[MATERI BAHASA INGGRIS BISNIS] CHAPTER 3 COMPETITION
7:57:00 PM
CHAPTER 3
COMPETITION
A. READING
Rivalry
among businesses and service industries is called competition. This feature of
a market economy encourages businesses to improve their goods and services,
keep their prices affordable, and offer new products to attract more buyers,
There
are four basic types of competition in business that form a continuum from pure
competition through monopolistic competition and oligopoly to monopoly (see
diagram). At one end of the continuum, pure competition results when every
company has a similar product. Companies that deal in commodities such as wheat
or corn are often involved in pure competition. In pure competition, it is
often the ease and efficiency of distribution that influences purchase.
In
contrast, in monopolistic competition, several companies may compete for the
sale of items that may be substituted. The classic example of monopolistic
competition is coffee and tea. If the price of one is perceived as too high,
consumers may begin to purchase the other. Coupon and other discounts are often
used as part of a marketing strategy to influence sales.
Oligopoly
occurs when a few companies dominate the sales of a product or service. For
example, only five airline carriers control more than 70 percent of ll tickets
sales in the United States. In oligopoly, serious competition is not considered
desirable because it would result in reduced revenue for every company in the
group. Although price wars do occur, in which all companies offer substantial
savings to customers, a somewhat similar tendency to raise prices
simultaneously is also usual.
Finally,
monopoly occurs when only one firm sells the product. Some monopolies have been
tolerated for producers of goods and services that have been considered basic
or essential, including electricity and water. In these cases, it is government
control, rather than competition, that protects and influences sales. The
following chart represents the competition continuum.
|
most ----------------------------------------------competition---------------------------------------least
B.
EXERCISE
B.
EXERCISES
- Which of
the following would be a better title for the passage?
- Monopolies
- The
Commodity Market
- The
Competition Continuum
- The Best
Type of Competition
- An example
of a product in monopolistic competition is
a.
Corn
b.
Electricity
c.
Airline
tickets
d.
Coffee
- The word
‘tolerated’ could best be replaced by
a.
Permitted
b.
Reserved
c.
Criticized
d.
Devised
- Which type
of competition is subject to the greatest government control?
a.
Monopolies
b.
Oligopolies
c.
Monopolistic
competition
d.
Pure
competition
- The author
mentions all of the following as characteristic of monopoly EXCEPT
a.
The
use of coupons or other discounts
b.
Government
control
c.
Basic
or essential services
d.
Only
one firm
C.
READING 2
Read the
article below and underline the present verbs!
Coke vs. Pepsi:
The New Cola Wars
Forget About How Vanilla Coke and Pepsi Blue Taste. Which Stock Is Better: Coca-Cola Or PepsiCo?
NEW YORK (CNN/Money) - The Beatles or the Backstreet Boys? Star Trek or Star Wars? They say you must like either one or the other.
Forget About How Vanilla Coke and Pepsi Blue Taste. Which Stock Is Better: Coca-Cola Or PepsiCo?
NEW YORK (CNN/Money) - The Beatles or the Backstreet Boys? Star Trek or Star Wars? They say you must like either one or the other.
And the same goes for Coke and Pepsi. But while it may be
true for the sodas, does it hold for the stocks?
Coca-Cola is launching a new product, Vanilla Coke, next week (May 15) while Pepsi
recently announced that it will start selling a berry flavored cola, Pepsi Blue, in August. With Vanilla Coke, the
company seems to be banking on nostalgia. (John Travolta's character in
"Pulp Fiction" ordered a Vanilla Coke at a 50's themed diner, for
example.)
Pepsi Blue, on the other hand, seems to be a concerted
attempt to reach out to the hipper, younger demographic that drinks Pepsi's
Mountain Dew. And embracing that demographic has worked. The launch of Code
Red, a cherry-flavored version of Mountain Dew, last year helped Pepsi increase
its market share. According to the Beverage Market Corporation, unit volume for
all of Pepsi's soda brands (including Diet Pepsi and Mountain Dew for example)
increased 1.3 percent in 2001 while volume for Coke's carbonated beverage
brands (Diet Coke, Cherry Coke and Sprite among others) declined by .2 percent.
Pepsi is not as pricey
Regardless of which soda you like better though, Pepsi seems
the better value than Coke right now. Coke is trading at a nearly 20 percent
premium to Pepsi based on 2002 P/Es even though the two companies' earnings
growth rates are nearly identical. (Pepsi's are actually a shade higher.)
And when you look at revenues, the gap is even more
dramatic. Coke is trading at 7 times estimated 2002 sales while Pepsi is
trading at 3.5 times 2002 revenue estimates. Both companies are expected to
post slight declines in sales this year and an increase of about 4 percent in
2003. Due to this disparity in valuation, Jeff Kanter, an analyst with
Prudential Securities, says he has a "buy' rating on Pepsi and
"hold" on Coke. Prudential does not do investment banking.
To be sure, Coke is still the market share leader in soft
drinks. One of the main reasons the stock has outperformed Pepsi this year was
because it reported a better than expected gain in unit volume in the first
quarter. And the company has taken steps to cement its carbonated beverage lead
as well gain ground in the bottled water market. (Coke and Pepsi both have
their own brands of water, Dasani and Aquafina, respectively.)
One potential risk for both Pepsi and Coke is the economy.
No, not if it goes back into a recession. If the economy continues to improve,
the stocks could fall victim to what is known as sector rotation, the selling
of defensive companies like food and beverages in order to buy more
economically sensitive companies in the financial services and technology
sectors. To that end, shares of Pepsi and Coke fell slightly on Wednesday
during the Cisco-induced market rally.
But if you're not a fan of either Pepsi or Coke, there
actually are several other beverage stocks out there. And they're trading at
lower valuations. Cadbury Schweppes (CSG:
Research, Estimates),
the British confectioner, owns the Dr Pepper, 7 Up, A&W and Royal Crown
brands of soda. It too is joining the new round of cola wars, introducing Red Fusion, a fruit flavored version of Dr
Pepper, Friday. Red Fusion will hit the market in July. Cadbury Schweppes'
stock trades at a sizable discount to Coke and Pepsi, with a P/E of 16.7 based
on 2002 earnings estimates. Earnings are expected to increase 12.5 percent this
year. (http://money.cnn.com/2002/05/10/pf/investing/q_cola/index.htm)
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