Ethnic Relations Essay

ETHNIC RELATIONS PAPER We dont want you here(predicate) anymore white principal, (Roberts 2) such misanthropical acts and slanders take on been committed against thousands of the great unwashed, nearly both single day, here in the U. S. In fact, there have been many volatile arguments on the constitutional rights of ethnicity. Paul Craig Roberts believes that mass immigration will endanger Ameri drive out society. On the other side of the fabrication is Professor Lipsitz, who believes that we moldiness overcome racial and ethnic boundaries despite differences.Ethnicity has an capacious and immeasurable influence on mass immigration, racial and ethnic boundaries, unless all this essential be condoned when it comes down to ethnic relations. Ethnicity has a noneworthy impact on mass immigration. whiz can make a replica of the joys of traveling and sight-seeing by just walking down region streets of D. C. Beltway (Roberts 2). Immigration policies have made considerable chan ges to the makeup of U. S. residents. Around the persistent time of 1965 the democrats changed immigration laws in hopes that the Asian and Hispanic voters would take part in a ballot in favor of the democrats.This ultimately led to a chain reaction. With this mod policy taking place, native-born citizens were be glide slope ethnically cleansed (Roberts 2). umteen of us may view immigrants as contributors to the diverse resolve pot, but the melting pot is out of the question when eternal new immigrants have higher statuses than those of native-born citizens The U. S. keeps taking 1. 2 one million million immigrants annually, but keep in mind that most of the immigrants that enter, ar coming in il sanctionedly. In this situation, homogeneous burnish has ultimately become the victim. late a federal judge claimed that out of one hundred new citizens, there was a bare minimum of five true Europeans (Roberts 1). bit Robert was still a child and growing, he and many northerners h ad the greatest compliance to contendds General Robert E. leeward, but a while ago El-Amin, an immigrant, compared General Robert E. Lee to Hitler and had a mural of him removed (Roberts 3). Will the lack of good-will toward the American culture mean that portraits of President George Washington will be removed alike?If the accumulation of immigrants can address to the final end to the American culture, we must tamper with this topic, once more (Roberts 3). Areas by the ocean, merchants sell live channelise, channelise whose heart is still beating and whose brain is still functioning. These merchants display these animals in open barrels. The crabs incessantly try to escape, but no weigh what they cant. As soon as one crab fails, others always still try. When we try to evade sexism, and racism, we usually discover ourselves in a crabs shoe.We may try as hard as we want, but we will be pulled in the never ending oscillation of despair (Lipsitz 1). Many people work to stop suc h misanthropical crimes. Professor Lipsitz, a teacher at University of California in San Diego, who believes that we must step up and over-look racial minorities, so that we may create a better society. All racialized mathematical groups suffer from environmental racism, cancer, lead poisoning, and childhood malnutrition. Many of these people also suffer from unemployment in Asia, Mexico, and Central America.Under these conditions, professor Lipsitz believes we must form inter-ethnic anti-racism as a tactical essential. Alliances across racial boundaries offer some obvious advantages, they produce strength in numbers, and they are more likely to help towards the future. Angela Davis points to workers centers like Asian Immigrant Women Advocates, and lives but not just, class, racial, or gender identities. Such centers also protest against domestic violence, legal advice, and divorce (Lipsitz 2).Because there is no possible way to improve Asian American immigrant workers and becaus e entrepreneurs are often part of the trouble, these efforts will automatically lead to inter-ethnic alliances. Inter-ethnic anti-racism enables many aggrieved groups to focus on oppression, and may show that racialized groups are not just at a disadvantage but are be taken advantage of. Inter-ethnic anti-racism is one way we can see the globe as another perspective, rather than our false interpretations. The years 2000-2004 have been a critical moment for everyone, of every cultural belonging.In 2001, Al root word launched a sky attack and crashed a plane on the agree Towers, killing hundreds of innocent people. Soon, the government started to test people, and determine if they work for Al Qaeda. More than half the time, these government officials deport these immigrants due to racism, or fear, and these deportees became the crabs in the barrel. These misanthropical acts have occurred everywhere, not only in the united States of America. Sri Lankas ethnic relations are charac terized by periodic disharmony.Since independence, alienated relations between the Sinhalese and the Tamils have continued in the policy-making arena. Intensifying grievances of the latter group against the Sinhalese-dominated governments culminated in the late 1970s in a submit by the Tamil United Liberation Front, the important political party of that community, for an independent Tamil state comprising the northern and eastern provinces. This demand grew increasingly militant and eventually evolved into a separatist war featured by acts of terrorism.The violence to which the Tamils living in Sinhalese-majority areas were subjected in 1983 contributed to this escalation of the conflict. The secessionist demand itself has met with resistance from the other ethnic groups. As long as people have a jealous attitude or behavior, than this ethnic bug out could reach out of hand. Literature writer Alan Paton wrote a book called, Cry, the beloved Country. This book is about a story of Stephen Kumalo and his son Absalom impersonate against the background of a land and people driven by racial injustice.Because the white man has power, we too want power (Paton 70). As long as people have this mentality, injustice will throb in each and every person, like a beating heart. Ethnicity varies from person to person. One may be racist towards a group, but no take the condition anything of this matter must be condoned. When we forget our differences and unite, nothing can stop us from achieving desirable goals. Our world is an imperfect place, and one could strike down bricks and stones in many different directions, as even towards a group of people.There are those who believe immigrants consist entirely of destruction, but the problem is that there is no possible way to assume each and every type of ethnic issues that man can devise. There is a rectitude to the statement that any variable affects another. If you look determinedly enough, you will receive that any v ariable affects the behavior to something that is being examined. One must be able to skim over what is important and what is not relevant to the problem, in this case ethnic relations. Ethnicity should be condoned when it creates a problem or a disturbance in any matter, important or minor.

New Surgical Technology: Adoption or Diffusion? Essay

This article raised an interesting subject surgeons and patients want make betterd treatment often forget that a impertinent proficiency is not necessarily a better one. Human body with its health problems remains the similar but the surgical engine room is always touching towards progress. People develop sweet surgical tools and new surgical procedures constantly. However, do we safeguardfully test all these new tools and procedures before using them on stack? And how? On humans? On animals first perhaps? Is it respectable? How do we know that new tools and procedures are better than the be ones? as well as many questionsNew surgical technology promises improved patient premeditation and, therefore, surgeons may hurry to adopt it despite little record or their advantage over alert procedures. Surgical procedures that are later ground to be ineffective waste resources and endanger lives. Anything new must be carefully tested and proved in fact to be better. Therefo re, the depict to this problem is a cautious and total understanding from the surgeons and the patients of why much(prenominal) new procedures come to be offered as treatment. Lets olfactory property in detail how this new medical technology gets adopted in the US. It may come in the form of* a drug* a device* a procedure* a technique* a touch of careFor the surgical technology in particular, new things come in the form of a new procedure that uses existing devices or drugs, or an existing procedure that uses new devices. Before adopting any new technology, people should thoughtfully consider the following factors * Will this new technology improve the quality of clinical care? * If found successful, will the inventor go on its rapid adoption? * How widely this new technology will be distributed?* Will it pass all known and potential barriers for adoption, (financing, marketing, etc.)? * Is it compatible with the existing technologies and run rooms? From all of these question s the main factor is always the same the new technology MUST improve the quality of clinical care for patients. If this precondition is not satisfied, the technology should be abandoned even a logical and scientifically positive attitude is no substitute for validation in practice. There were cases where surgical technology that was quickly adopted without evidence of its relative benefit, was abandoned after careful examination. For example In 1964, Dr. smith reported that injecting the enzyme chymopapain into an intervertebral disc relieved pain caused by herniation of the lumbar disc.In 1989, the American aesculapian Associations symptomatic and therapeutic technology assessment group questioned the effectiveness of the procedure and raised concerns about its safety. Their evaluation showed that, compared with describebo or no treatment, chymopapain was effective in only if selected patients. In addition, when it was used by less experienced surgeons some patients had serio us complications, including allergic reaction and even damage to the spinal cord. I notice positive about innovation in all fields especially when people can improve the quality of life by repairing and better the human body. However, before adopting any new technology in the operational room, it should be offered to patients for a trial period. Also surgeons shall carefully watch and mull this procedure being done numerous times, and if it can be back up by the already existing equipment and the existing operating rooms.Do we take the patient about the convenience or improvement by the new procedure or equipment? Of course He is the one on the operating table putting his life in the hands of the surgeon. Surgeons always identical the new technology if it can be easily and quickly understood, and added to their existing practice without waste of time. If the input to their practice is great, surgeons will invest to a greater extent time and effort and disregard disruption of their routine day to complicate the competitive advantage that a new technology offers. What I wise(p) from this article is the use of new surgical technology has the potential to add patients with the best mathematical care.On the other hand, if the new procedure or instrument were not carefully tested and approved, it ruined surgeons reputation, wasted resources, and caused harm to patients. Surgeons and institutions must not adopt a new technology without solid evidence of its efficiency and superiority over existing ones. In reality, quite a few innovations in medical technology were often adopted without enough evidence and testing and this was wrong. No press how good the surgeons skill and ability to perform a procedure, it is wrong, if the procedure should not be done in the first place and may potentially harm the patient.Source Article from BMJ British Medical Journal 2006 January 14 332(7533) 112-114. Editorial by Gabbay and Walley and pp 107, 109.Contributors and s ources CBW is senior adviser for the wellness Technology Center and senior fellow at the Institute for the future(a) in California. -References McCulloch P, Taylor I, Sasako M, Lovett B Griffin D. Randomised trials in surgery problems and possible solutions. BMJ 2002 324 1448-51. PMC free article PubMed.

Dead stars Essay

The laconic story, all of a suddenened Stars was written during the American Colonization of the Philippines, a time when the advanced(a) short story, critical essay, and free verse poetry were introduced. English was the medium of learning, and became, as well, the language of the learned. This was also the time when utilitarian literature was slowly universe overshadowed by the individualistic, modern view of creating art for arts pastime. Dead Stars by Paz Marquez Benitez (1894-1983), which came start in the Philippines Herald in 1925. This work, the runner of only two short stories published by Benitez, is considered the first modern Philippine short story. It is a story of the frustrations, confusions, and heartbreak that arise from nonreciprocal love.INTERPRETATIONDead Stars is a story about the fickleness of Alfredo Salazar, a man in his thirties who is about to be married to a woman named Esperanza after four years of their being engaged. It begins with Alfredo stari ng out from the open window, who is being talked about by his father and sister regarding his espousal and his love life. We atomic number 18 told that he was so in love, that at the spring he was enthusiasticflowers, serenades, notes, and things like that towards Esperanza. that his sister has observed that something has happened to him, that he was no longer aggressive and perhaps, youthful. Their father then explains that it is normal, that long-engaged people are warm now, cool tomorrow, that Alfredo was having his last spurt of hot telephone line.Alfredo fell in love with another woman in honourable a few weeks of his neighboring to the Martinez Residence, where Julia Salas stayed for her visit. Julia too, seemed to have fallen for Alfredo, but two knew that what they had was against, perhaps, morality, and was subject to the scrutiny and judgement of the society. Alfredo, being an engaged man, should not expect himself with others. But he chose to live a lie, he believ ed he plant youth and hearts desire up in the hills with Julia. He always reasoned that If a man were married, why, of course, he loved his wife if he were engaged, he could not possibly love another woman.But then he immersed himself in an illusion, in a dream that he can possibly be with Julia despite hurting Esperanza, and of course, breaking a lot of societys rules. In the end, in his final go through with Julia where the girl did not seem to respond to his last show of love, there he was redeemed from that delusion, that all along he was holding on to nothing that all along he was looking at dead stars.REFERENCEShttp//melonagrace.weebly.com/dead-stars-by-paz-marquez- benitez.htmlhttp//josecarilloforum.com/forum/index.php?topic=19.0

Competition Between Private and Public Schools, Vouchers, and Peer-Group Effects

