Coca Cola Company would like to introduce the market with the vending machine technology, a new technology with changed price according to weather, which has been developed and tested in the lab internally. The thought is to be based on the idea of automatically adjusting the price according to the demand increase as the weather temperature increases. The purpose of this strategy is to continue increasing the vending machine profit, which had been already main the profit resource for the company. It is an ideal thought of relating priced directly with the weather temperature but impractical. If it is applied into the market, there are below negative results:
It will have weaker competition while another vending machine is nearby with constant price, especially its constant price is. lower than Coca in hot weather. Let us suppose there is another vending machine from the competitor nearby. In the season of normal temperature, both of the vending machines have the same price. Consumer will do the selection just based on his or her favorite. However, in the season of lower temperature, although Coca takes the advantages of lower price, the competitor machine would not loss much because the demand is low in the lower temperature. However, in the season of higher temperature, as the demand has a large increase, Coca will have a big risk of losing business because its higher price pushes many consumers chase for lower price drink from the competitor’s vending machine because lower price will be a good reason of attracting consumers. As temperature increases, the demand will increase accordingly and Coca price will continue to increase. The increasing trend of demand will push more consumers, even Coca fans, away from Coca’s vending machine to purchase drinks from competitor’s vending machine because the tremendously increased price gap between Coca and its competitor as Coca price continue to increase as the temperature increases. Based on the above analysis in...
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