Consumers in a local setting have a tendency of going for new products in the market with the belief that these new products add more value and have an extra utility as opposed to the current products existing in the market. As such, in the case of the beverages market, the new entrants into the playing field come into the market with something unique and different from what domestic consumers know and are aware of, yet they satisfy the same need or serve the same purpose. As such, the consumers will go for more of Coca Cola’ s Kekou Kele as opposed to the domestically produced Jianlibao or the Li Ning.
This is because of the thing that because Coca Cola is a new brand and has a reputable global reputation, then its products are of a higher quality and thus more utility than the local products. The guidelines for such assumptions are the theory of consumption which states that consumers will always seek to maximize their utility at any given time of consumption. The local producers can defend themselves based on the New Trade Theory.
This advocates that innovating firms develop advantages to scale economies. This gives them an ability to build a sustainable market power that creates a barrier that stops competitors from entering their local markets. The theory even implies that it is sometimes necessary for the governments to intervene in order to assist domestic “ follower” firms in establishing their competitive positions. Therefore, the domestic beverage producers in China have to engage in creativity and innovation whereby they produce new products continuously for its markets. these new products show the consumers that they have something new to offer, something different, as well as, something with an enhanced utility and value.
As such, when consumers know that they can get locally what international players bring in then their tendency to consume and support brand new imports or products from international firms will drop.
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