Introduction: 2
Market structure: 2
Product differentiation: 5
Market Entry Barriers: 8
Conclusion: 9
References 10
Introduction:
The assignment has asked us to compile the assignment on the basis of the soft drinks manufacturing concern. After the completion of the assignment the picture prevailing in the United Kingdom market for a soft drinks manufacturing concern will be clear to us. We will get to know about different aspects to consider before entering soft drinks market in the country. After completion of the task given in the question we shall also understand the different barriers which a new concern will have to cross in order to establish itself in the market.
Market structure:
In order to understand the market structure in the country, i.e. in United Kingdom it will be a prudent to discuss the different types of market which exists in the country. The market structure in the country basically can be divided into four broad categories; these are Perfect Competition, Monopolistic competition, Oligopoly competition, Monopoly competition. The market structures in the country are shown below with the help of the following diagram: (Heywood and Peoples, 2006)

Let us discuss the essential characteristics of the above market types in details for better understanding of the readers.
Perfect competition: Perfect competition is said to be existing where huge number of firms deal in products which are homogeneous, i.e. similar in nature and character. Under perfect competition entry and exit of the firms are without any restriction. Here exists perfect condition as no single firm can influence the market. The buyers and sellers deals in the product in a hand distance to each other. Examples of perfect competition are cabbage, potato, vegetable, fish market. (Ashton, 1999)
Monopolistic Competition: Monopolistic competition also has many firms but compare to the perfect competition the numbers are less. There are no entry or exit barrier in the market, hence, firms can enter and exit the market at their will, depending on their assessment of the market situation. The major point of difference though is the difference in product offered by firms in Monopolistic competition. Unlike perfect competition in Monopolistic competition the firms offer differentiated products. Hence, firms are involved in dealing with products which are not homogeneous. Restaurant owners providing restaurant services, builders building different kinds of houses are few of the examples of Monopolistic competition. (Burke, Genn-Bash and Haines, 1991)
Oligopoly Competition: Firms under Oligopoly competition are involved in selling products which are both differentiated as well as homogeneous in nature. The major point of distinction between this type of market and others, i.e. perfect competition and Monopolistic competition is that the numbers of firms are very few in case of Oligopoly competition. Generally two or three firms dominate the whole market. The entry and exit into and out of the market are restricted; hence, firms are not free to e4nter the market at their will, accordingly the exit is also not in their hands. The entry and exit into and out of the market are regulated according to the norms set by the appropriate authority, generally the Government of the country. Firms dealing in petrol, soft drinks, electrical appliances, natural resources are few of the examples of oligopoly competition firms. (Geroski, Phlips and Ulph, 1985)
Monopoly Competition: Under Monopoly competition there are only one firm present in the market, hence, it is the monopoly of the firm in the whole market. The firm generally deals in a unique product. Generally the firms are barred to enter the market, i.e. there exists restriction of entering the market, and sometimes it is completely blocked. Firms dealing in rare natural resources, companies dealing in water, train operators are examples of Monopoly market. (Clarke, Davies and Driffield, 1998)
We have chosen the soft drink manufacturing concern as asked in the question to compile the answer. According to the characteristics of the market of soft drinks in the country it is clear that it falls under the Oligopoly market structure. As it has been discussed earlier that under the Oligopoly market structure the firms are not free to enter the market and exit from it at their will. Relative conditions have to be satisfies and other market barriers have to be overcome to enter the market. Apart from the Government regulations, if any, the firms will be required to achieve the product differentiation in order to achieve the wealth and profit maximization objective in the long run.
Product differentiation:
A firm by providing superior quality of product to the customer than other firms in the market will be able to achieve the dual objectives of maximizing shareholders wealth and maximizing profit in the long run. Following factors will help a firm to achieve the desired product differentiation:
Adding new features to the product which otherwise was not in existence till now will provide the existing customers with a valuable alternative. Hence, the firm shall look to satisfy the unfulfilled needs of the existing customers along with the basic requirements of the product which the firm proposes to sell in the market. Accordingly the firm should concentrate on adding new benefits to the customers which earlier did not exist. The product quality is the most important which alone can make the difference in the market. Higher quality of product will obviously attract customers in large numbers. Superior product quality will not only enhance the reputation of the new firm in the market it will also be instrumental in building a customer base for the firm in the market. Providing superior quality of product will give the firm an advantage over the exiting firms as this not only creates a customer base for the new firm but at the same time the market share of the existing firms will reduce considerably as the customers will obviously choose value for money. The firm by adding additional distinctive features in the product which currently not available in products offered by the existing players in the market will create a niche for the firm in the market which will work for its advantage in the future. Considering that the firm is to manufacture soft drinks it will be a challenge for the firm to come up with a distinctive product which shall obviously be liked by the customers in order to achieve the dual objective of wealth and profit maximization of the firm. Product packing is another aspect to be looked into by the firm, often it has been seen that the customers are attracted towards certain products with attractive packaging than those with lesser attractive packaging. Hence, the firm needs to give due importance to the bundling of the soft drinks in such a way so as to attract customers at first place. The reliability and durability of the product are other essential characters having substantial influence on the overall demand for the product, considering that the firm is venturing into food and beverages market it has to adhere to the minimum standards set by the Government and other regulatory authority in order to provide the customers with needed assurance regarding the safety of the product offered by the firm. Products with superior quality will obviously attract large number of customers to enable the firm to obtain the benefit of large scale economies. Customers are price averse; hence, lesser price will always attract customers, the firm if able to achieve the large scale economies by carrying operation in large scale, will be able to offer customers their product at reasonably lower price compare to other firms in the market, this will be a huge advantage for the firm in the future. (Arping and Loranth, n.d.)
