Chatime is one of the beverage industries in the world. Chatime origin is in Taiwan on October 2005. It is a well know franchise company around the world. It has expanding over 800 retail outlets in the world such as Malaysia, China, India, Australia, Singapore, Hong Kong, Thailand, Korea, and others. The combination 30 years of tea manufacturing experience in the tea industry and more than over 700 well trained trainers, it helps Chatime to become one of the famous tea companies in the world. As a well-known tea company in the world, Chatime is aimed to be the most famous beverage in revolutionizing the tea industry. To produce the highest quality of beverage, Chatime produces the state-of-the-art tea machines to modernize the traditional tea culture. Meanwhile, Chatime uses the highest quality natural ingredients to produce the high quality products and without any preservatives and additives. With the era of technological advancement, all of the processes are done by machine .The main product of Chatime is bubble tea
Chatime has becoming the market leader as leading the bubble tea industry in the world. It has sales $20 million in the business and expanding
more than 580 stores in the worldwide. According to the
survey, the net sale of Chatime is increasing every year. In the other way it
means that the demand of bubble tea in Chatime is also increasing.
Determinants of Demand
There are some others to determinants of
demand.
Figure 1 is a demand curve and it shows the demand of bubble tea
is shifts
to the leftward
Price of related goods
Price of
related goods is one of the determinants of demand. When the price of bubble
tea increases, consumers might shift to purchase others drink to replace the
bubble tea. Consumers may buy the coffee as a substitute for the bubble tea. Therefore, the demand curve will shifts to the leftward because the demand of
bubble tea decrease. However, one of the key factors which affect the demand
of bubble tea is pearl. This is because pearl is one of the complements goods
in the bubble tea. In year 2013, Maleic acid of topical pearl affects the
demand of bubble tea decrease. There are few tea business had been close down
because of the incident of maleic acid (Finance.eastday.com,
2013) .
Simultaneously the supply of pearl is decreasing due to the incident of maleic
acid as well. The demand of bubble tea will decreases
due to the supply of pearl is decreases. Thus, the demand curve will shift to the leftward.
Figure 2 is a demand curve and it shows the demand of bubble
tea is shifts to the rightward
Preferences
Besides,
preferences is also one of the determinants will affects the demand. The target markets of the bubble tea are all
different ages' people. Not everyone likes to drink the same type of the bubble
tea. Chatime provides different various series of bubble tea, it allows and
helps to target different consumers and different taste such as smoothie
series, refreshing juice and etc (Chatime, 2013) . It helps to add on
the consumers’ choice as well as attracting more customers to consume. In
addition, Chatime has also provided delivery service for the consumers to make
them more convenience and enhance to the degree of consumers’ satisfaction (Yin, 2012) . Therefore, the
demand curve will shifts to the rightward.
Determinants of Supply
There are
also few of the others determinants in supply.
Figure 3 is a supply curve and it shows the
supply of bubble tea is shifts to the rightward
Prices of related Goods produced
When the
price of sugar is increasing, the cost of production of bubble tea will be increasing.
Sugar is one of the key necessary ingredients to produce the
bubble tea. Therefore, when the price of sugar increases, the selling price of bubble tea will be increases. Thus the supply curve will shifts to rightward.
Weather
During the summer season, the supply of bubble tea of Chatime is obviously increasing.
It is because the weather in summer is hot, thus people might want to get some
cold drink. Bubble tea is cold beverage and the consumer who purchases the
bubble tea might be increasing and the demand of the bubble tea will be increasing on the period of time. Therefore, the supply of the bubble tea will
increases and the supply curve of the bubble tea will shifts to the rightward.
Elastic demand
Bubble tea is an elastic demand due to it is not necessary to everyone and there are many available substitute drinks of bubble tea. Consumers are not necessary to buy bubble tea, they can also choose alternative products such as coffee and cola. There are few types of elasticity.
Bubble tea is an elastic demand due to it is not necessary to everyone and there are many available substitute drinks of bubble tea. Consumers are not necessary to buy bubble tea, they can also choose alternative products such as coffee and cola. There are few types of elasticity.
Bubble tea is an elastic demand because when the
price of bubble tea is decreasing , the quantity sold of the bubble tea will
increasing, total revenue will increasing as well. Recently, Wechat is
announced its partnership with Chatime, and to give the wechat users an
opportunity to purchase a cup of bubble tea by RM1. Wechat users can actually
obtain the voucher when they follow the official ID of Chatime Malaysia
by using Wechat application. Present the voucher to any Chatime outlets in
Malaysia by using phone. Then, users can enjoy theirs second cup of the Chatime
after purchase of anyone of the normal priced beverage in Chatime. This
promotion is from 21 October 2013 until 27 October 2013 (BorneoPostOnline, 2013) . Although the price
of bubble tea is reducing to increase the quantity of sold of bubble tea, the
total revenue is increasing. Therefore, bubble tea is elastic demand.
