Pepsi Tests ‘Naturally Sourced’ Beverage - Advertising Age - News

Pepsi is just about to launch its first new beverage since 1992.  The drink, called “RAW” will present consumers with a healthier alternative to the artificially flavored soft drinks that dominate the oligopolistic market.

Apple extract, sparkling water, grapes, coffee leaf, raw cane sugar. The list of ingredients sounds like it belongs to a health drink, but those are the components of Pepsi’s newest variant.

Pepsi Raw, being launched in U.K. test markets, is meant to be a more healthful alternative to the traditional cola. A type of Pepsi made from only “naturally sourced” ingredients, it taps into demand for premium, less-processed products.

Sounds great, right? But would you be willing to pay more for a “natural” Pepsi than for the good old fashioned artificially flavored Pepsi and Cokes you grew up with? Pepsi is betting the drink will appeal to young hipsters, and is launching it primarily at clubs and bars in six UK cities to test out the market.

So when can Americans expect to  enjoy the natural goodness of Pepsi RAW? Unfortunately, Pepsi seems to think Americans are a bunch of fat tightwads:

 ”It makes sense to launch first in the U.K. because health concerns are a bigger issue there,” Ms. Dornblaser said, adding, “It might not fly as well in the U.S. because of the price.”

Oh, and if you’re too young to remember what Pepsi’s last attempted new product launch was, allow me to jog your memory:

Hey, I LOVED Crystal Pepsi! So, would you be willing to pay more for a healthier Pepsi?

Nokia Won’t Play iPhone’s Tune

As we know, oligopolistic markets are characterized by a few large firms which act interdependently based on the actions of one another. Examples of such interdependence may include pricing and output behavior, advertising behavior, sales and promotions, non-price competition, services offered to consumers, and so on. The “game” of oligopoly is played with one very important goal in mind: maintaining market share in the face of competition from rivals.

In a previous post I discussed some of the strategies Apple has used to break into the oligopolistic market for cellular phones, which it recently did by introducing the thus far wildly successful iPhone. A chart in that post showed that as of earlier this year, the dominant firm in the mobile phone market was Nokia, with a market share of 35.1%. Apple was not even a competitor in this market until July of this year, which saw the successful launch of the iPhone, causing some of the incumbent mobile phone makers to pay close attention to the newcomer’s behavior.

Nokia executives, however, appear to be in denial of the potential threat posed by the iPhone to its dominance in the cell phone industry:

Nokia managers would never admit to being influenced by the Apple iPhone, which mobile phone industry insiders regard as clever but technologically unimpressive. “We don’t determine strategy based on the competition,” insists Anssi Vanjoki, Nokia executive vice-president and general manager for multimedia. “The consumer is our compass.”

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China Mobile negotiating with Apple to carry iPhone

Try try as he might, Steve Jobs and Apple can barely launch their hottest new product, the iPhone, before the Chinese have copied it and put a knockoff on the market as quickly as you can say “can you hear me now?” But what is Apple doing making a cell phone anyway? Isn’t the mobile phone market pretty much dominated by a few big name companies already? How will apple ever survive in a market with such well established firms as Nokia, Samsung, and Motorola?

The answer is through product differentiation. The iPhone is truly an innovative little gadget. More than an MP3 player, more than a cell phone, the iPhone has features that differentiate it from most products available from the established firms in the mobile phone market. Like any firm, Apple advertises its iPod through commercials and other media in order to inform consumers about what makes its product special. What message does the following advertisement send about the iPhone?

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BBC NEWS | Technology | Nintendo warns of Wii shortages

Looks like Brits dreaming of the Wii from Nintendo may have to wait a while longer this holiday season, as British retailers are finding it nearly impossible to fill customers’ orders. It turns out there is quite a shortage for the hot new gaming system from Nintendo!

“Although we’re receiving regular deliveries from Nintendo, Sony and Microsoft and getting the products onto the shelves as fast as we can - it’s possible that demand will outstrip supplies on some products, for example the Nintendo Wii, which has been hugely popular all through the year,” read a statement from high street gaming specialist Game…

“The Nintendo Wii consoles have proved extremely popular with our customers and have been flying off the shelves whenever we get new stock in,” said a spokeswoman.

