Business Analysis

of Coca Cola
BUSINESS SCHOOL
Microeconomics
Final Project
Coca Cola Company (coke)

Submitted by:
Moater Imran L1S19BBAM0137
Anam Khan L1S19BBAM0169
Abdul Qadir L1S19BBAM0752
M pehlwan L1S19BBAM0494

Submitted to:
Dr. Kanwal Zahra

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Contents
1. Introduction ................................................................................................................................................................... 3
2. Substitutes and complement goods of the product and their implementations ....................................................... 3
3. Major current and past reasons for variation in Demand and supply .................................................................... 4
Demand variation reasons: .................................................................................................................................................. 4
Consumer Preferences .................................................................................................................................................. 4
Trending......................................................................................................................................................................... 4
Complement Goods ....................................................................................................................................................... 4
Substitute Good ............................................................................................................................................................. 4
Income ............................................................................................................................................................................ 4
Supply variation reasons: ................................................................................................................................................. 5
Price relation and effect ................................................................................................................................................ 5
State of technology ........................................................................................................................................................ 5
Number of Consumers .................................................................................................................................................. 5
Price of Input ................................................................................................................................................................. 5
Environmental Effect .................................................................................................................................................... 5
4. Cost Structure ............................................................................................................................................................... 6
Fixed Cost Detail ............................................................................................................................................................... 6
Cost of Sales ........................................................................................................................................................................... 6
2019......................................................................................................................................................................................... 6
2017......................................................................................................................................................................................... 6
2016......................................................................................................................................................................................... 6
Explanation............................................................................................................................................................................ 6
Variable cost Detail ............................................................................................................................................................... 7
Explanation............................................................................................................................................................................ 7
5. Market Structure .......................................................................................................................................................... 8
Market structure of Coca cola company is monopolistic in which there are many Buyers and many sellers in it. .............. 10
6. Conclusion ................................................................................................................................................................... 10

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 Coca Cola Company(coke)

1. Introduction

The Coca-Cola Company, American corporation founded in 1892 and today engaged primarily in the manufacture
and sale of syrup and concentrate for coca cola, a sweetened carbonated beverage. The company also produces
and sells other soft drinks and citrus beverages. With more than 2,800 products available in more than 200
countries, Coca-Cola is the largest beverage manufacturer and distributor in the world. The Coca-Cola Company
started their operations in Pakistan in 1953. The System of Coca-Cola in Pakistan operates through eight bottlers,
four of that are majority-owned by Coca-Cola Beverages Pakistan Limited. The Coca-Cola company serves
70,000 customers/retail outlets in Pakistan. 1,800 people work system of Coca Cola in Pakistan. The competitive
markets of coca cola are Pepsi, Fanta, Diet coke/Diet Pepsi, Mountain Dew, Red Bull, Nescafe, lemonade,
barbican and Cola Next. The market structure of coca cola is monopolistic.

2. Substitutes and complement goods of the product and their implementations

Substitute and complement goods of coke are as follow:

Substitute Goods Complement Goods

1. Pepsi 1. Popcorn

2. Cola Next 2. Lays

3. Sprite 3. Burgers

4. Fanta 4. Fries

5. Mountain Dew 5. Pringles

6. Barbican 6. Sandwiches

7. Lemonade 7. Pizza

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 3. Major current and past reasons for variation in Demand and supply

Demand variation reasons:

Consumer Preferences
Soft drinks have been embracing by consumers all around the world. Coke is also been consumed worldwide.
The demand of coke was initally low as it was a new product in market, its sale was only 9 cups a day on initial
level. Quantity demand was not high because consumer preferences were different at that time. But it didn’t take
time for coke to become most demanded drink in all over the world.

Trending
Demand for coke increased as it has become the most trending drink of the time. Consumers shifted towards coca
cola instead of taking other beverages. Consumer preferences are changed when something is going with trend.
It has become a trend to drink coke. It was consumed mostly by the young ones. But it is now not only consumed
by only young people. Children and old people are also demanding for this soft drink.

Complement Goods
Coke is demanded highly for its complement goods. When fast food and junk food industry got raised and gained
customer attention the demand for coke rises vice versa. People liked to have this drink with sandwiches, burgers,
fries, popcorns etc. All type of meals became a perfect Match of coke. Here if we talk about the demand curve then
it shifted towards right because it is the drink which is still consumed prefer in the consumer taste.