Proportion of income
spent on the goods
The proportion of income spent on the bubble tea
is one of the factors that influence the
elasticity of demand. The target consumer of Chatime is all love tea person
without limit the age and degree of the person. The price of the bubble tea is
not high and reasonable because all people can affordable with the price. The consumers have greater the proportion of income to
spend on the bubble tea, the larger is the elasticity of demand for bubble tea.
The willingness to pay is increase due to the price of bubble tea is becoming
cheaper based on increase the proportion of income.
Cross elasticity of
demand
Figure 4 shows the
price of sugar rise, the demand curve will shift from Do to D2.
However, when the price of cola decline, the demand curve will shift from
D0 to D1.
In the cross elasticity of demand, when the
price of sugar
increasing, the demand of bubble tea will decrease. The demand curve will shifts to the leftward due to the sugar is the complement of the bubble tea. It will be
the negative cross elasticity. However, the demand of bubble tea will increase
when the price of cola is increasing. Cola is the competitor of bubble tea
and Cola is the substitute products of the bubble tea. The demand
curve of the bubble tea will shifts to the rightward and it will be the positive cross elasticity.
Income elasticity of
demand
Figure 5 shows demand for
the normal good rise from Q to Q1, demand for the inferior good
falls from Q to Q3
The change of the quantity of demand is responds
to a change of income. The type of the bubble tea is depends on the level of
income. For some medium level income of people, bubble tea will become
inferior goods when the income is increasing. This is because the price of
bubble tea is cheap for them when their income is increasing. Since they have
more money can spend, consumers will purchase some luxury brands of drinks
such as Starbucks. For some lower income person, the bubble tea will become normal goods when their
income is increasing. The price of the bubble tea is not high so consumers will
be more affordable.
As a result, the demand of bubble tea will
increase
when the income of lower income person is increasing. However, the demand of
bubble tea will decrease when people is getting richer.
Monopolistic Competition
There are many of firms
compete with Chatime in beverage industry and it can not prevent other firms
enter to the industry. As the result, Chatime is a monopolistic competitive
market structure (Mzoulghina, 2013) .
No barriers to entry
Chatime can free entry
and exit in the long run, as there the low set up cost and do not have major
barriers to entry or exit. Since the product of Chatime is bubble tea drinks so
it just needs a tea machine and blender to set up in the shop.
Chatime increases the outlet in different countries to expand its market
shares in beverage industries. Based on the product and its market, Chatime can
make independent decisions about the price of product. For example, Chatime put
the pearls and jellies into bubble tea for topping. Pearls and jellies are
lowering the cost of production for the Chatime because the cost of pearls and
jellies are quite cheap.
Product
differentiation
Chatime is using
different type of product differentiation in the bubble tea industry to attract
more consumers to buy the products which are physical product differentiation,
marketing differentiation, human capital differentiation, and differentiation
through distribution.
Market
power
Chatime has a market
power to charge a higher or lower price than its competitors for the products.
It is also price maker so it can set its own prices. Chatime set a lower price
of the bubble tea to attract the consumer and increase the demand of bubble
tea. Chatime have many of independent firms’ competitors
in the market such as Startbuck, Gong Cha and others.
Short run and Long run
In the short run, the land of Chatime is fixed
and the employee is variable. To increase the productivity, Chatime increase the
employees to make profits. However, increase the employees make the shop become
crowd because the land is fixed. When Chatime moving to the long run, they can
ability to change all the input to variable.
Reference List:
BorneoPostOnline, 2013. WeChat and Chatime offer
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Chatime, 2013. About Chatime. [Online]
Available at: http://www.chatime.com.my/about-chatime
[Accessed 21 October 2013].
Available at: http://www.chatime.com.my/about-chatime
[Accessed 21 October 2013].
Chatime, 2013. Products. [Online]
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[Accessed 22 October 2013].
Available at: http://www.ichatime.com/webe/html/products/index.php
[Accessed 22 October 2013].
Finance.eastday.com, 2013. Global tapioca pearl scare
affects bubble tea industry. [Online]
Available at: http://finance.eastday.com/m/20130529/u1a7423502.html
[Accessed 22 October 2013].
Available at: http://finance.eastday.com/m/20130529/u1a7423502.html
[Accessed 22 October 2013].
Mzoulghina, 2013. Monopolistic Competition. [Online]
Available at: http://www.studymode.com/essays/Monopolistic-Competition-1353221.html
[Accessed 23 October 2013].
Available at: http://www.studymode.com/essays/Monopolistic-Competition-1353221.html
[Accessed 23 October 2013].
Yin, 2012. Chatime Now Deliver to doorstep at selected
areas. [Online]
Available at: http://visit-malaysia.yinteing.com/2012/05/19/chatime-now-deliver-to-doorstep-at-selected-areas/
[Accessed 22 October 2013].
Available at: http://visit-malaysia.yinteing.com/2012/05/19/chatime-now-deliver-to-doorstep-at-selected-areas/
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