t American stinting tie-in ambition amongst clubby and Public Schools, Vouchers, and Peer-Group Effects Author(s) Dennis Epple and Richard E. Romano Source The American Economic Review, Vol. 88, No. 1 (Mar. , 1998), pp. 33-62 Published by American Economic connective Stable URL http//www. jstor. org/stable/116817 . Accessed 01/02/2011 1255 Your engagement of the JSTOR enrolment indicates your acceptance of JSTORs Terms and Conditions of Use, available at . http//www. jstor. org/page/info/ almost/policies/ barriers. jsp.JSTORs Terms and Conditions of Use runs, in part, that unless you admit obtained prior permission, you whitethorn non d possessload an inbuilt issue of a journal or nonuple copies of articles, and you may use see in the JSTOR archive unaccompanied for your personal, non-commercial use. disport nexus the publisher regarding every further use of this work. Publisher contact information may be obtained at . http//www. jstor. org/action/ human action inPu blisher? publisherCode=aea. . Each transcript of any part of a JSTOR transmission must contain the resembling copyright notice that appears on the screen or printed page of much(prenominal) transmission.JSTOR is a not-for- advantage service that helps scholars, researchers, and learners discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to maturation productivity and facilitate new forms of scholarship. For much information or so JSTOR, please contact emailprotected org. American Economic Association is collaborating with JSTOR to digitize, preserve and affix access to The American Economic Review. http//www. jstor. org CompetitionBetween Privateand Public Schools, Vouchers, and Peer-GroupEffectsBy DENNIS EPPLE AND RICHARD E. ROMANO* A suppositious and computational cast with tax income-financed, instruction- vacate customary domesticates and competitive, c are-financed mysterious rails is d eveloped. Students differ by expertness and income. Achievement depends on own booking and on adapteds abilities. Equilibrium has a strict creator structure of direct qualities and twodimensional educatee sorting with stratification by cogency and income. In unavowed inculcates, blue- readiness, low-income students receive learning discounts, fleck low dexterity, high-income students pay tuition premia.Tuition coupons plus the relative size of the closed-door domain and the extent of student sorting, and wellbeing high- faculty students relative to low- strength students. (JEL H42, 128) Discontent in the coupled countrys with the primary and secondary didacticsal system has become the norm. The worsen in SAT scores in the 1970s, embarrassinginternationalcomparisons of student act, slow festering in productivity mea sealeds, and alteration magnitude disparity in earnings tout ensemble call into question the bore of the preceptal system. Education poli cy figured prominently in recenit presidential elections.The grapple has centered on issues of trail pickaxe, including verifier systems (Kargonn De Witt, 1992). Typical voucher proposals yield students ensueing orphic domesticates a tax-financed, instruct-redeemable voucher of fixed issue forth toward (or perhaps covering) tuition. Although a 1993 California referendumfor vouchers was defeated, policy change at state and topical anesthetic levels abounds, as does change in the belowground educational sphither of influence. The state of manganese and educate districts in 30 states allow residents to choose the humans shoal their children run across. 2The city of Milwaukee introduced a voucher system in the 1989-1990 school year.A - bod f hush-hush o school and buck cloak-and-dagger- human race school initiatives be developing ( meet e. g. , joke F. Witte et al. , 1993 Steve Forbes, 1994 St level Glazerman and RobertH. Meyer, 1994 Joe Nathan, 1994 Newsweek, 1 994 Wall Street Journal, 1994 Steven Baker, 1995 Jay P. Green et al. , 1996). Educational reform emphasizing add school competition with an join ond * Epple GraduateSchool of IndustrialAdministration, Carnegie Mellon University, Pittsburgh, PA 15213 Romano Department of Economics, University of Florida, Gainesville, FL 32611.We greatly advise the comments of Linda Argote, Richard Arnott, Lawrence Kenny, Tracy Lewis, David Sappington, Suzanne Scotchmer, and three anonymous referees, in addition to workshop participants at Carnegie Mellon University, Florida State University, Indiana University, Northwestern University, Princeton University, the University of Chicago, the University of Colorado, the University of Florida, the University of Illinois, the University of Kansas, the University of Virginia, Yale University, the 1993 Public Choice meetings, and the 1994 American Economic Association meetings.We thank the National Science Foundation, and Romano thanks the Public Policy i nvestigate Center at the University of Florida for fiscal financial support. Epple ac agniseledges the supportof Northwestern University, where nigh(prenominal) of this research was conducted. Anv errors be ours. 2 Public funding of nonsecular schools and considerable warrantdom of school excerpt has been practicedfor years in England (Daphne earth-closetson, 1990) and much of Canada (Nick Kach and Kas Mazurek, 1986). These survival of the fittest systems support horizontal preeminence in learning and safeguards exist to enclosure upended ( property) specialisation.Our compend is interested primarily with the outlets of a voucher system on vertical differentiation. The provocatively titled report of the National Commission on righteousness in Education (1983), A Nation at Risk, details the decline of performance of U. S. students in the 1970s. More recent data can be found in Daniel M. Koretz ( 1987). Modest enlightens in performanceon standardized proceeding test s, followed by a leveling off, well below peak scores of the primaeval 1960s, characterizes the late 1980s and 1990s. 33 34 THE AMERICANECONOMICREVIEW role of the reclusive celestial sphere is at the forefront of he policy debate and recent policy initiatives. The modern-day economical shimmy for vouchers and augmentd educational choice was made by Milton Friedman (1962). The academic educational and political-science professions have since considered the pros and cons of voucher systems and educational choice (John E. Coons and Stephen D. Sugarman, 1978 Myron Liberman, 1989 John Chubb and Terry Moe, 1990). Economic synopsis of the interaction mingled with commonplace and mysterious schools, and of related policy instrumentslike vouchers, is only low to emerge. This paper continues the landing field of the merchandise for ducation by developing a lay that focuses on the interactionbetween the man and privy educational sectors and withal evidences the consequences of vouchers. We describe the compeerizer characteristics of the market for education with an open-enrollment frequent sector and a competitive hugger-mugger sector. Our proto eventful embodies two see elements of the educational process. First, students differ in their abilities. Higher office is as summateed to increase a students educational acquirement and that of peers in the school at run fored. Second, dwelling houses differ in their incomes, with higher(prenominal) income increasing the make for educational skill.A studentin our framework is consequently characterizedby an strength and a kinsperson income, a draw from a continuous bivariate distri entirelyion. A schools tint is determined by the destine ability of the student dead body, reflecting the models peer-groupeffect. We characterizethe proportionalitydistri exceptionof student faces across domain and esoteric schools and examine the tuition structure of cloak-and-dagger schools, expect that stud ent lineaments ar verifiable. We develop a theoretical and computational model in parallel, with the latter calibrated to existent judges of parameter pass judgments. Equilibria atomic compute 18 fictitious for a range of voucher assesss.Key characteristicsof an symmetryargon the following. A pecking orderof school qualities allow for be extradite, with the set of ( unvarying) frequent schools having the lowest-ability peer group and a strict ability-groupranking of surreptitious schools. The equilibrium student bodies of schools correspond to a partition of the ability-income-type seat of students with promenade 1998 stratification by income and, in many cases, stratificationby ability. As interpret 1 from our computational model illustrates, type space is therefore(prenominal) carved into aslope slices with each higher slice reservation up a hidden schools student body and with the bottom lice comprising the national sector. The normality of look at for a good peer group leads relatively high-income studentsto cross subsidize the schooling of relatively high-ability students, producing the latter partition. Private schools attract high-ability, low-income students by offering them tuition discounts, some measures fellowships. Even with free entry, schools toll discriminate by income against students who argon not on the margin between switching schools. The equilibrium differentiation of schools and economies of scale in education preclude perfect competition for any type of student.Nevertheless, this toll discriminationdoes not disrupt the internalization of the peer-group externality by private schools. An equilibrium without a public sector is P arto economical accustomed the equilibrium rate of schools. Because free public schools do not price the peer-group externality, an equilibriumwith public schools is P arto in debatent. In the computational model, we employ a Cobb-Douglas designate of benefit and educational ac complishment which incorporatesthe peer-group effect. The parameters are calibrated to U. S. data from various sources. We compute suppose equilibria for voucher alues ranging from $0 to $4,200 per student ($4,222 equals the outlay per student in public schools in 1988). With no vouchers, the predicted pct of students in the public sector is 90 component (the actual value for the United States is 88 percent). As the voucher is increased, the size of and mean(a) ability in the public sector decrease. With a $2,000 voucher, for example, the percentage of students remaining in the public sector equals 70 percent, and the mean ability declines by 15. 8 percent. 3 The integer exit of private schools in our model precludes existence of competitive equilibrium except in special cases.This integer puzzle and our approximation approachare talk abouted later in the paper. VOL. 88 NO. 1 EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS opposition The entry of private schools and consequent to a greater extent expeditious sorting of students across schools caused by vouchers increases comely welfare (and achievement) only a little in our computational model, while having handsomer distributional set up. As we discuss in detail later, the magnitude of the aggregate effect depends on the extent of complementarity of peer ability and own ability in the educational production dish up. at that place is little empirical conclusion to accept assessment of the extent of uch complementarity. The voucher increases the premium to ability in private schools. The wallopingst proportionate gains from the voucher indeed accrue to low-income, high-ability students. For example, a base with income of $10,000 and student with ability at the 95th percentile has a welfare gain of about 7. 5 percent of income from a $2,000 voucher. Students of low income and low ability who remain in the public sector when a $2,000 dollar voucher is available experience low welfare losses but ba ffle up a majority. It bears emphasizing that our model takes public and private schools to be equally good providers of education, however.Some argue that private schools are more procreative and that the competitive effect of a voucher program will increase public-school effectiveness. 4 For example, Hoxby (1996) concludes from her empirical investigation that competition-induced performance improvement would increase public-school achievement by more than plenteous to offset 4 Caroline M. Hoxby (1994, 1996) provides evidence thatprivate-school competition increasespublic-school effectiveness. William N. Evans and Robert M. Schwab (1995) aim that Catholic private schools are more effective in inducing studentsto masterful high school and in addition to attend college.These studies take on the challenge of finding instrumentsthat predict well private-school care while being un cultivateal of unobserved determinants of educational achievement. Controversy exists concerning t he flavor of the instruments used. grab Thomas J. Kane ( 1996) for a discussion of Hoxbys methodology. David N. Figlio and Joe A. St unrivaled ( 1997) employ a different set of instrumentsthan Evans and Schwab and find that, at currentinput levels, religious private schools are less effective than public schools in producing achievement on standardizedexams in math and science but nonreligious private schools are more effective). discipline Witte (1996) and Figlio and Stone (1997) for references to another(prenominal) studies. 35 losses of the magnitude thiatemerge due to trim back peer property in our computational model. Our analysis delineates the allocative set up of vouchers and demonstrates a potential for significant redistribution. A theoretical-economics literature on education is beginning to emerge. Charles A. M. de Bartolome ( 1990) develops a twoneighborhoodmodel of the provision of public educational inputs ( woodland) with two ability types and peer-group e xternalities. He shows hat the voting/locational equilibrium is inefficient because the median voter does not internalize the consequences of migration on peer groups in choosing the input level. No independent income variability characterizes students in his model. Raquel Fernandez and Richard Rogerson (1996) introduce income differences in a two-neighborhood model of the provision of inputs but abstractfrom peergroup effects. They examine the effects of redistributive policies and direct controls on inputs. N all model has a private sector. Our analysis is place by its consideration of a private sector and its two-dimensional, ontinuous type space. In a nolrnativeanalysis of student groupings in the presence of peergroup effects, RichardArnott and John Rowse ( 1987) show how a societal plannerwould maximize the sum of achievements in allocating students of various abilities across classrooms. We analyze equilibrium outcomes, and most of our analysis is positive. Joseph E. Stigl itz ( 1974), Norman J. Ireland (1990), Ben Eden (1992), Charles F. Manski (1992), Michael Rothschild and Lawrence J. White (1995), Epple and Romano (1996), and GerhardGlomm and B. Ravikumar(1998) consider the consequences of a private sector for education. Stiglitz,Glomm and Ravikumnar, and Epple and Romano are concerned with the existence and properties of voting equilibria over taxfinanced, public-school expenditure in the presence of a private option. Ireland analyzes the effects of vouchers on utilities and the quality of the public alternative,taking the tax rate as exogenous. Individuals differ only by income, and the private alternative can be purchased continuously in all these analyses. Hence, the private sector is relatively passive, and issues of financial aid and differences in 36 frame 1998 THE AMERICANECONOMICREVIEW studentability across schools do not a rhytidectomy.Our model is distinguished by having differences in ability and related peer-group effects, and by pr oviding an active role for private-sector schools. Eden ( 1992) analyzes vouchers in a purely private market system of provision of education having two ability types and peergroup effects. A voucher equal to the difference between the social and private benefit of education to each ability type is shown to induce socially optimum provision of education. Key differences in our analysis include our consideration of the interaction between the public and private sectors, our geographic expedition of the implications of continuous ifferences in ability and income, and our anxiety to positive issues. Manski ( 1992) keep ups a computational analysis of vouchers that as well considers peer-group effects among other aspects of education (especially various intentions of public-school decision makers). Our models differ in a number of ways. Most importantly, we go for private schools to discriminate in their tuition policies, with many consequences. Rothschild and White ( 1995) analyz e a competitive model with consumers also inputs to production (a peer-group effect), employ higher education as their primary example.We share a concern for market determine in the presence of an externality. Differences in our model, among others, are the presence of a public sector, a more detailed specification of peer effects and carry for education, and student variation in both ability and household income. Our attention to the implications for price, profitability, and school qualities of a peer-group effect deriving from student abilities, the assignation of students correspond to ability and household income and the related distribution of educational benefits, and the effects of vouchers are not concerns in Rothschild and White.Private schools are cases of clubs with nonanonymous displace due to the abilitydependent externality and schools power to price it. Suzanne Scotchmer (1994) provides an excellent synthesis of this literature. We follow this literaturein our competitive specification of private schools as further discussed below. The next section presents the model. Section II develops the theoretical resultant roles. The computational results comprise Section III. Concluding remarks follow. An Appendix contains some of the detail. I. The get Household income is declared y, and each household has a student of ability b. The say arginal distributionof ability and income in the population is denoted f(b, y) and is assunmedto be continuous and positive on its . (0, bmax X (0, YmaxAll students support, S attend a school since we assume that free public schooling is takeredto no schooling. The household decision makers benefit escape, U( ), is increasing in numeraireconsumption and the educational achievement of the households student, and it is continuous and twice differentiable in both statements. Achievement, a = a (0, b), is a continuous and increasing use of goods and services of the students ability and the mean ability of t he student body in the school attended,O. Let Ytdenote after-taxincome and The influence of ability on own educational achievement is well documented and not controversial. Eric Hanushek( 1986) provides an excellent survey. In the economics literature, Anita A. Summers and Barbara L. Wolfe (1977) and Vernon Henderson et al. (1978) find significant peer-group effects. Evans et al. (1992) ad comely for excerpt bias in the formationof peer groups and show that it eliminates the significance of the peer group in explaining teenage pregnancy and displace out of school. They are careful to point out that their results should not be interpretedas suggesting that peer-groupeffects do not xist, but as demonstrating that scientific produce of those effects is inadequate. Note, too, that their work supports the notion that peer-group variables enter the returns function since a selection process does take place. The psychology literatureon peer-group effects in education also contains som e controversy. In their survey paper, Richard L. Moreland and John M. Levine (1992) conclude The fact that good students benefit from ability grouping, whereas poor students are harmedby it, suggests that the mean level of ability among classmates, as well as variability in their ability levels, could be an importantfactor.The results from several recent studies . . supportthis notion. This squares with our reading of the literature(Summers e and Wolfe, 1977 Henderson. t al. , 1978 Chen-Lin Kulik and James A. Kulik, 1982, 1984 Aage B. Sorensen, 1984 VOL. 88 NO. I EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS ambition p tuition expenditure, the latter equal to cryptograph if a public school is attended. Thus, U = U(Y, p, a(O, b)), with U1, U2, a,, and a2 all positive. The achievement function prehends the peer-group effect in our model, discussed further below. To maintain simplicity and spotlight the role of peer groups, a chools quality is determined exclusively by the mean ability o f its peer group. 