Apart from the basic operational differentiation in the product, the firm will have the option to build a brand image for its product, in this case for the soft drinks by aggressively campaigning for the product in the market. At present companies are using different platforms to show case their product and advertising aggressively to build a customer base at the very initial stage of the product. Considering the huge market of soft drinks in the country the firm will have to draw a competitive marketing strategy for its product to make sure that maximum people are aware about the product and are aware of its availability in the market. Distributors play a vital role in familiarizing a new product; hence, the firm has to keep in mind core customer segment it is going to target and accordingly should make plan to achieve its objective, i.e. maximizing the sales of its offering in the market.
Customer service is another determinant factor in overall success of the product in the market. Taking into account that the firm is going to manufacture soft drinks, which generally do not involve any after sales support to its customers, the firm shall primarily focus on manufacturing superior and distinct quality of soft drinks to capture the market at the beginning.
Pricing strategy plays an important role in Oligopoly structure; the firm has different options in front of it to price its product. In case the firm is confident about its product it may decides to price its product quite high with enough confidence to achieve the targeted market share despite highly pricing its product. The firm may also decide to use the penetration pricing strategy to price its product very low to achieve high market share at the very beginning then in future after achieving the desired market share it may decides to revise its price and enhance the same in order to earn desired level of profit.
Market Entry Barriers:
Considering the company has decided to enter the Oligopoly market, there bound to be various restrictions in entering the market. Let us discuss about those entry barriers:
At the very beginning the existing company will create barrier to the newer entrant considering the existing firms already have intellectual property rights which they will not be ready to share with the new firm in the market. Hence, the new firm either has to purchase intellectual right from existing firm s in the market by paying huge amount of money to the firms or will have to acquire fresh intellectual rights from others.
In case the existing firms enjoy strong brand image in the market and have good reputation in the market then it will be difficult for the new firm to make its own place in the market. Hence, the firm will have to manufacture superior product to penetrate the market and make some dent into the existing firms’ market share in soft drinks market. Existing firms with large scale of economies benefit will have the advantage of offering their product to the customers at relatively low price compare to the new firm which may not have yet achieve the large scale economies benefit.
The capital requirements in soft drinks manufacturing is quite substantial, often it is a huge deterrent for newer firms to enter the market. Considering that future is uncertain the firms will be obviously feel jittery to invest substantial amount of funds in such project, considering the failure will result in huge amount of loss, often it act as a huge barrier in entering into the market.
Apart from the above factors access to suitable distributors, i.e. inappropriate distribution channel often plays a spoil sport for those trying to enter the market. Accordingly the firm will have to choose suitable distributors to distribute its product to different segments of the market and enhancing the chances of the firm to attain maximum sales.
Government regulations require firms entering food and beverage market to adhere to the minimum safety standards in order to get the license to manufacture soft drinks. The composition of the soft drinks shall be such so as to achieve the safety standards to get the license required to start manufacturing process. Apart from Government regulations a manufacturing concern also has to adhere to other safety standards required by different authority in order to get the license to manufacture soft drinks. (Heger and Kraft, 2008)
The above discussion clears the picture regarding various entry barriers which the new firm will face to enter the soft drinks market under Oligopoly market structure. Hence, the organization will have to cross all these barriers before it can enter the market to achieve the results that the firm has set out to achieve.
Conclusion:
The above compilation has taught us about different market structures that exist in the country and the characteristics of these markets. The assignment has specifically discussed the soft drink manufacturing market; accordingly we have got to know the different factors which have to kept in mind before entering the market.
References
Arping, S. and Loranth, G. (n.d.). Corporate Leverage and Product Differentiation Strategy. SSRN Journal.
Ashton, J. (1999). A test of perfect competition in the UK retail-banking deposit market.
Burke, T., Genn-Bash, A. and Haines, B. (1991). Competition in theory and practice. London: Routledge.
Clarke, R., Davies, S. and Driffield, N. (1998). Monopoly policy in the UK. Cheltenham, UK: Edward Elgar.
Geroski, P., Phlips, L. and Ulph, A. (1985). Oligopoly, competition, and welfare. Oxford, OX, UK: B. Blackwell.
Heger, D. and Kraft, K. (2008). Barriers to entry and profitability. Mannheim: ZEW Zentrum für Europäische Wirtschaftsforschung.
Heywood, J. and Peoples, J. (2006). Product market structure and labor market discrimination. Albany: State University of New York Press.