Economic Demand and Supply
Economic Demand and Supply
1.0 INTRODUCTION Nescafe is one of the beverages product produced by Nestle Company. It is a brand of coffee that suits to everyone who loves coffee so much. It comes in the form of many different products such as Nescafe Original, Nescafe Classic and Nescafe Gold that totally will give different tastes and experiences to its consumers. It is consumed by people staying in urban, semi urban and rural areas. As the Nestle is a well established company in producing many products not just Nescafe like cereals, chocolates and ice cream, it has its own perception by consumers by each products that they are producing off. Every new product that was published by Nestle will get hot responses from the consumers.
Consumers are willing to try on what product that they are publishing and normally positive feedback will be gained. However, Nestle is not the only company producing the coffee product. Its position was shaken by the almost unlimited choices available on shelves. There are other companies which is also entering their product in this coffee market such as Power Root (M) Sdn. Bhd and Kopitiam Asia Pacific Sdn. Bhd. Numerous of companies entering into this market make them become monopolistic competition.
All of these companies need to compete each other in order to survive in this market as they are producing the same product which is coffee but not really identical in their characteristics. Nonetheless, the company still managed to lead, with its long established brand Nescafe which has a loyal following, especially among older consumers. Such people are less inclined to try new products and are less receptive to change. As such, they were not as easily swayed as younger groups by more sophisticated coffee and additional features, which often confuse older generations.
2.0 FINDINGS AND ANALYSIS There are many types or level of coffees. It is either regular coffee or gourmet coffee. These differences make it differ in their prices. Of course the gourmet coffee will be slightly expensive compared to the regular coffee but it is still attainable to the consumers to buy it. For this paper, I will discuss only on one type of the Nescafe product which is Nescafe Gold. Nescafe Gold is one of the premium coffees produced by Nestle used gourmet coffee.
It was a distinctive blend of Arabica and Robusta beans that serves nothing less than satisfaction with every enticing sip. Compared to Robusta, Arabica is more fragile as it best grows in mountainous climate. The gourmet coffee made from the beans of this plant tastes great and holds a premium position in the market. Gourmet coffees from Arabica coffee beans boast of a finer aroma, richer flavour, and more body than those made from Robusta beans. The Robusta beans on the other hand, are known for their disease resistance properties and are more popularly used in commercial blends. All of these show this gourmet coffee is more exclusive compared to the others.
3.0 DISCUSSIONS (ECONOMIC THEORITICAL APPLIED)
3.1PRICE ELASTICITY OF NESCAFE GOLD
According to N. Gregory Mankiw (2011), the price elasticity of demand measures how much the quantity demanded responds to changes in price. Demand for a good is said to be elastic if the quantity demanded responds substantially to changes in price. However, demand is said to be inelastic if the quantity demanded responds only slightly to changes in price. For Nescafe Gold, there are determinants that influence the price elasticity of demand.
3.1.1THE AVAILABILITY OF CLOSE SUBSTITUTES TO NESCAFE GOLD
Nescafe Gold is one of the gourmet coffees that are available in the market nowadays. But, bear in mind there are many types of coffees that have same standard and quality like Nescafe Gold. The price increase in it will lead the consumers to switch to the other coffee products such as Pearl Cafe and Ali Cafe produced by Power Roots, Old Town White coffee produced by Kopitiam Asia Pacific Sdn. Bhd. and many more. Moreover, the trend of drinking coffee at coffee shops gathered momentum with consumers extending their coffee drinking in outlets to the office and at home. The nostalgic feeling of village type ‘kopitiam’ was cleverly revamped with serving the traditional cups of coffee. With the increasing number of ‘kopitiam’ like ‘Old Town White Coffee’, ‘Hailam Kopitiam’, ‘Ipoh Old Town Kopitiam’ and numerous other coffee chains opening, the coffee drinking scene certainly mushroomed in Malaysia. This ‘kopitiam’ also can be a substitute to Nescafe Gold as it is also served the best coffees that have the same quality like it.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 29 September 2016
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