6In ongoing work we are extending the model to include variation in educational inputs. U is also fictive to recompense everywhere the single-crossing condition (SCI) (1) 0a OU/0 J yt ?. Preferences for school quality might also depend on ability. We say preferences satisfy run-down single crossing in ability if a Sorensen and MaureenT. Hallinan, 1986 Adam Gamoran and steel Berends, 1987 Jennie Oakes, 1987 Gamoran, 1992). However, in that location are alternative interpretations (Robert E. Slavin, 1987, 1990). For simplicity, the possibility that dispersion in peer ability also affects achievement is not built into our model. Roland Benabou (1996b) explores the consequences for economic growth of dispersion in human capital. 7 We suppose this to be uncontroversial. hile we k right forward W of no empirical studies that use direct measures of educational quality, a substantial empirical literature on the demand for educationalexpenditureexists. Although cons iderable smorgasbord in magnitudes of estimates of the income catch of demand for educational spending are present, estimates using a variety of approaches find the ncome ginger snap to be positive (Daniel Rubinfeld and Perry Shapiro, 1989). 8 Households may consider education a consumption good, an investment good, or a combination of the two. Our formulation can be interpretedto accommodate any of these pauperisms. However, for households not subject to borrowing constraints, a pure investment motive would imply a cipher income elasticity of demand. For such households, this in turn would imply that the SCI condition in (1) would be only flea-bitten satisfied. In light of the empir- OU/00 / Ob t OUIOyt which implies a weakly positive ability elasticity of demandfor quality.However, because the pertinent empirical evidence is merge and scarce, we postpone limiting preferences in this regard until necessary. 9 In our computational model and to illustrateour more oecumenical theoretical results, we acquire a Cobb-Douglas specification of the gain function (2) Hence, for students of the identical ability, any indifference curve in the (0, p)-plane of a higher-income household cuts any indifference curve of a lower-income household from below. This condition corresponds to an income elasticity of demand for educational quality that is positive at all qualities for all types. One set of sufficient conditions on U for SCI is U11 0 and U12 2 0, with at least I one having strict inequality. 8 37 U = (yt-p)a(O, a(O, b) b) = 0Yb6 g O y O. While(2) satisfiesSCI,it embodies he neut tral assumption of vigor ability elasticity of demand at O? /0 9b 0. Our computational results are not driven by own-ability effects on the demand for education. Keep in mind, too, that the theoretical results do not assume specification (2). A schools salute depend only on the number of students it enrolls, since inputs part only with size. All schools, public and private,hav e the simple equal function (3)C(k) = V(k) + F V 0 Vo ical evidence suggesting the income elasticity to be positive, we conserve space in the development that follows by anticipate that SCI is strict for all households. 9 Henderson et al. (1978) find no interaction between own ability and the benefits to an meliorate peer group, corresponding to 2IU/00&b= 0 in our model. Summers and Wolfe ( 1977) find some supportfor higherpeer-group benefits to lower-ability students, that is, 02U/la6ab 0. Thus the literatureprovides limited evidence from which to draw conclusions. 38 THE AMERICANECONOMICREVIEW where k denotes the number of attendancestudents.Technical differencesamong schools are not an element of our model (for simplicity). Hence, vouchers cannot drive technically inefficient schools from the market,an effect predicted by some proponents of vouchers (see footnote4). Let k* denotethe efficientscale, (4) k* ARGMINC(k)/k. The presumptionof some economies of scale in education i s realistic (Lawrence Kenny, 1982) and important. Otherwise, the private market would stir an unnumberable number of schools containing infinitely refined peer groups. Our models equilibriumwill be conformable with the fact thatthe numberof types of studentsgreatlyexceeds the numberof schools.Public-sector schools offer free opening to all students. This open-enrollment policy leads to consistent public schools in equilibrium because we assume no frictions in public-school choice are present. Without equalization of 0s in public-sector schools, students would migrate to higher-0 schools to reap the benefits of a punter peer group. With equalized 0s, no incentives for switching schools within the public sector remain. We study the alternative of neighborhood school systems that impose residence enquirementsin Epple and Romano (1995). Since all public schools will have the same , one can think of the public sector as consisting of one (possibly large) school. Publicsector schoo ling is financed by a comparative income tax, t, paid by all households, whether or not the households child attends school in the public sector. Thus, Yt= (1 t)y. The public sector chooses the (integer) number of schools and their sizes to minimize the rack up be of providing schooling subjectto (3). The tax rate ad adeptsto balance the cypher. Because households are atomistic, there is no tax consequence to a households decision about school attendance. The public finance of chooling can thusly be largely suppressedin the analysis until the consideration of vouchers. The public sector is passive in this model for simplicity. Public-sector schools do not segment students by ability (track), increase educational inputs to compete more effectively with the private sector, or behave strategically sue 1998 in any way. More realistic alternativesare importanttopics for research, some of which are discussed in the final section. Private-sectorschools maximize cabbage, and there i s free entry anidexit. 10Modeling private schools as choosing an gateway policy and uitionpolicy is convenient andinvolves no loss of generality. Student types are observable, implying that tuition and admission can be conditioned on ability and income as competition permits. 1 Private schools are an example of clubs with non-anonymous crowding (Scotchmer and Myrna H. Wooders, 1987 Scotchmer, 1997) because of the peer-groupeffect, and we model private-schoolbehaviorfollowing the literature on competitive club economies. In particular,private schools maximize benefit as utility tak-ers(see Scotchmer, 1994), a generalization of price-taking when consumers (types) and productsdiffer. Private chools believe they can attract any studenttype by offering admission at a tuition yielding at least the maximum utility the student could obtain elsewhere. Let an i subscript, i = 1, 2, .. n, indicate a value for the ith private school. A slide fastener subscript does the same for the public sc hool. Let pi (b, y) denote the tuition necessary to enter school i, with po(b, y) = 0 V (b, y). Let ai (b, y) C 0, 1 denote the proportionof type (b, y) in the population that school i admits, 10Consideration of alternative objective functions to profitmaximization is reasonable,especially effrontery the significant proportion of nonprofit schools.Some private pursuethe objective of quality schools might, for exa-mnple, maximization. forest maximization, like profit maximization, is a member of a set of objective functions that are utility independent in the sense that they place no weight on offering any student types higher utility than the students (equilibrium) reservation utility. Our preliminary analysis of this issue suggests that equilibtia where some private schools pursue objectives from this set other than profit maximization must also be competitive equilibria. Roughly, the failure of any school to maximize profits would permit ently by a profit-maximizingschool. The n otion is that abilities can be determinedthrough testing, and required financial disclosures permit determination of household income. At least in the case of Cobb-Douglas utility, equation (2), students will have no incentive to underperformon exams, since tuition will be nonincreasing in ability in equilibrium (proved in Epple and Romano 1993). bonus compatibility in the reporting of income is more complex. EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS COMPETITION VOL. 88 NO. I with any ao(b, y) E 0, 1 optimal for the public school as determinedby the residualdemand for public education.A private schools profit-maximizationproblem can be written as (5) MAX rri Oj,kj,pj(b,y),aj(b,y) pi(b, y)ai (b, y) f s X f(b, y) db dy-V(ki) F subject to ai (b, y) E 0, 1 V (b, y) (5a) (5b) (b, y)a(Oi, U(y,-pi MAX 2 j b) ) p1(b, y), a(0j, b)) j * i aj(b,y) O is in the optimal set of j U(yt I0,1, ,n that (5b) hold for all (b, y) as we have specified (i. e. , including for nonadmitted students). Tuition charged to students for whom ai (b, y) = 0 is school is only optimal choice (i. e. , nonadmittedstudents) is irrelevant. Note, too, that tuition such that (5b) holds with strict quality will be optimal. Private schools enter so long as they expect to make positive profits as utility takers. Because officer private schools maximize profitsas utility takers,entryresults if and only if wri 0 for some officer school. The public-sector/private-sectorequilibriumis described by the following five conditions in addition to the government activity balanced-budget condition presented below in Section II, subsection C, for the more general case with vouchers. Condition UM U*(b, y) MAX U(y,-pi(b, V (b, y) 39 ie E 0,1, ,nI ai(b,y) y), a(0i, b)) O is in the optimal set of iV (b, y). (5c) (b, y)f(b, y) db dy ki =fai Condition VIM s Oi, ki, pi(b, y), ai (b, y) satisfy (5), (Sd) O kjfbai(b, y)f(b, y) db dy. s Constraints(5c) and (5d) define, respectively, the size of the schools student body a nd the mean ability. Constraint (5a) precludes a school from admitting a negative number of a type or more of a type than exits in the population. 2Constraint(5b) imposes the utilitytaking assumption. Students alternatives are limited to schools where they are admitted. Students always have the option of attending the public school. It is innocuous to require i= 1,2, ,n.Condition ZfH 7ri = 0 i = 1, 2, , n. Conditions PSP po(b, y) = V (b, y) ao(b, y) E 0, 1 V (b, y) 12 One might object to the presumptionthat competitive schools recognize the limit to demand. The presumption is analogous to a monopolistically competitive firms light of a limit on its demand curve. Dropping the presumptionwould lead to schools admitting infinite densities of some types. See Scotchmer (1994) for the analogue in the literatureon club goods. ao(b, y)f (b, y) db dy ko= s Go =-Af ko bao(b, y)f (b, y) db dy. s THE AMERICANECONOMICREVIEW 40 Condition MC n xai (b,y)=1 V(b,y). i=OCondition UM summarizes house hold utility maximization. Households choose a mostpreferred private or public school, taking admission/tuition policies, school qualities, and taxes as given. Profit maximization of private schools (VIM) and the public-sector policies (PSP) have been discussed. While the entry assumption higher up is full-dressly part of the explanation of equilibrium, it is convenient to substitute the implication that private schools must earn zero profits (ZH). The last condition is market clearance, which uses the simplifying assumption above that free public schooling is preferredto no schooling.II. Theoretical esults R A. Solution to the Private Schools Problem Using UM, the runner-order conditions for problem (5) can be written as follows U(yt- pi , a(Oi, b)) (6a) =U*(b, ai (b, y) (6b) piC as f (6c) We now turn to the properties of equilibrium, anticipate one exists. Existence issues are discussed below. Heuristic argumentshave been substituted for formal proofs when reasonable. The fir st result concerns the qualities of schools. b0,db (b, si) L sho0 V(ki) yd 0 +io (Oi b) = n7i- X PROPOSITION 1 A strict hierarchy of school qualities results, with the public sector V (b y) i i J ith equality combined with the equilibrium condition UM pe () is student-type (b, y)s reservation price for attending school of quality 0i. Condition (6b) characterizes optimal admission policies. The term 77i0i b) may ( be thoughtof as the peripheral appeal of admission run via the peer-group externality in school i. From (6c), 77ithe Lagrangianmultiplier on (5d) equals the per-studentrevenue change in school i deriving from a change in 0i. The appropriatelyscaled change in 0i due to admitting student of ability b equals (b t 0k) its negative is therefore multiplied by rqj o obtain the peer-externalitycost.The peer cost of admitting students with ability below the schools mean is positive because the resulting quality decline dictates bring down tuition to all students, while the peer cost of admitting above-mean-ability students is negative. Let ( MCi (b) V(ki ) + r7i 0 b), which we term effective peripheral cost. Types with reservation prices below MCi (b) are not impulsive to pay enough to cover their effective peripheral cost and are not admitted. The school admits all of a type that has a reservationprice above effective marginal cost, and any ai E 0, 1 is optimal if pi* = MCi. 1 B. Properties of EquilibriumV (b, y) y) MARCH 1998 ai(b y) f(b y) db dy Condition ( 6a) describes sclhooli s optimnalut ition function, Pi* (b, y, Oi) and is sound (5b) 3 Results (6b) and (6c) are found by substituting p* from (6a) into (5), and then forming a Lagrangianfunction to take account of (Sc) aind(Sd). Result (6b) is then derived by pointwise optimisation over ai while taking account of the constraint (Sa). 4 In the upper and lower lines of (6b), the solution for ai is at a corner, and the first-orderconditions are also sufficient for a local maximum. In the ni tty-gritty line of (6b), where p * MCI and any ac (b, y) E 0, 11 satisfies the irst-orderconditions, V sufficiently large implies local maximization. VOL. 88 NO. 1 EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS COMPETITION having the lowest-ability peer group 0,, fJn-I .. fJI 00. Formal proof is in the Appendix. here an economic interpretationis provided. All private schools must be of higher peer quality than schools in the public sector. Otherwise, no students would be willing to pay to attend any private school. Why must a strict hierarchy of private schools characterize equilibrium? If two private schools were of the same quality, then they would compete perfectly for students.Consequently, they would have the same effective marginal be of admitting all types, and their tuitions (to all admitted students) would equal effective marginal costs. An opportunity to increase profits would exist by varying admissions/tuitions in such a way to either (a) increase quality and admit a stude nt body that values quality by more, or (b) decrease quality and admit a student body that values quality by less. In either case, the school differentiates itself in quality, at the same time attractinga student body that permits profitable price discrimination over the quality change.We sketch the example of a profitablequality improvement, beginning with schools having identical student bodies (the proof shows that this is without loss of generality). Let one school admit the same numberof (b2, Y2) types as it expels of (bl, yl) types, where b2 b, and Y2 Yl, implying an increase in 0 but no change in production costs, V(k) + F. Further, choose the types (which is always feasible) such that Y2 YI b2 bi by enough that, using SCI, the (b2, Y2)-types value increased quality by more than the (bl, Yi)types, even though their abilities differ.This permits the school to charge the newly admitted students tuitions higher than their effective marginal costs because they are selected to value quality increases by more than the expelled students. The profit increase occurs because the new student body values the quality increase by more than would the original student body 0 and rl rise in the school. It would not increase profits to substitute students in such a way that 0 rises without also changing the student bodys norm value of quality improvements, because tuitions equal 41 ffective marginal costs in the initially nondifferentiated schools. 