Monopolistic Competition Introduction to the Thesis

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4. Reasons for Differences in Supply, Demand and Price

Before presenting the two major reasons which generate changes within a monopolistic market, it is necessary to state that they refer to a general market, rather than the soft drinks market, which stands fairly increased chances of regulating itself on the long run. This being said, the two reason are the mechanisms of setting price and the control of the monopoly.

Within a well regulated market, in which economic agents compete through the implementation of the principles of friendly competition, the retail price of a commodity is established based on the assessment of the offer and the supply. This feature constitutes the primary reason as to why differences occur in the demand, supply and price, as these three elements are no longer established within the free market, but by the discretionary desires of the monopolistic organization.

The second element of the rationale behind the changes is given by the fact that the supply of soft drinks is no longer ensured by a multitude of organizations, but by a single large player. This means that the player, be it the Coca Cola Company, PepsiCo or any other entity, is able to manage supply of soft drinks as it wishes. However, it is possible that they offer a reduced product variety.

5. Economic Factors

There are generally three types of production factors required to operate the soft drinks business: natural, human and financial. Each of these resources has numerous distinct, but equally important, applications.

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For instance:

(a) the natural factors of production are required to offer the commodities to be used in the manufacturing of the soft drinks, such as the water, the sugar or other ingredients

(b) the human resource is required to handle the manufacturing and distribution processes

(c) the financial resources are required to set the two other categories of production factors into motion; additionally, they are required for additional investments, distribution and so on (Mulcrone, 2001)

6. Using Economic Factors to Create Competitive Advantages

Each of the three categories of production factors outlined throughout the previous section can be successfully used to generate competitive advantage. The lines below reveal some examples as to how this could be achieved:

(a) the company could decide to use cleaner water from less populated natural sources; such a decision would significantly improve customer satisfaction, would enhance organizational reputation, and as a result, would improve competitive strength.

(b) the company could place an increased emphasis on developing HR policies which improve employee on the job motivation, and as such enhance their levels of performance. This translates into higher levels of productivity, and an increased volume of the offer, to once again strengthen the company's competitive position

(c) Finally, the means in which the financial resources could be used to generate competitive advantages include the ability to invest in newer and better technologies, motivate the staff members, purchase the most adequate commodities, promote the organization and so on......

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