Coca Cola Case Essay

1053 words - 5 pages

Report for Coca Cola Case:Problem:1. Whether Coca cola should introduce the concept of vending machines that chargesdifferent price during different weather?2. What did Coca Cola do right? What did it do wrong? How would you do it?3. What is price discrimination and when does it work?Decision Analysis:Coca cola plans to introduce the concept of price discrimination in its market through vending machines that will charge different price according to weather.Price discrimination can be defined as charging of different prices for different quantities of a product, at different times, to different customer groups or in different markets, when these price diffference are not justified by cost ...view middle of the document...

Thus when Coke prices increase in hot weather, it could run into fierce competition from Pepsi products which would still be a lower priced and hence more desired option of the customer.IV. The cost of segmenting should not exceed the extra revenue generated - Since the machine, being weather sensitive, does all the work of segmenting there is no cost involved in manual segmentation. However cost of installing this weather sensors and computer chips for the same reason in the vending machine, although not known, in most probabilty will be huge as the technology is very new and may offset the aditional revenues generated.V. The practice must not breed ill will - This concept can generate resentment as it can be perceived as seeking new ways to make thirst pay. This is a concern area as there has already been negetive publicity of this new concept. There has been some miscommunication from the company before the right time, which resulted in wrong image being potrayed.VI. The particular form of price discrimination must not be illegal - which is just not the case, there is nothing illegal about this concept.Other two concepts to be considered are :The Price Elasticity of the Coca cola drinks - the soft drinks market can be described as Oligoplostic Market where there is high price elasticity as products are very less differentiated in this market. It should be kept in mind that a slight increase in the price might result in losing out the market share to the competitors.However this brand commands good brand loyalty, being no. 1, so the consum,ers may not shift to other brands.The Price Sensitivity of the consumers - since the product involves too frequent purchases, consumers may be price sensitive. Hencethey may not appreciate even a slight increase in prices and shift to other brands.There is nothing wrong with the practice of price discrimination. It has existed in other...

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