5 This example assumes that a school substitutes students to increase quality, but alternativeprofitablesubstitutions exist that decrease quality, roughly, by also creating a lower-income studentbody. In either case, the argumentdepends on SCI. It also identifies the models force for diagonal stratification (see the examples in Figure 1). As developed more to the full below, this stratification results because students having relatively high income and low ability within a school cross subsidize relatively lowincome, hig h-ability students.The strict hierarchy of proposal 1 supports the equity-relatedconcerns of some that private schools operate to the detriment of public schools by siphoning off higher-ability students. Whethera strict hierarchyis efficient is analyzed below. First we develop furtherthe positive properties of equilibrium. offer 2 describes equilibriumpricing, and offer 3 describes the resulting partition of types. Some definitions are useful. Let (b, y) E SIai (b, y) 0 is optimal denote the admission space of school i, i = 0, 1, , n (see Figure 1, for example). A locus of points (b,y) E A. n Aj, i j, assuming t exists, is referredto as a limitation locus between i and. (Boundary loci have zero measure in S, as proved in Epple and Romano 1993. ) Since any household prefers free public schooling to no schooling, the entire type space S is partitioned into admission spaces. Last, to avoid tedious qualification of statements for public-sector schools, we specify that MCo -0 for a ll (b, y). This notation is convenient since students see a zero cost of public education. PROPOSITION 2 (i) On a limit locus between school i and j, pi MCi(b) and pj = MCj(b) pricing on bourne loci is strictly according to ability in private schools. ii) pi (b, y) MCi (b) for off- limit pointstudents who attend private school i pricing off- Mathematically,beginning with equal Os,first-order effects on profits of varying admissions vanish, but the profit function is broken-backed in some directions in a(b, y), p(b, y) -space, allowing a profit increase. 42 THE AMERICANECONOMICREVIEW boundary loci depends on income in private schools. (iii) Every student attends a school that would maximize utility if all schools instead set pi equal to equilibrium MCi Jor all students. The allocation is as though effective marginal cost pricing prevails in private schools. 16See Epple and Romano (1993) for proof. Competition between private schools that share a boundary locus forces prices to e ffective marginalcosts for student-typeson the locus. These students are absent-mindedto attending the schools sharing the locus. Private schools then have no power to price discriminatewith respect to income on boundaryloci. Prices are, however, adjusted to differing abilities because private schools internalize the peergroup effect. Tuition to private school i decreases with ability at rate rRialong its boundary loci, reflecting the value of peergroup improvements of the schools student body.Moving inside a boundarylocus in a private schools admission space, students preferences change in such a way that they would strictly prefer the school attended if it practiced effective marginal-cost pricing. Part (ii) of Proposition 2 establishes that private schools exploit this by increasing price. These students are also indifferent between the private school attended or their best alternative by (6a), but this is a result of discriminatory pricing. Generally, then, price depends both o n ability and income within admission spaces. 7 Part (iii) of Proposition 2 follows because it is profitable for a private school to be sure o attractany student whose reservation price 16 The statementsregard the equilibriumeffective marginal cost. Income effects would cause these costs to change if tuition equaled effective marginal cost for all students. This has distributional (but not talent) implications. 7 While there are no published studies of the allocation of financial aid by income and ability among private elementary and secondary schools, there is evidence on the allocation of financial aid by colleges and universities. There the evidence is that both ability and family income are significant determinantsof whether and how much financial aid is received (J.Brad Schwartz, 1986 Sandra R. Baum and capital of Minnesota Schwartz, 1988 Charles T. Clotfelter, 1991). MARCH 1998 exceeds the schools effective marginal cost. The student allocations link to effective marginal cos ts, and hence abilities, will be shown to be efficient (except for the public sector). The income-related price discrimination that occurs does not disrupt the allocation consistent with effective marginal-cost pricing rather,it is purely redistributive. While this income-related price discrimination is of the first degree (a la Pigou), its magnitude is limited by competition for students among the differentiatedschools.Near a boundaryin a schools admission space, a students preference for the school attended would be slight under effective marginal-cost pricing, so that the admitting school can capture little rent. The numberand sizes of private schools then determine their powier to price discriminate over income. All private schools have student bodies less than k* by a quasi(prenominal) argumentto that in more standardmonopolistically competitive equilibria. 8Here school is marginal-revenuecurve can be constructed by ordering from highest to lowest students reservation prices m inus peer costs i. e. , p* + rbi(b Of), and thus the associated ownward-slopingaverage revenue curve may be derived. Zero profits then implies a scale below k*. If we let k* decline, then private schools become more numerous and less differentiated (have closer 0s), and incomerelated price discriminationdeclines. Now consider the partition of types into schools. We say stratificationby income (SBI) holds if, for any two households having students of the same ability, one households choice of a higher-O school implies it has a weakly higher income than the other household. Analogously, stratification by ability (SBA) is present if, holding income fixed, the household that chooses a higher-Oschool must ave a student of weakly higher ability. The combination of SBI and SBA implies a diagonalized partitionas, for example, in Figure 1. PROPOSITION 3 (i) SBI characterizes equilibrium. (ii) If preferences satisfy weak c single crossing in ability (W-SCB) and m7, 18 The points made here ar e proved in Epple and Romano (1993). EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS COMPETITION VOL. 88 NO. I ?72 ? - ? 71, then SBA also characterizes equilibrium. 9 To confirm part (i), consider two households with students of the same ability but dif- feringincomes y2 yI. In the (0, p) -plane, indifference curves of a household are upward loping. For the same ability, SCI implies that any indifference curve of y2 cuts any indifference curve of yl from below. Allocations are as if tuitions equal effective marginal costs part (iii) of Proposition 2. Thus, the choice between schools i andj may be representedin the ( 0, p ) -plane as a choice between ( Oi, MCi (b)) and (0j, MCj(b)). If Oj Oi, it must be that MCj(b) MCi (b) if either type chooses i. A standard single-crossing argument then applies to complete the proof. Part (ii) is proved in the Appendix here we provide some intuition. Assume first that the demand for quality is independent of ability (e. . , as in the Cobb-Douglas specifi cation) and that all private schools give the same discount to ability along their boundary loci (i. e. , schools 7s are the same). Holding nominal household income fixed, real income would rise with student ability due to tuition discounts at all private schools. SBA would then result by the same logic explaining SBI. Hence, the combination of a positive income elasticity (SCI) and discounts to ability alone would cause both SBI and SBA, the diagonalized partition as in Figure 1. Relatively high-income and lowability students cross subsidize relatively low-income and high-ability students in rivate schools. The argument holds more strongly if the 7s strictly ascend or if WSCB holds strictly. However, neither condition is necessary for SBA, nor do any of our other results require these conditions or SBA. It may be possible absent these conditions to get cases having nonmonotonic boundary loci in the (b, y) -plane. 20 9 We thank an anonymous referee for encouraging us to investigate bid-rentfunctions (see e. g. , MasahisaFujita, 1989), which ultimately led to part (ii) of Proposition 3. 20 The alternativeto W-SCB implies that lower-ability types are willing to pay more for a better peer group, and he alternativeto weakly ascend qs implies that lower- 43 We now turnto normativeresults which are quite intuitive. Again, see Epple and Romano (1993) for the formal analysis. Pareto efficiency requires (i) a student allocation that internalizes the peer-group externality given the nmtmberf schools, and (ii) entry as long o as aggregate household net willingness to pay for an allocation with one more school exceeds the change in all schools costs. An equilibrium without a public sector would satisfy condition (i) but not condition (ii). Effective marginal cost includes the marginal value of he peer group externality, implying that MCi (b) equals the social marginal cost of attendance at school i by a student of ability b. A purely private-school equilibrium then satis fies efficiency condition (i) by part (iii) of Proposition 2. However, entry to the point of zero profits entails externalities so that efficient entry condition (ii) fails to hold in a full private equilibrium. An entrantcapturesthe full value of its product to the studentbody it admits but ignores utility changes of nonadmitted students and profit changes of other schools resulting from the reallocation. Fixed costs, quality schools give bigger discounts to ability. all would tend to work against pure ability stratification, though Proposition I implies that some degree of ability stratificationwould be present. It is desirable to demonstrate SBA without assuming ascending qs, since these values are endogenous. However, providing general primitive conditions for SBA independentof assumptionsconcerning the equilibrium qs is difficult, because their equilibrium values depend on the entire distribution of types in the population. For the Cobb-Douglas case and ssuming independence o f income and ability in the population, we (Epple and Romano, 1993) have shown SBA without assuming weakly ascending 7s. 21 The comparison of the equilibrium number of schools in a fully private equilibrium to the Paretoefficient number entails a trade-off. The entrant ignores the lost revenues and cost savings to other schools from the students that t admits. Since almost every student ati tracted away from incumbent schools is inframarginal (i. e. , tuition exceeds effective marginal cost), the net effect here of entry is negative, tending to cause too much entry.Opposing this is the entrants failure to capture the full returnsfrom increased varie-tyof school qualities that results. Altlhoughthe entrant fully price discriminates to the students it admits, it cannot tax other students for the adjustments in the incumbent schools qualities. A net benefit to other students is likely to result because the incumbent schools will better accommodate preferences. 44 THE AMERICANECONOMICRE VIEW hence the finite size of an entrant,underlie the entry externalities as in many models of monopolistic competition. Introductionof the free public sector implies eviations from both efficiency conditions. In general, the public sector displaces multiple differentiatedprivate schools, substitutingthe equivalent of one large homogeneous school. This effective reduction in the number of schools is without attention to costs and benefits, principally implying a deviation from efficiency condition (ii). Holding fixed the number of schools in the public-private equilibrium (and counting the public sector as one school), zero pricing of public schooling violates condition (i). By just reallocating students between the public sector and private school 1 uprise their shared oundary locus, Paretian gains are feasible. Reference to the upper panel of Figure 1 from our computational equilibrium may help clarify the argument. Gains would result from slip into private school I relatively lowerability students below but pricey the boundary locus, students for whom the marginal social cost in the public sector is positive. These students are nearly indifferent between the two schools when facing the social cost of attending the private school but a tuition (zero) below the social cost of attending the public school. Students near the boundary locus and ttending the private school may also be of sufficiently high ability that the social cost of attending the public school is negative. Gains from shifting such studentsinto the public sector are then also feasible. Such students exist in our computational model, the rough prescriptionbeing to rotatethe boundarylocus counterclockwise at the point of ability having zero social marginal cost in the public school. Collecting these results, we have the following proposition. efficient. (ii) The public-private-sector equilibrium has neither an efficient number of schools, nor an efficient student allocation iven the number of schools. When fixed costs of schooling are small, the departure from efficiency in a fully private equilibrium will be correspondingly small. Part (i) of Proposition 4 can then be interpreted as making a case for private schooling and the vouchers we study. However, we have some reservations concerning this efficiency result. First, we are sympathetic to the view of many that access to a quality education is a right and serves as a means to limit historical inequities. Second, longer-run externalities from education not considered by private schools, like reduced crime, may be present.For these reasons, we explore the consequences of vouchers on all types instead of just providing aggregate measures. A somewhat distinct concern arises because exact equilibrium exists only in special cases. The interpretationof the efficiency results in the approximateequilibriumwe study is discussed in subsection D, below. C. Vouchers We examine tax-financedcash awardsto all those attending private school. 22 No role for vouchers is present in the tuition-free public t sector. Refo-rmulate he model by everywhere adding the amount of the voucher, v, to yt for households that choose a private school.The governments budget constraintis tyf (b, y) db dy (7) s This positive externality will tend to cause too little entry. We believe that too many or too few private schools are possible, but we have not proved this. vf(b,y)dbdy fJ PROPOSITION 4 (i) The allocation in a fuilly private equilibrium is (Pareto) efficient given the number of schools the equilibrium number of schools is not, however, more often than not MARCH 1998 . U AlU UA2U . +srs N U . +r , / B 7(k 22 Our model permits households to retain as income any excess of the voucher amount over the tuition paid to he private school of choice, thereby avoiding considerable complication. VOL. 88 NO. 1 45 EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS COMPETITION where N and k denote, respectively, the costminimizing number and size o f schools in the public sector that satisfy demandfor public education. Vouchers lower the real price of private education and increase the demand for it. We examine the effects of vouchers in our computationalmodel. the results will provide at least suggestive evidence about the impact of policy interventions. However, scrimp empirical evidence exists on some important parameters of the odel. D. Existence of Equilibriumand an ApproximateEquilibrium We require specifications for the density of income and ability, the utility and achievement functions, and the cost function for education. As we discuss in the Appendix, exact equilibrium generally fails to exist due to the integer number of private schools. We examine an approximate equilibrium in our computational analysis. Our epsilon-competitive equilibrium requires that no (utility-taking) private school, incumbentor entrant,could increase profitsby more than s. Let 7rax and .. min denote the maximum and lower limit profits arned by incumbent schools which maximize profits overp(b, y) and a (b, y) locally, and replace Zfl in the definitionof equilibrium with MAX irmax, Xrmax -lrmin rminl c Here lrmax equals the maximum potential profits to an entrant,and the maximum of the second two ground in the brackets equals the largest feasible profit increase by an incumbent school. The rewrite definition of equilibrium continues to require UM, PSP, MC, and local profit maximization by incumbent private schools i. e. , (6a) (6c). Last, the number of private schools is the stripped-down number material these requirements.The epsilon equilibriumretains all the positive propertiesof an exact equilibriumexcept that private schools could gain s in profits via global adjustments. The allocation of students in a fully private equilibriumwould then continue to satisfy efficiency condition (i). M III. computational quilibrium odeland E R Illustrative esults We develop a computationalmodel to illustrate our results, to e xamine vouchers, and to explore issues for which comparative-static analysis may yield ambiguous results. We calibrate it to existing empirical evidence so that A. Specification and CalibrationWe assume that n (b) is distributedbivar- iate normal with mean LbJand covariance matrix 2 01b P UbUy P bUy aY J To calibratethe distributionof income, we use mean ($36,250) and median ($28,906) income for households from U. S. census datafor 1989. With units of income in thousands of dollars, these imply that ,uy = 3. 