Substitute Good
Substitute goods of coke have been also produced in the market. From which slightly the demand curve for coke
shifted to the left. As people moved towards those of similar drinks for new and much better taste. Pepsi cola,
juices, energy drinks etc. gained consumer’s attention. When the price of coke raised in the market surely people
used it substitute drinks for better consumption in low rates. This consumption decreased the demand of coco
cola. Most likely consumer demand for coke is divided into its substitute goods.

Income
The relation between income and quantity demanded is positive. When the price of coco cola rises in the
market, consumers who are having a constant increase in their incomes will easily prefer the coke whether it has
substitutes. On the other hand, people who are not satisfied with their income will surely prefer substitutes of
coke if the prise is high and income is not high. Most likely, when a consumer's income increases, he buys more
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of a product because he has more money to spend. A rise in income also increases the demand for luxury
goods.so if the price of coco cola raised instead of its substitute drinks customers are still ready to spend on
such drink (coke).
Supply variation reasons:
Price relation and effect
Price has a positive relationship with quantity supplied. When the price of coke increases in the market, quantity
supplied also increases. Due to this relationship when price increases the producers and sellers increased the
supply of coke in the market. The raised price of coke increased the willingness of sellers to sale more coco cola.
At the initial stage of coke when produced sellers and producers are more willing to sell their relative product for
customer attention and market at low price. So, in future they are able to have revenue with raised price of coke.

State of technology:
Technology addition has a great impact on the customers to attract the certain product. As coke has added new
technology by changing its packing and by selling it in different kind of shape bottles, cans etc. It has
implemented a positive attraction for customers. When tin the state of technology in production stage of coke
the cost of production reduced, which tends the sellers of coca cola to sells more of its product at the same price
Number of Consumers
In the case of coke there are high number of customers of coco cola. Suppliers of coke always been in the effort
of selling the demanded coke to the large number of customers. Suppliers supply more coke in market to cater
the larger number of needs of their consumers. Their willingness to sell coke in this case is more, the supply
curve shifted towards right in this more willingness to sell.

Price of Input
Price of input includes the following factors
• Labor cost
• Cost of machinery
• Variable costs
In the coke industry there is always a well structured and permanently planned of every cost spending on product.
Cost of labour, machinery etc. has included in this firm to starting as other firms do have. These types of costs
didn’t make an impact on the supply of coke because there is no scarcity in these factors of production in coca
cola company. In the result cost for these factors reduced, suppliers and producers have more willingness to sell
coke at same level of price.

Environmental Effect
Coke is a fizzy drink and much used in the summer season. It gains market attention in the summer season. In
this type of weather condition cost of production increases for coke and due to this suppliers and producers are
willing to sell more of the product with high prices. In environmental issues such as consciousness of consuming
coke because of health and viral issues quantity demanded reduced and where the producer’s willingness to sell
increases. Coke is being avoided in such ways in this type of circumstances. Suppliers and producers make special
offers on coke to be sell and gain customer attention in the more willingness to sell. Output of coke is higher in
summer season due to which cost of production reduces and producers supply more coca cola at the same price.
The price of coke is gradually increasing but it doesn’t affect the huge quantity demanded and supply in both
cases the supply of coke is more and producers are much concern with producing more coco cola product.

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 4. Cost Structure

Fixed Cost Detail

Cost of Sales 2019 2017 2016

Depreciation & 20,00,00 956,987 769,765
Amortization
Utilities 295,567 285.676 81.745
Insurance 121,529 118,738 110,812
Transportation 69,564 61,069 58,976
Rent 345,674 237,756 213,345
High staff salaries 897,909 897,909 897,909
Social security 354,870 354,870 354,870
Advertising 17,12111 8,00,000 7,00,000
Interest 783,790 780,568 78,943
Equipment 789,879 789,879 789,879
Property Tax 789,987 784,786 770,564
Employ Benefits 690,897 690,879 690,879
Total 98,00,000 92,87,876 89,76,987

Explanation

• Fixed costs are expenditures which are independent in case of production

• Cost are varying due to the facts of supply and demand. These costs are also relatively connected with
supply and demand relation. The demand of coke decreased at the year when other sodas were getting in
the trend.
• According to the table shown in the above fixed cost have been increasing over the years (2017-2019)
• Salaries, equipment and employ benefits remain constant.
• In 2019 Fixed costs increased due to the high increase of advertising expense.

