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1. Market share of UK branded coffee shops, 2015, percentages Figure 1: Market share of UK branded coffee shops, 2015, percentages Costa Coffee: 30% Starbucks: 13% Caffe Nero: 9% Pret a Manger: 6% Morrisons: 6% Tesco: 7% Others: 29% 2 - Edexcel - A-Level Economics A - Question 1 - 2018 - Paper 3
Question 1
1. Market share of UK branded coffee shops, 2015, percentages Figure 1: Market share of UK branded coffee shops, 2015, percentages Costa Coffee: 30% Starbucks: 13%... show full transcript
Worked Solution & Example Answer:1. Market share of UK branded coffee shops, 2015, percentages Figure 1: Market share of UK branded coffee shops, 2015, percentages Costa Coffee: 30% Starbucks: 13% Caffe Nero: 9% Pret a Manger: 6% Morrisons: 6% Tesco: 7% Others: 29% 2 - Edexcel - A-Level Economics A - Question 1 - 2018 - Paper 3
Step 1
1(a) Briefly explain the market structure that describes the UK branded coffee shop market.
Answer
The UK branded coffee shop market can be described as an oligopoly, where a few large firms dominate the industry. Companies like Costa Coffee and Starbucks hold substantial market shares, making it difficult for smaller firms to compete. This market is characterized by product differentiation, significant brand loyalty, and some degree of pricing power. The competition primarily relies on factors such as quality, service, and atmosphere. The market structure influences consumer choices and pricing strategies.
Step 2
1(b) With reference to Figure 3 and other information provided, discuss the price and non-price strategies Starbucks may pursue to compete.
Answer
Starbucks can employ various price and non-price strategies to compete effectively.
Price Strategies:
- Premium Pricing: As illustrated in Figure 3, Starbucks generally uses premium pricing for its products, such as the Espresso Double at £2.00 which is higher than competitors like Greggs. This positions Starbucks as a high-quality choice in consumers' minds.
- Bundling: Offering combinations of products at a slight discount could encourage larger purchases, enhancing overall sales.
Non-Price Strategies:
- Quality and Customer Experience: Starbucks invests in the ambiance of their stores to create a unique, inviting atmosphere, enhancing customer loyalty.
- Branding and Promotion: Targeted advertising campaigns emphasizing ethical sourcing and high-quality ingredients can attract conscientious consumers.
- Loyalty Programs: Implementing rewards and loyalty programs that incentivize repeat purchases also strengthens customer retention.
Step 3
1(c) Examine the advantages of using an indirect tax as a means of reducing the use of disposable coffee cups.
Answer
Implementing an indirect tax on disposable coffee cups offers several advantages:
- Behavioral Change: By imposing a tax, consumers may opt for reusable cups to avoid extra costs, encouraging sustainable practices.
- Revenue Generation: The tax can generate additional revenue for the government, which could be allocated to environmental initiatives.
- Environmental Impact: Reducing the consumption of disposable cups can decrease landfill waste and lower CO2 emissions associated with cup production.
- Incentivizing Alternatives: This tax could lead companies to innovate and provide more environmentally friendly packaging options.