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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 - 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 - ... 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 - Edexcel - A-Level Economics A - Question 1 - 2018 - Paper 3
Step 1
With reference to Figure 1, briefly explain the market structure that describes the UK branded coffee shop market.
Answer
The UK branded coffee shop market reflects a monopolistic competition structure. In this market, multiple companies, including Costa Coffee, Starbucks, and Caffè Nero, operate with differentiated products, allowing them to compete not only on price but also on quality, brand recognition, and customer service. Notably, Costa Coffee leads the market with a significant share of 30%, indicating its strong brand presence. Meanwhile, Starbucks, Caffè Nero, and others contribute to the diversity within the market, which allows consumers to choose from various options that cater to different preferences.
Step 2
With reference to Figure 3 and other information provided, discuss the price and non-price strategies Starbucks may use.
Answer
Starbucks employs both price and non-price strategies to maintain and enhance its competitive position in the coffee shop market.
Price Strategies: Starbucks can utilize skimming pricing, offering premium pricing for its high-quality offerings, such as specialty coffees, which justifies a higher price due to perceived quality. The comparison in Figure 3 indicates that Starbucks charges higher prices compared to competitors like Greggs and McDonald's, where an Espresso Double is priced at £2.00.
Non-price Strategies:
- Brand Loyalty: Starbucks invests heavily in brand loyalty programs and customer experience, creating a strong emotional attachment with its customers.
- Quality and Variety: By offering a diverse menu and high-quality beverages, Starbucks differentiates itself from competitors.
- In-store Experience: The ambiance and customer service emphasize the experience over mere consumption. Effective marketing and seasonal promotions also enhance its brand image.
Step 3
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 can encourage reduced usage in several ways:
- Behavioral Change: An increase in the price of disposable cups incentivizes consumers to opt for reusable alternatives.
- Revenue Generation: The tax can generate funding for environmental initiatives and disposal infrastructure, thereby addressing the root causes of waste.
- Environmental Impact: Reducing disposable cup consumption contributes to less landfill waste and lower carbon emissions, promoting sustainability.
- Consumer Awareness: The introduction of such a tax raises awareness about the environmental impacts of disposable cups among consumers, further encouraging positive purchasing behaviors.