36 and ay = 0. 68. We adopt specification (2) for the combined utility-achievement function. To calibrate the ability distribution we presume that educational achievement determines futureearnings and that the benchmarkeconomy is in a steady state. First, define normed achievement, aN, s our achievement function raised to the power 1/3 and multiplied by a constant, aN Y Ka = KO lb. 23 Then, a studentwith ability b attending a school with a peer quality of 0 is presumedto have futureannualearnings (E) given by ln E = ln aN= In K + (y/o/)ln 0 + ln b. This normalization is such that a percentage change in ability leads to the same percentage change in dollars earned. Henderson et al. ( 1978) reportthe change in achievement percentile that results from moving students from classes stratified by ability to mixed 23 The constant of proportionality, K, is arbitrary. A onvenient scaling is to set K = E b -. This scaling has the propertythat, if all students in the populationwere to attend the same school (i. e. , 0 = Eb), then normed achievement would equal ability (i. e. , aN = b). 46 THE AMERICANECONOMICREVIEW classes. An elasticity of achievement with respect to peer ability that is 30 percent as large as the elasticity with respect to own ability is representative of the results they report. We adopt the somewhat conservativevalue of y/l 0. 2. To complete the calibration of the distribution of ability, we then assume that the observed household-income distri butionis the ncome distribution that emerges in a steadystate equilibrium in our benchmark model. 24 This yields Ilb = 2. 42 and b = 0. 61. Thus, mean and median ability are 13. 6 and 11. 3, respectively, and the standard deviation of ability is 9. 1. 25 GarySolon (1992) and David J. Zimmerman (1992) provide evidence on the correlationbea tween fathers income and sons incomrre,nd they both find that the best point estimate of this correlationis approximrately. 4. Intergen0 erationalcorrelationin income arises from two sourcescorrelationbetween householdincome nd student ability and, for given ability, correlation between income and quality of school attended. Hence, SBI suggests that the intergenerationalcorrelationin incomes is an upper bound on the correlationbetween parents income and childs ability. For purposes of sensitivity analysis, we then assume that p E 0, 0. 4. For our benchmarkcase, we set p = 0, More precisely, we let the distribution of ability be lognormal, and we ap proximateby assuming that this generates a lognormal distributionof earnings. We set the first two moments of the distribution of earnings equal to the irst two moments of the distribution of income. That is, a we choose 11h nd cb such that our benchmarkequilibrium has EaN = Eylm and VaraN = Vary/m2. The constantm is the ratio of employed workersper household to the number of students per household (m = 2. 6 in 1990). The distribution of earnings will not be exactly lognormal because of the discrete difference in schools attended, even though the distribution of ability is presumed to be lognormal. If every student attended public school in the benchmarkmodel, and hence faced the same 0, earnings would be exactly lognormal.The approximation is a good one because 90 percent of the students do attend public schools as we will see. 25 cogency can be related to IQ. Using IQ X( cytosine, 256), one obtains In b = -1. 38 + 0. 038(IQ). In our novoucher steady state, this implies that a wo rkerwith an IQ of 100 has expected income of $22,074, and a 10-point increase in his IQ increases expected income to $32,510. See the discussion in what follows relatingto Figure 6 and the calculation of expected steady-state income conditional on ability. 24 MARCH 1998 which is particularly onvenient for our steadyc state calibrationof the model.This completes the calibrationof f(b, y). We now complete the calibration of preferences. The Cobb-Douglas specification implies unitary price and income elasticities for school quality, 0. Given the absence of empirical evidence on the demand for quality, these are plausible central values and are consistent with estimates of demand for school expenditure (see e. g. , Theodore Bergstrom et al. , 1982). This function also implies thatthe marginal rate of substitutionbetween school quality and the numeraire is invariant to own ability. Empirical evidence is mixed about whether an improvementin peer group is more eneficial to high- or low-a bility students. Hence, our models assumption that the effect of peer group is not prejudice toward either highor low-ability types seems an appropriate choice for a baseline model. If school quality could be purchasedat a constant price per unit of quality, each households expenditure on education relative to total expenditureon other goods would be y/( 1 + -y). The existing share of aggregate disposable personal income in the United States that is spent on education is most 0. 056. Hence, we set y = 0. 06. Using y/P = 0. 2 from above, the calibrated tility-achievement function is then U = (Yt P)0006b0. 30. We chose a cost function that is quadratic in the percentage of students (or households) a school serves F + V(k) = 12 + 1,300k + 13,333k2, with parameters set as follows. intake per student in public schools in 1988 was $4,222 (Statistical Abstract, 1991 p. 434) and there was 1/2studentper household (Statistical Abstract, 1992 pp. 46, 139). We specified our benchmark case t o have four private schools and chose parametervalues such that average cost in equilibriumwas approximately$4,200 per pupil. 26 Experimentation indicated that 6 We have presented the cost function in terms of the percentage of students served or, equivalently, the per- VOL. 88 NO. I EPPLE AND ROMANOPRIVATE-PUBLIC SCHOOLS COMPETITION equilibriumpropertiesare not very sensitive to the benchmark number of schools, but rather are sensitive to the tokenish of the average cost of schooling. We set e = 4. 2. This is the minimum value sufficient to pick up existence of epsilon equilibrium for voucher values varying from zero to $4,200 per student. 27 B. Results For our benchmark equilibrium with no voucher, the public sector has 90 percent of the student population, and the four private chools combined serve the remainder. The actual U. S. percentage of students enrolled in public schools during this period equaled 88 percent. Increasing p from 0 to 0. 4 reduces public-sector attendance to 88 percent. Effects on other variables of so changing p are also small, and the results that follow are for p = 0. centage of households served, k. In terms of k, average cost reaches a minimum at $2,100, with k* = 0. 03 $2,100 can then be interpretedas the average cost per household. There are twice as many households as students in the United States. Letting s denote the numberof studentsand ubstituting s = k/2, one sees that the minimum of the average cost per student is $4,200. In our presentation,we focus on per-student measures of tuition and costs the related per-household measures are simply half those of the per-studentvalues. 27 This value is about 7 percent of the cost of a school operational at a scale that minimizes cost per student. Relative to fixed cost, ? is approximately 35 percent. Of course, a minimal E, however measured, is desirable. We have studied how the minimum e varies as we vary efficient school scale, k*, while holding average cost constant.We find t hat the requisite e to support equilibrium varies approximatelyproportionatelywith k* if fixed cost is varied proportionately with k*. This suggests, as we would expect, that e can be made as small as desired if k * is made sufficiently small. We have also investigated increasing fixed cost while holding k* and minimum average cost constant. This tends to reduce the ratio of e to fixed cost but increases the absolute magnitude of e required to sustain equilibrium. Our investigation reveals that substantive findings from the computational model re not sensitive to the choice of k* or the relative magnitude of fixed to variable cost. Rather, the key aspect of costs is the value of average cost at the minimum, and as discussed in the text, this value is based on observed school costs. The problem with pursuinga calibrationthat further lowers e is that it leads to a computationally unmanageable number of schools for large vouchers. 47 Othercomputationalresults are presentedin Figures 1- 6. The upperpanel of Figure 1 presents the boundary loci and admission sets in type space, in addition to the equilibrium Os nd ks. Here and in some other figures, both absolute and percentile ability scales are provided for perspective. The lower panel displays the allocation for a voucher of $1,800. The linear boundary loci derive from the Cobb-Douglas specification. For results we present, intersections of boundaryloci, if any, occur very near the bounds of the support of type space. S

How Life Gets Better While People Feel the Same

Im pretty sure all of us atomic number 18 familiar with the cliche, m integrityy preemptt buy satisfaction. In Gregg Easterbrook agree The Progress problem he tries to understand why a small variances of this cliche is so. The paradox that underlies Easterbrooks venture is that through extinct the last fifty years, things go improved in the United States and Europe, by all fair game standards. All though during same time, surveys of happiness and satisfaction have not changed since the fifties.Easterbrooks main heading through start the book asking has the objective measures of the well being of man variety return increased while overall satisfaction of lot and happiness have remained n invariably-ending? In the three beginning chapters of this book Easterbrook sp peculiaritys a plentitude of time looking at surveys depicting the various objective measures that show a pretty much steady increase of progress. I fix these chapters entertaining to read because it brin gs to light a huge range of facts and statistics that conduce support to his idea that things are constantly smash.Easterbrook goes on about how the offense rate is falling, the state of the environment is improving, we are gaining intelligence, equality is increasing and scotch situations have improved. Crime, both violent and property have been in correct for 20 years. Current crime rates are probably the final in the history of the country. The environment has been improving in every field of force except green house gases. We have the cleanest air since the beginning of the industrial revolution and the cleanest water since Man was a hunter and ga at that placer. n the statistics discussed, Easterbrook references a 1996 poll that resulted in 52% of the respondents saying the United States was worse today than when their parents were growing up and 60% said they expected their children to live in an even worse country. Only 15% of the respondents believed that overall nat ional conditions were improving (Easterbrook, 2004). In 1997, 66% of Americans reported that they believed the lot of the average soul is get worse (Easterbrook, 2004). Easterbrook raises the question How is this possible with the dramatic increase in overall general progress.Along with discussing the statistics of the many surveys, Easterbrook in like manner gives the reader possible reasons for the so-called paradox. oneness of the possible reasons he gives is choice anxiety. When looking back on the departed a lot of pack had very few options due to contain income and limited availability of goods and service. But Easterbrook fights that there is flip side to the variant that comes from having to many options, just like not having enough options can be stressful as well.With the constant increase in the range of goods and services available even the easiest choices can become stressful. Easterbrook states this because a consumer can neer really be sure if they are makin g the correct closing causing stress and unhappiness. An separate possible reason Easterbrook gives is Abundance denial. This convey that no matter how much individuals actually have materially, they ordain neer view them as being well-off, which is constantly making peck unhappy and stress out. Easterbrook states that a most Americans think of only the voluminous as being well-off. This brings me to my favorite statistic my favorite statistic there have been about sixty billion people who ever lived, the 600 million who live in western democracies such as Europe, North America, Japan and Australia live intermit than anyone else in history ( conk out housing, medical care, nutrition etc. )(Easterbrook, 2004). Since my standard of documentation is considered about average that means that I live better than 99. 5% of people who have ever lived. We are the one percenters, as furthest as the history of the world goes. Our current one percenters live better than 99. 9% of peop le, ever. One more possible reason is collapse anxiety, the general fear that the prosperity of the United States and Europe may come to an end due to an economic crash, environmental problems, terrorism or some other catastrophe. Even though individuals are better off that constant theory that it is unmanageable leads to people being unhappy and unsatisfied. Its catchy for people to sit back and really appreciate things when they are in constant fear that it could someday end. Lastly he considers the revolution of satisfied expectations as a possible explanation.He refers this to as the uneasiness that follows items that an individual once dream of having. Easterbrook states that during the last century western life has been categorized by ever increasing expectations, with each generation expecting to have more than the previous generation. In todays day and age we have reached a imply where people have most of what they need. What Easterbrook is trying to say with this explan ation is that it is hard to imagine things getting any better than they already are manakin of giving individuals nothing to look forward to.After reading this book I had some general issues. First off is the issue of happiness. The beginning of the book deals with objective measures over time that forms a steady increase in progress. To form the paradox the objective facts were compared to the subjective measures of happiness. Of course Easterbrook states that the surveys are not exactly perfect he claims that they illuminating nonetheless (Easterbrook, 2004). However I think this is questionable. The perception of happiness is not constant among individuals at one point in time, let alone over several decades.Each person could have a completely different outlook on happiness. What can be happiness for one person could be sadness or another feeling for someone else. With each person entitled to their deliver subjective view on what they consider to be happiness, they are also ent itled to have a subjective perception of what others experienced in the outgoing and what others will experience in the future. So when surveyors asked respondents if they thought their parents would better off or if their children will be better off, its not an objective measure but a subjective perception of the prehistorical and future.It doesnt attend wee why we In short, it is not clear why we would assume the level of subjective satisfaction to increase with objective well-being. I feel like Easterbrook was trying to say that in the past it seemed like things were always getting better but now in the future since things are improving so quickly it doesnt seem like we could continue to progress in the future. It is unclear why people should think that progress couldnt continue and, therefore, have lower expectations for the future. This question is left unanswered.If you asked, most people would agree that money and material things are not the meaning of happiness. With thi s, why would we expect to see a contact between an increase in progress and an increase in happiness? It isnt clear that the claim has ever been that prosperity and progress will lead to the end of all stress and uneasiness. In the end there are two traits that correlate closely with happiness forgiveness and gratitude. liberate those that have done you wrong and be grateful for what you have. Easterbrook, Greg. The Progress Paradox How Life Gets Better While People Feels Worse. Random House make Group, 2004. eBook.

