Few years ago, almost all of the coffee in the Gulf Countries was imported from abroad. These days, caffeine lovers can purchase fresh coffee made from the finest beans, imported from around the world but roasted locally. Coffee shops have become a global phenomenon. Although coffee shops, or coffeehouses, have existed for nearly 500 years, in the past few decades they have experienced a dramatic expansion. It has become common to find coffee shops, coffee bars, and kiosks in places where they were once rare or nonexistent and almost every major place on the planet.
Many factors contributed to the expansion, including the consumer culture and the public’s eager acceptance of casual spots to study, relax, socialize, growing appreciation of high-quality coffee (Taste),soaring youth population (number of buyers) prices and promotion.
1- growing appreciation of high-quality coffee (Taste):
consumer tastes (preferences) for a product- a change that makes the product more desirable – means that more of it will be demanded at each price. Demand will increase; the demand curve will shift rightward. An unfavorable change in consumer preferences will , decrease demand, shifting the demand curve to the left.
2- The consumer culture ; public’s eager acceptance of casual spots to study, relax, socialize : An increase in the number of people who accept these cultural habits in a market is likely to increase demand the demand curve will shift rightward a decrease in the acceptance of these cultural habits will probably decrease demand, shifting the demand curve to the left.
3- soaring youth population ( number of buyers ) : An increase in the number of buyers in a market is likely to increase demand the demand curve will shift rightward ; a decrease in the number of buyers will probably decrease demand, shifting the demand curve to the left.
4- Prices of related Goods : An increase in the prices of related goods in a market is likely to decrease demand the demand curve will shift leftward, a decrease in the prices of related goods will probably increase demand, shifting the demand curve to the right. And its divided to the following :
A – substitute good is one that can be used in place of another good.
Star bux café and Costa coffee are substitute goods or, simply, substitutes. When two products are substitutes, an increase in the price of one will increase the demand for the other.
B – complementary good is one that is used together with another good.
For example the fuel & electricity prices which will affect the prices of the services at any coffee producer which will lead to increase at the prices of the coffee which will decrease the demand and shifting the curve leftward.
5- Promotions: increase in the Promotions in a market is likely to increase demand the demand curve will shift rightward, a decrease in the Promotions will probably decrease demand, shifting the demand curve to the left.
And as per the GCC market these factors have affected the coffee market well and raised the sales of coffee which mean that they are affected the demand curve and shifted it to the Right .
THE FIGURE SHOWING THE SHIFTING IN THE DEMAND CURVE FOR THE COFFEE :
Lets Suppose that the government restricts the total number of new branches that can be opened by all chains that will affect the demand and the market surly but how it will affect it ?
In any market we have 2 sides , supply and demand and they are connected to each other , in other words if the supply affected by any factor that will lead to affect in demand and the opposite is right also ,either positive or negative ways , and when the government make restrictions for the total of new branches that’s mean the supply of coffee will be limited in order it will lead to defect between the supply ; demand curve , which in this case will lead to demand excess which might be affect the prices of coffee to be increased .
The figure above is showing an upward-sloping supply curve and a downward-sloping demand curve, there is only a single price at which the two curves intersect. This means there is only one price at which equilibrium is achieved. It follows that at any price other than the equilibrium price, the market will not be in equilibrium Which mean that the all supplied Quantity are demanded.
The demand of coffee is increasing in the GCC Countries that mean the demand curve will shift to the rightward as per the above graph , and in the other hand the supplying of coffee will be decreasing which lead to shift the curve to the left .and that will lead to shortage ( excess of demand ) . then the equilibrium Quantity will change in order the equilibrium price will change . and all that will be affected in negative way as per the following equation :
Government restrictions =Less quantity = High Prices = Less Demanding = Loss
As we see that the Restrictions will lead to less profit or maybe LOSS for the business .
so if the government make restrictions on the total number of new branches that can be opened at the market that will lead to shortage or excess of demand which mean the quantity demanded will be larger than quantity supplied.
How can Costa ensure maintaining a profit margin over its competitors for a longer period of time before economic profits becomes zero ?
The firm will of course incur an extra cost from producing an extra unit, but will also receive revenue from that unit. If the marginal cost is bigger than the marginal revenue obtained, then the firm should realize that producing an extra unit of output was not profitable. The firm should thus cut down some of its production. If the marginal cost is smaller than the marginal revenue, then it is profitable for the firm to produce an extra unit of output. The firm should continue to rise produce extra units of output as long as the marginal revenue it receives from that unit exceeds the marginal cost. The firm should continue doing this until MC=MR, a point at which they should keep production constant, because producing an extra unit beyond this point creates a higher marginal cost for the firm that it creates marginal revenue.
The Costa have to follow the role of the profit-maximizing price (where MC = MR), first find the profit maximizing output. Which is showing in the following graph
So if the Costa follow this role they will stay making profit in the market but if they didn’t follow it and increasing their production which in order increasing the cost that will lead to break even point. as Per the following graphs which Showing that the firm have no profit . so in this point its still surviving in the market , in this point Costa still in the market , but once the average Total cost exceed this point which the total cost equal total revenue they have to stop the production to avoid the loss .