It seems like the shortage of Wii’s in the UK should send a message to Nintendo and its retailers: RAISE THE PRICE!! One way retailers have tried to do this is by bundling the consoles with up to three or four games, meaning to take home a console shoppers would have to fork over 300 GBP. This seems like a great strategy for retailers faced with strong demand from customers, given that they are probably not allowed to charge above Nintendos suggested retail price for the console itself. Continue Reading »

by Annie Sung and Kristie Chung

Which do you prefer, the Wii? the XBox 360? the PS3? How about other video game consoles? Can you even think of any other video games consoles? Hmm… let’s see… how about the Sega? Wait, no, haven’t seen any of those in a while… what about the Atari? Oh, shoot, nope! Oh yeah, don’t forget the Caleco Vision (for the record, Mr. Welker’s earliest video game memory was of playing Smurfs on a Caleco Vision).

The fact is, today, the market for video game consoles has shrunk to three dominant firms: Nintendo, Microsoft and Sony. This podcast will investigate the video game console market, examine its characteristics, including the elasticity of demand for the different consoles, and conclude whether it exhibits the features of an oligopoly.

Wetpaint, the free online wiki service, has stepped up its use of non-price competition in an attempt to increase its market share in the wiki market. In addition to releasing several Mac vs. PC parody videos meant to showcase the user-friendly, customizability of Wetpaint’s wikis vs. its rivals, the company also announced this morning that it would be offering ad-free wikis to educators!

As a user of Wetpaint since early this year, the distracting presence of advertisements bothered me; the decision to provide educators with ad-free wikis is huge, and makes Wetpaint even more attractive as a platform for hosting online learning communities for teachers of all grade levels.

You may be thinking, “Huh? There’s a market for wikis?” Well sure there is. Just because something’s free for us consumers does not mean it’s not a profit oriented business. Wetpaint and its rivals compete for consumers in an oligopolistic market in which competition is not based on price (since its products are essentially free), rather on product differentiation based on features and communicated through advertising and public relations.

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Managing Globalization » Business Blog » International Herald Tribune » Blog Archive » China takes to the skies

and the full article: China hopes a homegrown regional jetliner can challenge Airbus and Boeing - International Herald Tribune

Here’s another great example of a market that is set to experience a serious change in the near future. The oligopolistic market for “regional jets”, long dominated by two firms, is set to see the entrance of a new manufacturer. From whence doth the new bird fly? From the far East, no less…

“After a couple of false starts, the Chinese commercial aircraft industry may finally be getting off the ground. Starting next year, the prosaically named China Aviation Industry Corporation 1 plans to offer a regional jet that will compete directly with the two dominant forces in the market, Canada’s Bombardier and Brazil’s Embraer.”

Without even reading the rest of this article, you should be able to picture what will happen in the market for regional jets once the Chinese planes start rolling off the assembly lines. This article will also prove relevant when we begin studying market structures. What are the effects of a more competitive market for regional jets?

“Consumers in the rest of the world could benefit, though. Moving from two companies to three in a growing market could bring aircraft prices down, and eventually airfares as well - especially if the Chinese company’s costs are lower.”

But what of the widespread concerns that have emerges of late about the quality of products coming out of China?

“…if China has to combat worries about product quality in areas like foods and toys, just imagine the hurdles it will face with a passenger plane. Those benefits could still be many years away, depending on how people perceive the new product. Would you fly on a Chinese-made airplane?”

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While students and teachers across America settle into their summer routine and look forward to three more weeks of summer vacation, the first week of August marks an unseen exodus of thousands of international students and teachers in countries on every continent. For some reason, international schools all seem to start about two weeks earlier than the post-Labor day start date enjoyed by most public school in the US. Here at Shanghai American school, teachers arrive in droves around the 7th and 8th of August, just in time for our first work day on the 9th.

My wife and I returned to 95 degree heat from the pleasant 70’s of Seattle last night to begin preparing for our second year at Shanghai American School. In a week SAS will welcome around 2900 students, making it one of the largest international schools in the world. As part of our orientation this morning, our director, Dr. Dennis Larkin, shared a bit of SAS’s 95 year history with the faculty, enlightening many of us to the school’s storied past stretching back to the concession era of Shanghai’s “golden age” when thousands of Westerners made their settlements in the city’s center. 100 years ago Shanghai underwent a renaissance unseen in China’s thousands of years of history. European influence brought the city into the 20th century architecturally, culturally, economically, and perhaps more notoriously in the realm of criminal activity as gangsters took over the city through much of the 20’s and 30’s.

