Market Structure

OldTown White Coffee is a monopolistic competition market structure. As there is a large number of firms in the coffee house industry even though they offered differentiated products but highly similar; and therefore, highly substitutable (Parkins, 2005). For instance, Starbucks is one of the competitors of OldTown White Coffee. Starbucks sells instant coffee and coffee drinks and their products are the same as OldTown White Coffee. However, the taste of OldTown White Coffee's coffee is slightly different to Starbucks's coffee due to the different types of coffee bean that they used. Starbucks uses Robusta and Arabica beans (Starbucks, 2013). Although OldTown White Coffee uses the same types of bean as Starbucks, but also uses an extra type of coffee bean which is Liberica beans(Anonymous, 2012). Thus, they produce differentiated products. In monopolistic competition, OldTown White Coffee will not be able to collude with other firms such as Starbucks to set a higher price as the market is too large, but both OldTown White Coffee and Starbucks have a limited market share in the whole market.

 
Chart 1: Coffee Manufacture Market Share

OldTown White Coffee will not concern much about Starbucks or other competitors’ action because no firm can cause a direct effect to the other firms since the market volume is very large. However, they will focus on their marketing, price and quality of the product to compete with its competitors. In order to increase the sales, they market the coffee mix by using an interesting packaging. This could attract more buyers to buy their coffee mix instead of others. They also advertised their coffee on the television. Next, OldTown White Coffee can sell their coffee mix at a higher price for their coffee mix is a high-quality product. To ensure that they produce high-quality goods, they actually designed attractively to attract consumers.

Figure 3: OldTown White Coffee’s attractive design

In addition, they provide efficient service and consumers can get their goods immediately in their outlet. Besides, it is easy for firms to enter and quit the market due to the low barrier of entry.