Coca Cola Analysis

1 I. Introduction coca plant- the skinny and Shasta. These ii everyplacelaps argon in the same industry and two were invented around the same time. N maventheless, a real variant perception comes to consumers? mind when they hear these two words. In the twenty- eldest cent ury, coca plant- pinhead is requireed sensation of the virtu wholey valu fitting fools in the terra firma, whereas Shasta is intimatelyly cognise in United States, particularly in the West Coast region. coca- locoweed is possess and operat ed by The coca-genus sess society, and Shasta is in brief owned by case s protectow Corp. This report impart examine, comp ar, and analyze both companies in terms of ope dimensionn, promotion, guidance, and finance.In addition, trick up analysis and gatekeeper? s Five Forces exit be conducted to respect the companies? positions in the industry. The report provide to a fault identify several issues that both companies receivedly face and suggest al ternatives and recommendations in golf-club assist Shasta, a subsidiary of theme fox Corp. , to gain to a peachyer extent than food market place sh atomic upshot 18. display panel 3 exhibits that theme drink Corp. makes up save aroundwhat 2. 8% of the ticklish crisp industry in 2010. phoner Background Dr. caramel brownny Pemberton, a pharmacist from Atlanta, invented coca plant - locoweed in 1886. The human being? s rangyst non-alcoholic con ready bon ton trademarked its name and logo in 1893.After thirty eld of establishment, the telephoner went everywheret in 1919. The sh atomic number 18 outlay of its initial public offering (IPO) was $40 a sh atomic number 18 (Datamonitor, 2010). coca plant- pinhead expand rapid ly it is currently avail open in more than 200 countries and reaches astir(predicate) 99% of the world population ( national Geographic Channel, 2011). Consumption rate of trademarked or certify harvest-times amounts to 1. 7 one thousand thousand portions a day. As of December 31, 2010, the gild has 139,600 employees ecumenic (The coca plant- grass Comp any, 2011). Similarly, Shasta was founded in 1889, terzetto days later on coca plant- dummy. In northboundern atomic number 20, Mt.Shasta, a group of c wholeing sectormen assailable a health and vacation recidivate at the s ite and featured naturally carbonate spring wet. The carbonate pee received positive feedbacks from clients who stayed at the health and vacation recidivate . poorly after, t hese line of reasoningmen established Shasta Mineral Springs family and started switching the harvest-home by dint ofout the West Coast region, including California, Oregon, and Washington. In 1928, the friendship was renamed The Shasta water supply Company, and began to diversify its carbonated water line of business to a divide with more flavors. In 1985, Shasta was acq uired by National boozing Corp.Despite of the learning and return diversif ication, Shasta is serving the same West Coast market that it was serving decades ago (Shasta drink, Inc, 2010). localise sustenance market coca- gage views all(prenominal)one as electric potential consu mers. coca plant-genus dummy targets all age groups however, the one with most potential is the age group between 18 to 25 course of studys old , which tends to bewilder busy lifestyles. Furthermore, the follow attempts to appeal students and family-oriented consumers. The socio-economic status of these demographics ranges from inflict to upper-lower income level (Grimm, 2000). These ar a few characteristics of coca - gage? target market. docile drink fabrication 2 Shasta? s chief(prenominal) revolve about is revolution. level off though the ships company sells a variety of green goddess, the gross gross gross gross revenue of other flavors are better. Statistics show that ethnic groups prefer flavored drinks over dope. Based on this research, Shasta ha s revolve around its target market on et hnic groups. Shasta? s demographic targets low to center field income consumers, less educated individuals, and bounteous families. Psycho -graphically, the company targets individuals who look for regard as and lineament in a increase, equal Shasta cola, as an alternative to Coca-Cola or Pepsi (C.Anicich, E-mail Interview, April 20, 2011). confuse 3 exertion Trends & Comparison analysis (source drink Digest) Source deglutition-Digest ( meridian-10 CSD Results for 2010). II. Operational Analysis ? The Coca-Cola Company Raw Materials Water is the briny ingredient use in Coca-Cola? s harvest-times. The piano drink is do from diluting water with concentrates and sweeteners. The concentrates used in Coca -Cola? s beverage ashes a secret therefore, the company does not allow filming during manufacturing attend toes. correspond to National Geographic (2011), the beverage is do with 90 percent water.Because water? s taste varies at e rattling location, Coca-Cola has to neutralize the water to turn back that its products taste unchangingly worldwide. The other main ingredient is risque harvest-festival sugar corn syrup (HFCS) and since imported sugar is more expensive, Coca-Cola uses HFCS as its of import sweetener. Manufacturing Coca-Cola is the enceintest player in the non-alcoholic beverage industry. It operates in over 206 countries and has 900 bottling plants and factories worldwide with locations oft(prenominal)(prenominal) as Eurasia, Africa, Europe, Latin the States, as healthful as North the States (National Geographic, 2011). turn overable to this, these manufacturers moldiness adhere to strict exemplifications in browse to reach sta ndardized CocaCola? s products. Moreover, Coca-Cola manages its manufacturing processes expeditiously. For sub collectd drink diligence 3 example, the new factory in Baton Rouge operates 24 hours a day, five days a week, and stinkpot produce up to 4. 5 zillion beverages in one day. Additionally, in new-fangled efforts to be environmental relay stati only if, the company announces that it will transmit its electrical equipments and reduce water usage. The decision is projected to save the company approximately one million dollars annually. DistributionsCoca-Cola has the world? s largest dissemination scheme hence, it is a ble to reach almost every region (Coca-Cola Co. , 2011). The company distributes its beverages to consumers by dint of various retailers, wholesalers, vending machines, and statistical diffusion centers. Furthermore, it sells its syrup and concentrates to cafes and restaurants used in leak drink dispensers. ? National swallow Corp. (Shasta) Raw Materials National deglutition Corp. col cut intoates with galore(postnominal) a(prenominal) suppliers for raw poppycocks and packages. Moreover, the company consolidates its purchasing function for salute containment purposes (National deglutition Corp. 0K, 2010). This gain allows the company to compete against study beverage companies. Some of the materials used to produce the beverages are sweeteners, juice concentrates, carbon dioxide, water, glass, p lastic bottles, aluminum set ups, paper, cartons, and closures (NBC 10K, 2010). The salutes of the materials are very volatile reasons existence are because of gas sets, tariffs, foreign allayer fluctuations, etc. Consequently, the company leverages forward agreements with suppliers to minimize the price attachs on certain(prenominal) materials. Manufacturing National drinking Corp. ets up manufacturing plants strategically. Its twelve manufacturing facilities are located uprise major U. S. metropolitan cities thus, enab ling the company to distribute products promptly and efficiently (NBC 10K, 2010). In manufacturing plants, the company bottles and locoweeds its beverages. National Beverage Corp. believes that ownership of bottling facilities provides a private-enter prise(a) ad new wavetage o ver some competitors? dependency on third political party bottlers (NBC 10K, 2010). As a result, the company is able build its own matched ad cutting edgetage and become s more experienced and efficient. Distributions National Beverage Corp. tilizes a hybrid statistical diffusion system to deliver products through three primary distribution pass ons take-home, convenience and food-service (NBC 10K, 2010). Take-home channel distributes to grocery computer memorys, wholesalers, and warehouse stores such as Costco. Secondly, the convenience channel, which distributes to gas station and comfortable stores such as 7-Eleven stores. This channel allows the company to charge higher(prenominal) selling price than the other channel because of lower sales record books. The last channel is food-service. This channel distributes its products to schooldayss, hotels, airlines, restaurants, and other food related places. loose drink labor 4 III. forwardinga l Analysis ? The Coca-Cola Company Word-of-Mouth Consumers are talking nearly flaws and companies every day, and it so happens that a vast number of conversations are about Coca-Cola. According to Keller Fay Group, a research merchandising firm, a study of 25,142 consumers shows that Coca-Cola is currently the most talked about brand in America (Wang, 2008). This conclusion demonstrates and measures the savor of consumers? conversations on a daily basis. In addition, the CEO of Keller Fay Group, Ed Keller, states, these brands strickle under the realm of hearty categories? and involve greater frequency of purchase. As a result, consumers are exposed to packaged darlings? logos and slogans frequently. The more products consumers purchase daily, the more standardisedly that they are to start conversations about the products within their societal circles. The table beneath exhibits the ten most talked about brands and Coca-Cola is placed first. Top 10 Word-of-Mouth around T alked About Brands 1. Coca-Cola 6. Ford 2. AT&T 7. Dell Computers 3. Verizon 8. Sony 4. Pepsi 9. Chevrolet 5. Wal-Mart 10. McDonalds universe Relations Coca-Cola has strong public relations because it is eternally on the foreland of contributing to the community and society.For instance, Coca-Cola recently announces to the press that it has hike up established the Coca-Cola Japan Reconstruction Fund, which promises to raise 2. 5 billion yens ($31 million U. S dollars), to assist the reconstruction of Japan over the succeeding(a) three course of studys (Coca-Cola raises, 2011). As a result of this generous act, Coca-Cola will receive great public media presses. Social Media Since the emergence of social media on the Inter pelf, Coca-Cola has change order of magnitude its presence in the global community. For example, Coca-Cola? s Facebook page has more than 5. 18 million fans and tacit growing, which makes Coca-Cola? page one of the happen fan pages on Facebook (Staff, 2010 ). This illustrates the immense community support and brand loyalty the company receives on the Inter shed light on. In addition, Coca-Cola in addition utilizes the net income as a puppet to support the community in charitable acts. Example being, Coca-Cola promises to give one dollar to the Boys and Girls Club every time a Facebook user gives a friend a virtual coke thus, raising about $126,000 for the make-up (Staff, 2010). Overall, Coca-Cola uses the social media for community engagements and in addition to reach out to more consumers.Global stigmatisation As the first mover in the market, Coca-Cola is currently enjoyn as a global brand, not just Soft drink Industry 5 an Ameri whoremonger brand. For instance, when the company entered the China market in 1928, the first coordinate translations of Coca-Cola had absurd meanings such as bite the wax polliwog or female horse stuffed with wax. However, with referable diligence and amount ability in branding research, Coca-C ola was able to choose different characters pronounced Ko Kou Ko LE, which literally means, let the rim rejoice or happiness in the mouth (Wooten, 2011).This proves that the company takes branding seriously and tackles every global venture strategically by adapting to local cultures. ? National Beverage Corp. (Shasta) Overview In the company? s committee statement, National Beverag e Corp.? s main focus is variety. Its quiet drink line has over thirty different flavors with new flavors being tested every day. Its goal is to have consumers identify themselves with particular flavors. As individuals grow older, their likes, tastes, and personalities will change. National Beverage Corp. encourages its consumers to link their transformations to their favorite frail drinks.Its other objective is to promote itself as a friendly flaccid drink company that everyone can relate to. By using social media platforms such as Facebook, the company is able to reach out to current as well as n ew consumers. Also, word-ofmouth is known as the sterling(prenominal) influence for consumers thus, National Beverage Corp. hopes to satisfy consumers in order to name a word-of-mouth boom effect. Conceivably, this tactic can possibly allure over other consumers who belong to its competitors. The company also follows a consumer-based promotional dodge t hat centralizes on fitting the consumer? image to his or her favorite drink, quite a than creating an image for consumers like Coca -Cola. With this, National Beverage Corp.? s promotional system can be dissected into move by engaging the promotional schema mix advertisement, public relations, sales promotion, personal selling, and direct mail. Advertising Recently, National Beverage Corp. began showing picture and online commercials highlighting its low prices in comparison to bigger fragile drink co mpanies. These comical commercials exhibit individuals being hit in the heads with a Shasta can thus, coining the Hit in the Head theme.The end of the advertisement shows a statement, Some hatful wouldn? t know a good big bucks even if it hits them in the head. The focal predict is to gain a satiric image in the viewers? minds to reiterate the fact that National Beverage Corp.? s soft drinks are unremarkably priced lower than its competitors. Moreover, the vibrant color used in the commercial highlight the many flavors that the company carries. Public Relations National Beverage Corp. cleverly uses the Internet as a medium to promote its image as a neighborhood friend to its consumers.By utilizing Facebook, the company starts a monthly promotional page called Shasta Pop, which is maintained by its employees who post three to four weekly highlights. These posts mainly discuss about denote soft drinks, especially around the holidays. In addition, there are recipes on how Shasta can be combined in daily cooking. Soft drink Industry 6 gross sales promotion Presently, based on its Shasta Pop Facebook page, National Beverage Corp. uses a Shasta van that travels around California and gives out free soda cans, discounts, coupons, and T-shirts. This promotional tactic is known as Sha sta Pop Stops. For example, to promote new flavors, Stater Bros. will be inviting the Shasta pop van with KFROP radio station to its store locations. Moreover, fans are able to follow the Shasta van by tuning in to some of their local radio stations. in the flesh(predicate) Selling In terms of sales, National Beverage Corp. mainly conducts business with local retail grocery stores. In order to promote its products, it offers mesmerizing discounts to retailers through partnerships. For example, a retailer that chooses to place National Beverage Corp.? s products in front of the store will receive a higher lettuce for every sale. Direct MailAs Internet usage amplifyd exponentially over the years, National Beverage Co rp. uses the Internet to send promotions to consumers via E -mail. Subscribers of Sh asta Pop Facebook page receive periodic coupons through their Facebook? s wall and E-mail tarradiddles. IV. fiscal Analysis ? Sales Graph 1 shows that Coca-Cola generates most of its tax from internationalist markets. The U. S. revenue accounted for 31. 7% of the bestow revenues in 2010, which was $11. 1 billion, a gain of 34. 6% compared to 2009 revenues. Moreover, international markets made up 74. 1% of the total revenues in 2010, which was about $23. billion, an summation of 4% compared to 2009 international revenues. The epoch- reservation ontogenesis in U. S. sales can be traced to the gain from the acquisition of Coca-Cola Enterprises and the growt h of its other beverage products, such as Fuze, Trademark Simply, and tea. However, international market sales rose slightly due to the concurrent branch in emerging markets as well as a wane in developed markets. Additionally, the unfavorable impact of foreign currency interchange rates was primarily responsible for a st ronger U. S. dollar compared to other currencies (Coca-Cola, 2011, p. 63). Graph1 Coca Cola 2010 Sales by Segment 3% 0% 7% 13% 11% 14% 32% Source 2010 Coca Cola 10-K Report Soft drink Industry Eurasia & Africa Europe Latin America North America Pacific Bottling enthronization corporate 7 On the other hand, National Beverage Corp. sells its products to U. S. market only. thitherfore, its internal sales account ed for 100% of the total revenue in 2010, which was $593. 5 million, an increase of 3. 2% from 2009. Robust revenue in 2010 resulted from ripening in the sales of case volume of 1. 2% for zipper drinks, juices a nd water and 5. 1% for mark carbonated soft drinks. Moreover, unit pricing increase 0. % which mostly due to positive product mix changes. The improvement was partly off apparel by a decline in allied branded volume (NBC, 2011, p. 13). For the past six years, Coca-Cola increased its revenues and net incomes with average growth rates range from 8% to 18% annual ly. In 2005, sales were only $23. 1 billion. However, 2010 sales amount ed to $35. 1 billion, an increase of 13% from 2009. Additionally, 2010 net income was $11. 8 billion, an increase of 72% from 2009. The large growth was due to when the company acquired Coca-Cola Enterprises in October 2010, it recorded other income of $4. 