With the large Western presence came a demand for Western schools, thus in 1912 Shanghai American School welcomed its first class of 12 students. By the 20’s enrollment rose to 600, and by the 30’s it approached 1,000. In 1937 China was invaded by Japan, and foreign firms and embassies began nervously moving their people out of Shanghai. By 1939 Shanghai had fallen to the Japanese and the school grounds were occupied by Japanese troops. But with the surrender of the Japanese in 1945, the school was back in operation, albeit for only a short time as a civil war between the Chinese Communist Party and the US backed Nationalists brought violence to the streets of Shanghai once more. By 1950 Beijing had fallen to Mao and the Communists, and SAS was shut down “for good”. Its doors would remained closed for 30 years until 1980, when Mao had died and Deng Xiaoping had ushered in the era of “Reform and Opening”, a euphemism for westernization. Once again SAS opened for business.

In the 27 years since the school’s rebirth, the student body has grown from the seven children of American diplomats to 2,900 students from over 50 countries. In the last five years alone the student body has nearly doubled in size, as the school has added a second campus and countless new buildings to serve the growing population of foreigners in Shanghai. Over the same 27 years, around ten other international schools have opened in Shanghai, some with two or three campuses spread across the vast city, several serving over 1000 students also from scores of foreign countries. What impact has the opening and expansion of SAS and other international schools had on tuition paid by foreign students in Shanghai? You may think that with so many schools competing to attract students, each school would have to lower its fees in order to attract students away from its competitors. Well, you’d be wrong. SAS increased its tuition fees by 10% this year, bringing a year’s tuition to around $22,000. Its competitors charge something in the same ballpark, meaning a year of schooling at any of Shanghai’s international schools will cost a family more than a year’s tuition at most state universities in the US.

Discussion Questions:

So, what does all this history and data have to do with economics? Here’s a simple supply and demand question for you. In 1980, international schools in Shanghai had room for, let’s say 20 students total. I am not sure, but I’d guess tuition in 1980 probably ran around $2,000. Today, there are somewhere around 10 international schools with room for probably around 10,000 students, and the average tuition is somewhere in the realm of $20,000.

1. How would an economist explain the 1,000% increase in tuition over the last 27 years, given the fact that today international schools in Shanghai have the capacity to serve 500 times as many students as they could in 1980?
2. Could you draw a supply and demand diagram illustrating the changes that have occurred since 1980 in the market for international education in Shanghai?
3. Let’s be honest, $22,000 is a lot of money for a year of school. What would have to happen in the market for international education in Shanghai for the tuition fees to go down? Identify two scenarios that would result in a tuition decrease. Illustrate these scenarios on your diagram.

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For six of our 16 days, my wife Liz and our friend Leah rented a jeep and circumnavigated the island. Our first stop was for two days of scuba diving in the northeast region of Ahmed. As we drove along the seven or so beaches near Ahmed, we observed there were around ten dive operators offering packages for the local dive spots (including one of Asia’s most famous dives, the WWII-era USS Liberty wreck). Based on our Lonely Planet recommendation, we settled on Eco-Dive, where we paid $60 a day for two dives and all our gear rental. We felt good about this rate and agreed that $60 was a fair and competitive price for a day of diving.

Our next stop, Pemuteran, a remote and relatively undeveloped area on the northwest coast just across the straits from Java, is also known for its great diving. Our first morning in Pemuteran, my wife and I strolled along the beach and found that there were only three dive operators to choose from! And guess what, they all charged between $95-$105 for a two-dive day with gear included! That’s around 60% more than the operators in Ahmed charged! In the end, we decided to do only one day of diving in Pemuteran, and elected to spend our second day there reading by the pool.

Discussion Questions:

1. What was the difference between the scuba diving markets in Ahmed and Pemuteran? Which market was more competitive?
2. What allowed operators in Pemuteran to charge 60% more than the operators in Ahmed? What kind of market structure best describes the diving market in Pemuteran?
3. What do you think is keeping one of the three dive operators in Pemuteran from lowering their price to, say, $60 for a day of diving? How would the other two operators respond? Would this be good or bad for the dive operators of Pemuteran? Would it be good or bad for scuba divers?
4. Assuming that the cost of opening a dive operation was relatively low, and there were no government or other barriers to doing so in Pemuteran, what do you suspect will happen in the Scuba diving market as the tourism industry continues to develop in the remote town of Pemuteran? Explain.

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