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Variable cost Detail

Nature of expense 2019 2018 2017

Wages 227,560 235,330 237,890
Rates & Taxes 603,000 660,000 589,900
Repairs & Maintenance 395,300 259,250 456,350
Business Travelling 315,000 260,100 226,000
Outward Freight & Handling 303,563 245,650 268,00
Raw & Packing material consumed 6,266,087 5,051,129 4,880,900
Total

Explanation

• Variable cost increases and decreases with volume of production by a firm. If a firm increases its volume
of production then variable costs also increases while if a firm decreases its volume of production then
variable costs also decreases
• This table shows a increase in variable costs due to the increase in production of coca cola.

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 5. Market Structure

Product Price Product Market Response to Advertisement

attributes entry& price change Need
exit
1. Coke 2.25litre 1.Delicious and Free Slight change in Advertisement
Rs.120 sweet demand due to need for customer
2.Fizzy drink increase of price attention and
3.Aluminium and and substitutes consumption.
plastic case Demand curve Innovation
4.Non alcoholic shifted left but attention.
not constantly. Market
satisfactions.
2.Pepsi 2.25litre 1.Youth centric Free Consumers are Competition.
Rs.180 and fashionable demanding Inventions.
drink according to their Market
2.Quench thirst income and shift satisfactions.
3.Black in colour for substitutes.

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 4.Soft drink Consumer’s
attention.
3. Cola Max 2.25litre 1.Fizzy drink Free High elastic To gain success
Rs.130 2. black in demand by seeking
Colour Price change consumer’s
3.Prevent from shift consumers attention.
hot to use substitutes Persuade to use
4.complementry and decrease local brand
With fast food shift curve Market
towards right. competition
4.Sprite 2.25litre 1.Green pack Free High elastic For Demand
Rs.130 2.White inside demand. Not attraction
3.Youth centric much respond to Market
4.personification demand curves competition
are shifting right Success
and left.
5.Fanta 2.25litre 1.Orang inside Free Income of Motivation to use
Rs.122 2.Aluminium and consumers shift product
plastic case demand curve to Market
3.Fizzy drink left and to competition
4. quench thirst substitutes with Market
increase in price. satisfactions
Respond to price Success to gain
is low.
6.Mountain 2.25litre 1.Fizzy drink Free More elastic Persuade to use as
dew Rs.125 2.Extra sugar demand. substitute of
3.Heavy’s blood Consumers shift energy drinks
4.yellow in color towards Make local brand
substitutes with competitive
increase in price. Customer
Less respond to attention
price.
7.Barbican Rs.180 1.Aluminiun and Free Lovers are less Healthy fruit
bottle case responded. flavour ads to
2.Fruit flavour Demand curve is motivate
3.Green outside slightly left but customers
4.Fizzy drink not constantly. Market
High and competition
inelastic demand. To gain success
8.Lemoande 2,25litre 1.Youth centric Free High and Healthy ads to
Rs.130 2.lemon taste perfectly elastic motivate
demand curve. customers
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 3.Hommade and Market
ready made competition
4.Quench thirst Success purpose.

Market structure of Coca cola company is monopolistic in which there are many Buyers and many sellers in it.

6. Conclusion

COCA COLA COMPANY is a private and individual brand. It is a multinational brand which has offices around
the world. Coca Cola has the second largest Market share in Pakistan. The main competition of Coke is Pepsi
which has the largest market share when it comes to selling beverages in Pakistan. The main products of Coke
include Sprite, Fanta, Kinley.
Due to the diversity of their product, Pepsi is the competitor of the Coca Cola. According to market analysis, the
company tries to enhance the production and product promotion of media activity to attract customers. While
Coke now claims 35% of all cola sales in Pakistan, Pepsi's market share is now down to 65% from a high of 80%
According to cost analysis, with the information provided it is determined that Coca-Cola suffered a 19.97% loss
in their cost of goods production. Furthermore, a decline was evident in their gross sales in this timeframe,
however, sales only plummeted 15.38% that’s a 4.59% difference in the sales and COG combined.

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