The paper "State of Affairs in the Industry of Cafes and Coffee Shops in Australia " is an outstanding example of a marketing case study. You are a Freelance Economics Consultant who has been commissioned by the Commonwealth Government to analyze the state of affairs in the industry of Cafes and Coffee Shops in Australia and report your findings to the Government. Task Access the IBIS World report on the industry of Café s and Coffee Shops and answer the questions below, in your own words. To access the IBIS World Report, go to RMIT’ s home page.
Then select ‘ Library’ and launch ‘ Databases A-Z’ . After this, select the popular database of ‘ IBIS World. ’ Once in the database, search for ‘ Cafes and Coffee Shops in Australia. ’ You can also use any other resources you find relevant during your research. 1. Overview and Market Structure I. Provide a brief overview of the industry i. e. a definition of this industry, its products, and main activity. According to IBIS World, the cafes and Coffee shops industry in Australia is on the growth path. The rationale for this is because of the existing Australian culture which is passionate about coffee, in 2014-2015, 2.4% growth was experienced (IBISWorld Australia 2008). There are limited barriers to entry in the Australian market, the regulatory body encourages newcomers and hence making the coffee market dynamic and productive at the same time. The orientation of the coffee market structure in Australia is an oligopoly, the rationale for this is because the market is dominated by small producers whose supply and pricing influence the market prices and consequently the competition. II.
Identify the market structure of the industry. Explain how you reached your decision using economic theory. The market Cafes and Coffee Shops in Australia in Australia are largely shaped by the existing Australian culture, Australians love quality coffee.
In economic theory perspective, social choice best describes the Cafes and Coffee Shops in Australia. This culture has fueled the growth of many small specialty coffee shops which have led to increased competition and diminished industry entry barriers (IBISWorld Australia 2008). As such, there is an increase in the number of small operators as compared to franchised chains of stores. As a result, independent operators dominate the Cafes and Coffee Shops industry in Australia.
In terms of revenues, the industry generates about $4.2 Billion and an annual growth rate of 3.2 % (IBISWorld 2014, p. 1). 2. Demand and Supply Analysis III. Using demand theory, analyze the conditions of demand that are prevailing in this industry. Essentially, as the demand of coffee-related products increases, the price of the coffee products is also expected to increase, this is what the demand theory postulates. However in the Cafes and Coffee Shops industry in Australia, the demand for coffee and its products is on the increase, this explains the growing number of small specialty coffee shops which are on the increase to quench the thirst of the ever-increasing demand for coffee products (Hutzschenreuter 2009, p. 45).
Nonetheless, the price of coffee is sensitive in that a slight increase in price as it would be expected as a result of a huge demand actually has a negative impact on the consumer and demand of the product as well. As evidenced by the IBIS World report, the pressure on the margins has constantly pushed the profit margins down.
As such, the coffee industry in Australia does not fully comply with the demand theory that speculates increased demand will increase prices, or the more available the product, the prices drop. In the Australian market, the demand is increasing as well as the supply and hence the slight variation of the prices.
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