The Coca Cola Company, a Threat for Competition?
The Coca Cola Company, a threat for competition?
Universiteit Maastricht
Faculty of Economics and Business Administration
Maastricht, 12 December 2006
Coenen, PJGA
Table of contents
Introduction…………………………………………………………………………… 2
1. Market specification……………………………………………………………….. 3
1.1 Distinction within the market
1.2 Market dominance of The Coca Cola Company
2. Key economic issues………………………………………………………………… 4
3. Economic analysis………………………………………………………………….... 5
Conclusion……………………………………………………………………………… 6
References………………………………………………………………………………. 7
Introduction
Economists are always eager to eliminate every conduct which will lead to a non-competitive market. The models for economic analysis of markets presented in most secondary school books always start with the perfect competitive market. So, clearly every practice of business conduct which is not in harmony with the perfect competitive model has to be condemned. Unfortunately, in real life there are more factors which economists normally would not take into account. As Wehmhorner (2006) has said “Conditions of perfect competition are rarely fulfilled in the real world”. This calls for an extensive competition policy, inevitably with government intervention. The European Commission (EC) has developed a very powerful competition policy, which is divided into 2 different elements. First, the EC prohibits every agreement between companies which limit competition and second, the EC prohibits every abuse of a dominant position by a firm within a market (European Commission, n.d.). This paper will discuss a case of a firm that was assumed to abuse its dominant position, The Coca Cola Company (TCCC). There are probably numerous reasons behind the success of TCCC, such as its very strong brand name ‘Coca Cola’ and its marketing techniques. Of course, these are all legitimate reasons to explain the dominant position of TCCC on the market. It is the power which is linked to
Universiteit Maastricht
Faculty of Economics and Business Administration
Maastricht, 12 December 2006
Coenen, PJGA
Table of contents
Introduction…………………………………………………………………………… 2
1. Market specification……………………………………………………………….. 3
1.1 Distinction within the market
1.2 Market dominance of The Coca Cola Company
2. Key economic issues………………………………………………………………… 4
3. Economic analysis………………………………………………………………….... 5
Conclusion……………………………………………………………………………… 6
References………………………………………………………………………………. 7
Introduction
Economists are always eager to eliminate every conduct which will lead to a non-competitive market. The models for economic analysis of markets presented in most secondary school books always start with the perfect competitive market. So, clearly every practice of business conduct which is not in harmony with the perfect competitive model has to be condemned. Unfortunately, in real life there are more factors which economists normally would not take into account. As Wehmhorner (2006) has said “Conditions of perfect competition are rarely fulfilled in the real world”. This calls for an extensive competition policy, inevitably with government intervention. The European Commission (EC) has developed a very powerful competition policy, which is divided into 2 different elements. First, the EC prohibits every agreement between companies which limit competition and second, the EC prohibits every abuse of a dominant position by a firm within a market (European Commission, n.d.). This paper will discuss a case of a firm that was assumed to abuse its dominant position, The Coca Cola Company (TCCC). There are probably numerous reasons behind the success of TCCC, such as its very strong brand name ‘Coca Cola’ and its marketing techniques. Of course, these are all legitimate reasons to explain the dominant position of TCCC on the market. It is the power which is linked to
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