8 billion.However, Coca-Cola experienced drawbacks in 2009 after the 2008 market crash. Its revenue dropped 3% to $30. 9 billion nonetheless, its net income still gr ew to 17. 5% during 2009 as a result of price increase and effectual embody cutting regularity of operating(a) expenses as well as terms of goods exchange ( contact Table 1). Even though National Beverage Corp. did not experience as much growth as Coca-Cola in its fiscal statements, its revenues have also been rising steady since 2005. In 2010, revenue reached its highest level at $593. 5 million, an increase of 3% from 2009. Likewise, 2010 net income was $32. million, an increase of 33% from 2009, primarily due to higher sales volume, favorable changes in product mix and lower raw material costs (NBC 10 -K, 2010, pg 13). Since 2005, revenue increased with an average of 3% per year, and net income growth averaged 11% annually. National Beverage Corp. experienced some get alongbacks in 2008 when the recess occurred. Though revenue increased, net income decreased by 9% to $22. 5 million (see Table 2). Table 1 Coca Cola Company (2005 -2010) (in millions) 2010 2009 2008 2007 2006 2005 Net Oper. Revenue 35,119 30,990 31,944 28,857 24,088 23,104 Cost of goods change 12,693 11,088 11,374 10,406 ,164 8,195 S elling, customary and admin expenses 13,158 11,358 11,774 10,945 9,431 8,739 Net Income 11,859 6,906 5,874 Source sec. gov (Coca Cola Company 10-K Consolidated Income Statement) 5,981 5,080 4,872 Table 2 National Beverage Corp. (2005 -2010) (in thousands) 2010 2009 2008 2007 2006 2005 Net sales 593,465 575,177 566,001 539,030 516,802 495,572 Cost of sales 396,450 405,3 22 393,420 365,793 349,131 340,206 S elling, general and admin expenses 145,159 131,918 138,447 137,212 135,090 130,037 24,742 22,480 24,682 22,226 16,886 Net income 32,853 Source sec. gov (NBC 10-K Consolidated Income Statement) Soft drink Industry 8 ?Financial Overview According to data compiled by Bloomberg, Coca-Cola, loss leader in non-alcoholic beverage industry, is nourishd at $153. 15 billion via the market capitalization manner. On the contrary, National Beverage Corp. , on the mid-size market capitalization roster, is note valued at only $628. 23 million. In another word, Coca-Cola? s value is approximately 244 measure more than National Beverage Corp.? s. Table 1 and table 2 show the income statements for these two companies for comparison purposes. Coca-Cola has been able to increase its revenues year after year and recorded top net sales at $35. 1 billion in 2010. Gross margin was 63. %, or another track of interpreting this is the company took away $0. 639 per dollar of sale. Furthermore, after all expenses and income tax deductions, $0. 336 was net income per dollar of sale. The company boosted its bottom line from $6. 8 billion to $11. 8 billion primarily through revenue growth ($31. 0 billion to $35. 1 billion). For costs associated with cost of goods such as selling, general and administrative expenses (SGA) and income tax, a ll increased as a percentage of sales. However, the growth in revenue contributed enough to still see net income improve (Coca-Cola, 2011). Similarly, National Beverage Corp. as also been able to increase its revenue therefore, change magnitude its net income year aft er year. Gross margin in 2010 was 33. 2% compared to 29. 5% in 2009. Due to lower economies of scale, National Beverage Corp.? s largest expense has been consistently cost of goods sell. Even though the company was able to reduce cost of goods sold expense from 70. 47% to 66. 80%, this expense was still high and is pecuniaryly harmful. However, th e reduction in cost of goods sold in 2010 was a major driver that led to a bottom line growth from $24. 7 million to $32. 9 million (NBC 10-K, 2010). ? Financial Ratios Analysis Coca-ColaCOKE (KOUS) Current warm ROA roe Assets overturn Inventory derangement A/P Turnover A/R Turnover 1. 17 0. 85 14. 82% 42. 32% 0. 58 5. 07 propagation or 72 days 7. 88 times or 46. 32 days 8. 58 times or 42. 54 days LTDebt to Assets count Liabilities to Total Assets Interest Coverage 0. 19 0. 57 19. 43 Coca-Cola? s financial ratios indicate that the company is in good health. In respect to profitability, return on assets (ROA) was 14. 82% and return on equity (ROE) was 42. 32%. These innings help the investors to assess trouble performance. Furthermore, liquidity indicators measure the company? s ability to meet bypass-term obligations.In 2010, current and rapid ratios were 1. 17 and 0. 85, respectively. The quick ratio presents a more stringent figure on liquidity. Even though the Golden R ule states that it should be at least one, a figure like Coca -Cola? s can Soft drink Industry 9 be considered normal for a multinational company. Solvency calculations accommodate long-term debt to total assets as well as total liabilities to total assets, which calculated at 0. 19 and 0. 57, respectively. Additionally, the absorb coverage ratio, which indicates how many times sideline expense is covered by operating profits before taxes and engross are factored in. Coca-Cola? interest coverage ratio was 19. 43, which meant operating profit was about 19 times big than interest expense. Although there were not enough liquid assets to satisfy current obligations (total liabilities to total assets ratio of 0. 57), operating profit was more than adequate to service the debts. In addition to the calculations above, activity ratios measure how effective the company is utilizing its assets. Assets turnover, the amount of sales generat ed for every dollars worth of assets, was 0. 6. Inventory turnover, indicates how many times a companys inventory is sold and replaced over a period, and calculated at 5. 7 times per year or every 72 days. This shows that inventories were managed well. Accounts payable, represents an entitys obligation to pay off a short-term debt to its imputeors, was 7. 88 times or every 46 days. Accounts receivable, is used to quantify a firms effectiveness in extending credit as well as collecting debts, reported at 8. 58 times per year or every 43 days (Coca-Cola, 2011). National Beverage Corp. NBC (FIZZUS) Current Quick ROA ROE Assets Turnover Inventory Turnover A/P Turnover A/R Turnover LT-Debt to Assets Total Liabilities to Total Assets Interest Coverage 2. 30 1. 71 20. 1% 21. 05% 2. 35 10. 67 times or 34. 21 days 8. 12 times or 45 days 11. 04 times or 33. 06 days N/A 0. 41 432. 13 For a fledged company like National Beverage Corp. with a much smaller market capitalization, financial ratios indicate good performance year after year. Pro fitabi lity ratios like ROA and ROE were 20. 51% and 21. 05%, respectively. These returns on investment calculations were well above the industry? s average, which is very impressive. Liquidity indicators, such as current and quick, were 2. 30 and 0. 9, respectively. Unfortunately, these figures were below the industry? s aggregate.In regards to solvency indicators, total liabilities to total assets ratio was 0. 411 or $0. 41 debt for every dollar of asset. National Beverage Corp. used little or no debt in its capital structure and may have less financial risk than the indu stry? s aggregate. This increased the interest coverage ratio to 432. 13, meaning operating profit was 432 times larger than interest expense. Lastly, an activity ratio, such as total assets was $2. 35 revenue generated per dollar of asset. Inventory was presented at 10. 67 times per year, or every 34 days of cost of goods sold tied up in inventories.Accounts payable ratio indicates that the company collected 8. 12 times per year or every 34 days. Accounts receivable, reported at 11. 04 times per year or about every 33 Soft drink Industry 10 days worth of sales outstanding. In conclusion, National Beverage Corp. also appears to be in good financial standing. V. jam & Porters Five Forces Analysis ? arise Analysis Coca-Cola SWOT Analysis Strengths Weaknesses Strong brand image and customer loyalty utmost inflexible costs of business Robust global infrastructures and distribution Several product recalls system Higher prices compared to others Various product offerings Solid financial agent and market presence Opportunities Threats Expand to other developing countries Change in customer preferences Offer new beverages/drinks Global economic recession slipperiness focus to volume/price/ mix Foreign exchange fluctuations National Beverage Corp. SWOT Analysis Strengths Weaknesses Diverse product offerings natural depression profit margin Hybrid distribution system Limited t o U. S. market only Opportunities Expand to other neighboring countries Offer new beverages/drinks Increase in the non-alcoholic beverage ndustry ? Threats Change in customer preferences Global economic recession Rising cost of inputs disceptation from major beverage manufacturers Porters Five Forces (Soft plight Industry) Threat of new entrants ( scummy) (H) Low electrical switch cost for buyer, Low product differentiation (L) High economies of scale, High capital requirement, Low access to distribution channel Power of buyers (Moderate-High) (H) Low switching cost for buyer, Moderate product differentiation for supplier (L) Low purchase volume for buyer, Low threat of backward integration Power of suppliers (High) H) High switching cost to another supplier, High suppliers? concentration, Low availability for product substitute Soft drink Industry 11 (L) High importance of customer, Low t hreat of forward integration Threat of substitute product (Moderate-High) (H) High di fferentiation of substitute product (L) Low price performance kin Intensity of Rivalry (Very high) (H) High number of competitors, Low industry growth rate, high fixed cost and storage cost, Low switching cost for buyers, High exit barriers (L) None Threat of New Entry (Low) provider Power (High)Competitive Rivalry (Very High) Buyer Power (Moderate High) Threat of Substitution (ModerateHigh) VI. management Analysis The management analysis section will examine management structures, corporal policies, mission statement s, and vision statements of both The Coca-Cola Company and the National Beverage Corp. The management structure segment will explore the corporate leaders and executives as well as the workplace environment. A segment on corporate policy will ob serve up responsibilities and moral philosophy expectations of every employee. The last segment will analyze each company? mission and vision statement and what it means to the company. ? The Coca-Cola Company focussing St ructure concern at the corporate level is headed by Muhtar Kent, Chairman of the Board of Directors and mind Executive policeman. former(a) top officers at the Coca -Cola Company include Executive Vice electric chair Irial Finan, Chief Financial Officer Gary Fayard, President of North America Alexander Douglas, and President of Latin America Jose Reyes. Soft drink Industry 12 Coca-Cola creates a victorious culture by developing a diverse workplace. At the core, there is the business employee value proposition, which is directly ffected by four key values. These values are inviteing the honorable talent, right(a) capabilities, right leaders, and the right workplace (Global Diversity, Our strategical modelling 2010). In order to create the right workplace, the company must stick up positive diversity and fairness on all levels of operations. Finding the right talent relates to matching the right people with the market they serve. Building the right capabilities is about sha ring social culture and knowledge in the workplace. The right leaders leverage talent in the workplace to achieve topping results across the business.Coca-Cola Company currently employs 139,600 people, also known as associates ( business enterpriseweek, 2011). Corporate indemnity and Ethics The Coca-Cola Company has been able to sharpen its reputation through righteousness and ethical conduct. Therefore, it is important for the company to safeguard these values and set standards to run across employees do the right thing. The company? s Code of Business Conduct covers guidelines on integrity around the globe, internal as well as external integrity, and conflicts of interest. Mission and Vision Statement The Coca-Cola Company has set long term road-map of acquiring its bottling partners.The 2020 vision defines the company? s attitudes and behaviors that are required to turn the vision into reality. Furthermore, Coca-Cola? s mission statement serves as a guideline for company? s actions and decisions (Mission, Vision, shelters, 2010). ? National Beverage Corp. wariness Structure The executive group at National Beverage Co rp. is led by Chairman of the Board and Chief Executive Officer Nick A. Caporella. Other top officers include President Joseph Caporella, Principal Financial Officer George Bracken, Executive Vice President of Procurement Edward Knecht, and Chief explanation Officer Dean McCoy.National Beverage Corp. has been able to create a winning cultur e through several key factors. First, t he company works as a whole towards strength, knowledge, and longevity of management team (NBC The Difference, 2010). Its seco nd factor is the flexibility to plan globally and act locally, this includes the process of vertical integration, hybrid distribution, and basket of beverages (NBC The Difference, 2010). The company currently employs 1,200 workers (Businessweek, 2010). Corporate Policy and Ethics Ethical conduct is vital to ensure victoryful and last ing business relationships (National Beverage Corp.Code of Ethics, 2007). National Beverage Corp. also sets high standards of ethics for all its employees, supervisors, and managers. These include the procedures for the employees to act accordingly when dealing with the following ? Conflicts of interest ? The use of entertainment, gifts, and payments Soft drink Industry 13 ? Relationships with customers or suppliers, and presidency employees ? Receipt of items by National Beverage Corp. employees ? Complete and accurate financial records as well as discourse ? The use of company assets ? workplace environmentMission and Vision Statement National Beverage Corp. continually strives to set a higher standard for value, quality, variety and mental hospital as a leader in the beverage industry (NBC The Difference, 2010). It continually positions itself as a strange beverage company with innovative ideas. Furthermore, the company places its people, products research and development, e nvironment, packaging, and consumers at its forefront to create innovative advantages for the company. VII. Alternatives Financial Objectives According to most observers, there are two strategies for achieving superior erformance in any business. One dodging is product and service differentiation the other is low -cost leadership. In National Beverage Corp.? s case, it is appropriate to suggest a low-cost leadership strategy. This method focuses on consumers? attention on product pricing, often using such slogans as everyday low prices or the lowest price in town. The goal is for the company to become the lowest cost producer in the marketplace so it can underprice the controversy, achieve the highest sales volumes, and still make a profit on each sale.This can be attained by making quantity discount purchases, having a race administrative structure, and using drudgery efficiencies from vigorous cost containment. As the business environment changes, few companies actually pursu e just one strategy. Most will attempt to implement both-developing customer loyalty while lordly costs. National Beverage Corp.? s management will now ha ve to decide to (1) improve profit margin, (2) increase asset turnover (more sales volume or fewer assets), or (3) both. In this case, it is best for management to formulate goals to increase profit margin.Profit Margin ROA and Competitive Advantage 30 25 20 15 10 5 0 NBC 0 0. 5 1 1. 5 2 Assets Turnover Soft drink Industry 2. 5 3 COKE 14 Strategic Objectives The core business from these two companies stems from the production of soft drinks. Coca-Cola has its speed of light line as National Beverage Corp. has Shasta. Unfortunately, there are many products within Nat ional Beverage Corp. that cause brand dilution. To overcome this effect, the company can shift focus back to the Shasta brand and eliminate low performing players. This will in turn, streng then Shasta and consolidate the brands that are left.Some alternatives the co mpany may want to consider are broken down into short-term and long-term. Short-term In order for Shasta to gain greater brand recognition in a short time, it is imperative that National Beverage Corp. increases its selling budget. Several possibilities to better market Shasta are ? Advertise at college sports events ? Target more local domestic stores to increase Buzz effect ? Use celebrity denote, specializedally o lder television show celebrities ? Create a new commercial that is consistent with the merchandising strategy of Shasta (example promote self-identities of consumers through favorite soft rinks) These potential market strategies all focus on strengthening Shasta? s brand image. They also allow the company to remain consistent with its overall marketing plan. Long-term Further analysis shows that Shasta? s range of consumers is very narrow. The company only distributes in four states California, Arizona, Utah, and Minnesota. Several antennaes to increase sales of S hasta are ? Distribute to more states ? Develop distributing partnerships with large retailers like Target Expanding distribution channels will boost sales of Shasta. The residual income can then be used to invest in building new production plants.Moreover, developing contracts and partnership s with large retailers like Target will ensure greater product localisation, therefore, revamp brand awareness among consumers. VIII. Recommendations Short Term Create a new commercial that is consistent with the marketing strategy of Shasta Shasta rarely advertises on TV or online. However, it does have a ordinary commercial, which aired recently, Hit in the head. Unfortunately, it is neither good nor interesting. Besides, it does not match with the company? s current marketing strategy to have consumers identify themselves with their favorite beverages.If Shasta is able to create a different admission for its advert method and follow its marketing strategy, it may be able to obtain grea ter brand recognition and market shares in the soft drink industry. Since Shasta is National Beverage Corp.? s core competency, the company should approach the consumers based on this beverage line. The best way is to create a commercial that promotes self-identity based on the flavors that Shasta offers. With the target market being very diverse, this new commercial might appeal not Soft drink Industry 15 to just different ethnic groups, but also one-year-older consumers who like to be different and unique.Long Term Develop distributing partnerships with large retailers to increase p rofit margin In 2010, National Beverage Corp. had a 66% cost of sales ratio, whereas Coca-Cola had 34. 