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Market Failure - Real World Scenario

Write 1 to 2 pages on market failure with a real world scenario. Then discuss the nature of the market failure. Thanks.

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Real world scenario and discussion with related sources are included in the file attached below.


"New Coke" Failure

In 1985 the Coca-Cola Company decided to terminate its most popular soft drink and replace it with a formula it would market as "New Coke". New Coke came out because in blind taste tests, people preferred Pepsi to Coke. The revelation was startling and Coca-Cola decided that it was time to change their formula to make it sweeter like Pepsi. After months of tweaking the formula, doing blind taste tests, research and changing their packaging, New Coke was launched. There was an appalling increase of 8% in the sales observed soon after it was initially launched in the biggest consumer regions of New York, Washington D.C and in cities where it was for the first time introduced.

In the beginning everything went according to the plans of the executives of the company and many right steps were also taken, like tapping the market at the time when it was facing a decrease in its market share. The best team for research and development work was chosen to prepare the best flavor and packaging that was appealing to the masses, and, as already mentioned, no monetary compromises were made in carrying out the marketing campaigns and extensive market research was done. Surveys indicated, in fact, that a majority liked the new flavoring. Three-quarters of the respondents said they would buy New Coke again. The big test, however, remained in the Southeast, where Coke was first bottled and tasted.

Despite New Coke's acceptance with a large number of Coca-Cola drinkers, a vocal minority of them resented the change in formula and were not shy about ...

Solution Summary

A real world scenario is examined for market failures.