com/info-12153622-difference-between-monopolist-perfectly-competitive-
firm.html

http://hey-joe979.tripod.com/compare/

https://www.slideshare.net/aditisalgaonkar/financial-analysis-of-pepsico-and-coca-cola

https://www.reuters.com/article/asahi-permanis/update-2-japans-asahi-to-buy-malaysia-drinks-
firm-for-274-mln-idUSL3E7IL12I20110721

https://www.googlesir.com/does-perfect-competition-exist-in-the-real-world/

https://www.investopedia.com/ask/answers/032515/what-difference-between-perfect-and-
imperfect-competition.asp

https://www.cleverism.com/truly-understanding-perfect-competition/

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