The coffee shops are close to one another. This might be attributed to networking that has made the coffee so unique due to its value gained due to more people using them at one place. The market might have been designed in that manner by factors like proximity to customers and suppliers convenience.
The table below lists prices in four hotels as identified.
Hotel/price Highest price Lowest price
Chapters $21 $2
Starbucks $25 $2
Human Bean $35 $3
Bridge Cafe $22 $2
Price of a small (12oz) cup of coffee is $2.1. Average national price is $2.70
Price of a small (12 oz) cup of cappuccino is $3.95. Average national price is $3.65
Price of a small (12oz) cup of small latte is $5.49. Average national price is $ 5.23
Human Bean is identified to have the higher price for the three products with an average of $ 4.6 for the three products. This is much varied to the other shops that are slightly lower.
Coffee market in Newberg is characterized as monopolistic competition. Each coffee hotel has elements of creating individual uniqueness to enable competition for the same customers. These hotels are independently owned and due to their small sizes the owner is able to make fast decisions including adjusting with economic trends at any time (Nikaido, 2015).
According to Nocco, A., Ottaviano, G. I., & Salto, M. (2014) the coffee market bears the following characteristics:
Since they are individually owned coffee shops, they are able to make independent decisions about their prices in regard to a product or the market trends and the cost of making the coffee.
There is wide spread market knowledge of products and prices of the coffee. The customers are in a position to make their choices in pricing and product quality by comparing several coffee shops.
It involves simple procedures starting up coffee shop; there are fewer barriers to entry and exit into the market. The owner can therefore enter and leave at own will into market selling coffee.
There is product differentiation where individual coffee shops make use of different forms of the product in its design, sizes and color. Others include differentiated promotional methods in packaging, customer service and after sales service.
The coffee shops are pure price makers since each will be involved in developing the product uniqueness independently and therefore will be able to make a higher or lower price than the product competitors.
The coffee shops are many; the number of buyers and sellers are many since the products are differentiated according to the maker.
The individual shops are powerful in their own set up since the market is competitive and only the additives by owner can keep the business thriving. The individual coffee shops are able to make their own prices and the customers will select their price of choice. The only power that creates uniqueness is the differentiation of a product through enriching the product quality, design or size. Jonathan should take his wife to hotel Starbucks which is cozy with free Wi-Fi and good meeting zone.
Nikaido, H. (2015). Monopolistic Competition and Effective Demand. (PSME-6). Princeton University Press.
Nocco, A., Ottaviano, G. I., & Salto, M. (2014). Monopolistic competition and optimum product selection. The American Economic Review, 104(5), 304-309.
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