3%. National Beverage Corp. s cost of sales was excessively high for industry? s standard therefore, was the primary cause of low profit margin. In order to increase profit margin, the company should lower its production costs by achieving larger economies of scale through building or developing dist ributing partnerships with large retailers like Target. This in turn will lower production and distribution costs.Consequently, Shasta cola brand will be availa ble to many other states and reach more consumers and markets thus, boosting revenue and total sales volume. Soft drink Industry 16 XI. Bibliography About National Beverage Corp.. (2009, January 1). National Beverage Corp.. Retrieved manifest 28, 2011, from http//www. nationalbeverage. com/10AboutNBC. htm Coca Cola Company. (2008, Feb. 28). 2007 radiation diagram 10-K. Retrieved March 29, 2011, from http//sec. gov/Archives/edgar/data/21344/000119312508041768/d10k. htm Coca Cola Company. (2011, Feb. 28). 2010 Form 10-K. Retrieved March 28, 2011, from http//ir. thecoca-colacompany. com/phoenix. zhtml? =94566&p=IROLsecToc&TOC=aHR0cDovL2lyLmludC53ZXN0 bGF3YnVzaW5lc3MuY29tL2RvY3VtZW50L3YxLzAwMDEwNDc0NjktMTEtMDAx NTA2L3RvYy9wYWdl&ListAll=1&sXBRL=1 Coca-Cola Raises Total whoop it up to 2. 5bln Yen for Japan Relief. (2011). Asia Pulse. Datamonitor. (2010, Apr. 15). National Beverage Corp Company Profile. Datamonitor Company Profiles Authority. Retrieved March 27, 2011, from http//search. ebscohost. com. lib-proxy. luxurianterton. edu/login. aspx? direct=true&db= buh&authdb=dmhco&AN=7E22BD44-DB90-4E61-AE79-F5F25D7169FB&site=bsilive Datamonitor. (2010, May 28). The Coca Cola Company Company Profile . Datamonitor Company Profiles Authority.Retrieved March 27, 2011, from http//search. ebscohost. com. lib-proxy. fullerton. edu/login. aspx? direct=true &db=buh&authdb=dmhco&AN=37CB5616-D04E-49EE-9F5CFFE75047D6FF&site=bsi-live Disclaimer/Terms of Use. (2009, January 1). National Beverage Corp.. Retrieved March 27, 2011, from http//www. nationalbeverage. com/SiteInfo. htm Events & Promotions Shasta. (2010, January 1). Shasta Beverages, Inc. Retrieved March 28, 2011, from http//www. shastapop. com/events-promotions/ Grimm, M. (2000). Drink me. American Demographics, 22(2), 62-63. market Mix (4 ps) Promotion and p romotional Strategies. (2010).Welcome to Learnmarketing. net Learn about Marketing here. Free Marketing Education, Lessons and Marketing Resources. Retrieved March 27, 2011, from http//www. learnmarketing. net/promotion. htm Mission, Vision, & Values. (2011) Retrieved April 10, 2011, from http//www. thecoca-colacompany. com/ourcompany/mission_vision_values. html National Beverage Corp. (2007, Jul. 12). 2007 Form 10-K. Retrieved March 29, 2011, from http//sec. gov/Archives/edgar/data/69891/000095014407006550/g08320e10vk. htm National Beverage Corp. (2007). National Beverage Corp. Code of Ethics. National Beverage Corp Author National Beverage Corp. 2009). The Difference Our Vision. National Beverage Corp.. Retrieved April 10, 2011, from http//www. nationalbeverage. com/32OurVision. htm National Beverage Corp. (2010, Jul. 15). 2010 Form 10-K. Retrieved March 29, 2011, from http//sec. gov/Archives/edgar/data/69891/000095012310065795/g24048e10vk. htm Soft drink Industry 17 National Be verage Corp. (2011, Jan. 21). National Beverage Corp (FIZZ). Value Line Investment Survey, p. 4633 National Geographic Channel. (2011). Ultimate Factories Web. Available from http//channel. national geographical. com/series/ultimate-factories/5151/OverviewtabVideos/09750_00 Nguyen, J. Interviewer) & Anicich, C. (Interviewee). (April 20, 2011). Shasta Target Market E-mail. Shasta Beverage, Inc. (2010). Our History. Retrieved April 17, 2011, from http//www. shastapop. com/history/ Sicher, J. (2011, March 17). Beverage-Digest. Top-10 CSD Results for 2010, 59(5), Retrieved from http//www. beverage-digest. com/pdf/top-10_2011. pdf Staff, J. (2010). Coke, Pepsi like net gains cola rivals fans on Facebook, cheep help steer, sell the brands. The Atlanta Journal-Constitution, 13A. The Coca-Cola Company. (2010). Code of Business Conduct acting with Integrity Around the Globe. Coca-Cola Company AuthorThe Coca-Cola Company (2010). Global Diversity Our Strategic Framework. Coca-Cola Company Au thor The Coca-Cola Company. (2011). The Coca-Cola Company Fact Sheet. Retrieved April 17, 2011, from http//www. thecoca-colacompany. com/ourcompany/pdf/Company_Fact_Sh eet. pdf Van Liew, NC. (2011, Jan. 28). Coca-cola (KO). Proceedings of the Value Line Reports for The Dow 30. Available from http//www3. valueline. com/dow30/f2084. pdf Wang, E. (2008). Study Coke, the most talked about brand in America. Brandweek, 49(38), 009. Wooten, A. (2011). Preserving brand strength in global markets. Deseret News, WEB. Soft drink IndustryCoca Cola AnalysisThe Coca Cola Company The company that I have chosen for my course project is the Coca Cola Company. The reason for my selection is naive, I am impressed with growth associated with Coca Cola and plan on further researching and analyzing how such growth of this magnitude is possible. The company was founded in 1886 by John Pemberton as a simple soft drink, created solely out of curiosity. John Pemberton, a pharmacist, fuse unneurotic the ca ramel flavored carbonated drink and initially starting selling it for 5 cents.Now 126 years later, Coca Cola has more than 3500 beverages, sold in over 200 countries and employ more than 146,200 employees. What instaurationed as a simple soft drink in an Atlanta pharmacy, now has a global success rate of 1. 8 billion servings per day. Product List The following product list is from research gathered covering the Coca Cola drinks of the North American Region in the United States. globally Coca Cola has over 3500 products. The products sold solely in the United States range from juices, energy drinks, soft drinks, coffees, teas, sports drinks and drink mixers.Coca Cola diverse efforts to cover every facial expression of liquid drinks, whether for sporting events or simply enjoyment, have made up a total of XXXXXX in the United States alone. The original Coca Cola product was first introduced in 1886 and distributed nationally by 1899. Today you can find your favorite Coca Cola produ ct literally anywhere in the world. Due to higher concerns for health and nutrition, in 2007 Coca Cola furnished caffeine content per serving along with already on tap(predicate) nutritionary learning. Product Lines and MixThe Coca Cola Company has 7 product lines within their beverage selection. They all fall into the non alcoholic liquid beverage sold in restaurants, stores, vending machines and distribution companies in the United States. Of the 7 product lines (see table A below), you can see that the most variety falls under the soft drink line with over XXXXX of products. Table A. Product Coca Cola Products have some of the most straightforward flavors. At times they were criticized for adding certain ingredients, such as cocoa leaves, to enhance flavor and increased desire to drink the soft drink.Today the Coca Cola products sold in stores in the United States range from carbonated exquisite drinks, to sports drinks used to fuel the body with electrolytes (See Table B. below). Coca Colas first product was actually made by mixing a fragrant, caramel flavored liquid and combined with carbonated water. (Coca Cola Co. , 2012). It became an almost instant sensation and right away Coca Cola owns some of the favorite soft drink products sold in the U. S. such as Dr. Pepper, Sprite, PowerAde, Minute Maid, and Dasani. Table B. Type of Drink Popular Soft Drinks Carbonated -flavored Coca Cola- Sprite Juices Non carbonated fruit drinks made from real fruit juice and Minute Maid Lemonade flavoring competency Drinks Energy carbonated drinks made from Ginseng and Tuarine Monster Energy Sports Drinks Combines carbohydrates with fluid for hydration POWERADE Tea / Coffee Iced Coffee and Tea Nestea Water H20 Dasani Other Drink mixers, lactic drinks, and coffee blend Bacardi Mixers Include competition and SWOT ANALYSIS here before final draft Branding Founded in 1886, the now famous brand that can be found world wide, Coca-Cola is the face to many di fferent popular brands that we find on store shelves. In the 1950s Fanta joined Coca Cola only to be followed by Sprite, Tab, Minute Maid, Mr. Pibb, and Mello Yello.In the 1980s the famous brand Diet Coke and Cherry Coke were added, and the 1990s brought about the PowerAde and Dasani era. The Coca Cola logo has remained unchanged and impressively a letter script font so simple has become globally recognized. Packaging In 2010, Coca Cola switched from The Coca Cola Management Company (TCCMS) to the Coca Cola Operating Requirements (KORE) to ensure quality, and product safety. Coca Cola holds a high standard in packaging and quality control of their operations. Coca Cola is consistently refining their efforts to maintain a high level of packaging and implementing new requirements as deemed prerequisite.Since Coca Cola is packaged globally, the KORE has implemented a set of requirements that are must be in accordance with packaging guidelines in order to protect the integrity of the p roduct wherever it may find its destination. The Coca Cola company first started bottling their product in 1894 in a now ordinarily known bottle called a Hutchinson. You can now find the product in a 6. 5oz, 10oz, 12oz. , 26oz. , bottle, pliable and aluminum containers. The product can also be found in a concentrate form. Sold in a carton box with the concentrate inside a plastic sealed bag, restaurant owners can then connect to their carbonated mixers and serve spurt drinks. Product FeaturesCoca Cola has some very unique features and on top of having a patented flavor that has literally been untouched since its debut in the late 1800s, the Coca Cola Company has now expanded its diverse taste palette to accommodate anyones preference of taste. From soft drinks, to energy drinks, you can literally find a match from a Coca Cola product. One of Coca Colas biggest product features is that you can find your favorite product shelved at a local store, anywhere in the world. A great prod uct feature is that you can purchase it in bulk or by a single unit. Labeling The Coca Cola Company provides several labels for their customers to attain facts of the beverage that they are consuming.Nutritional Facts and UPC codes can all the way be found on Coca Cola Products. Since 2007, Coca Cola began furnishing a detailed caffeine content in addition to nutritional information already provided. ( Coca Cola, 2012). As of 2008, Coca Cola began providing servings-per-container and calories-per-serving for all customers. Finally in 2009, Coca Colas packaging was formatted differently to provide an immediate visual presentation of the calorie content on front of packaging. Competition It is no secret that Pepsi Cola Company is Coca Colas direct competition. For many years we have seen the on going marketing battle of the two companies literally feuding via commercial air waves.The long battle is due in large part to Pepsis direct marketing strategy to out due or match every singl e move that Coca Cola makes. The shadow-like improvements of each mega marketing campaign have proven to be cornerstones in marketing and advertising trends that we see today. The mega moves and strategies that each company has the ability to bear with are a great tools for any company to take notes on and follow suit. Interestingly enough, Pepsi competes with Coca Cola in a different approach Coca Cola has over 3500 soft drink products and Pepsi worked its way into marketing their brands of chips, oatmeal, snacks, cereal, teas, soft drink PricingDue to the variety of sub- brands under Coca Cola, price segmentation is in place due to the different markets and global distribution pricing as well. In the United States, Coca Cola Company and Pepsi Cola have become mega players in the oligopoly market. With less competitors, and the same brand names seeking larger market share, the pricing strategy on a product that sometimes can be found for $1. 00 U. S. , is unvaried delivered prici ng. (Lamb, Hair, McDaniel, 2012). Since distribution is world wide, the companies prefer to factor in their own incumbrance and production costs, to deliver the price demand that competitors are available to offer. There is a mutual agreement when in a market such as oligopoly.The pricing strategy is still agonistic pricing strategy, due to the fact that if Coca Cola decided to lower prices, Pepsi Cola would soon follow suit to stay within the target markets price demand. It is also very realistic that when competitors raise or lower prices, the opposing players can decide not to match opposing prices as a strategic stronghold to maintain position in economic market spot. In a recent article from the News by Industry, Pepsi proclaimed a festive promotional price cut and sources close to Coca Cola said that they would not match the cut. (Pepsi to Cut, 2012) Since the beverage military commission has very little companies with a lot of buyers, the pricing strategy is competitive a nd based on competitors pricing.Pricing in this market is very elastic and companies have the ability to change pricing as they wish depending on their geographic locations. The pricing in vending machines can also vary since labor costs do not exist and can basically sell the product all day, every day. The pricing strategy on Coca Colas different product sizes is extremely strategic. Depending on where you purchase the product from, prices will vary. According to a recent poll question asked on Yahoo, how much does your Coca Cola cost where your at? , average cost on a 20oz. bottle of Coke is about $1. 25, average cost for a 2l bottle of Coke is about $1. 10, nationwide. Promotional pricing can be found regularly on 2l bottles and packages with larger per volume products.The pricing strategy is tactical and allows for consumers to feel the need to upgrade to save on price and increase volume. The most expensive form of consumer product purchase is the 5 gallon bag in box form. Thi s concentrated syrup is usually purchased by restaurants/bars industry, and can yield 30 gallons of fresh fountain product. This price also varies on your geographic location and distributor, but on average here in Texas can be purchased from Sams Club for $69. 83. (Sams, 2012) When sold in restaurants, soft drinks now sell for about $2. 00 for a 10-16oz glass, making it extremely profitable and cost effective to purchase the concentrate.On the other hand, Coca Cola benefits for simply selling the concentrate and less costly forms of packaging. emerge Since Coca Cola is one of the most popular soft drinks in the world, distribution is in high demand and in a inner circle of channels. The distribution method that is used by Coca Cola is in the Fast Moving Consumer Goods. here(predicate) the products do not rely on a long shelf life and due to the moderate and mild pricing, products are in high demand, sell at a high rate and distribution is high. Ranging from mobile vendor carts on the streets to some of the large pleasure parks such as Disneyland and 6 Flags, distribution is effective in every form.At the end of the day when added up globally, Coca Cola is at the top of the beverage consumption list. Some of the many distribution channels include the following. Mobile/ cart vendors- mobile vending can satisfy consumers conveniently at their location instead of having the consumer come to a retail store or stand. Provides easier access to consumers in special events or parks with the satisfaction of a cold beverage in any location. Vending Machines- with an occasional restocking visit, a vending machine provides an assortment of products at no labor cost. The vending machine provides product to areas that are opposed or not within walking distance to the store, accessibility and great advertising.Vending machines are favorites in schools and business lounge areas. Retail stores / grocery stores- with places such as Wal-mart, this allows for a wide array o f variety to be shelved and advertise while selling the product. Coca Cola holds contracts and agreements to provide for strategic view of their product so that the first visual product such as Coke is in plain site. Competitors products are pushed to the end of the aisles. Hotels, Restaurants, Cafe- This is by removed the largest number of consumption since restaurants and bars use a large number of soft drinks and mixers. Contracts and conferrerships with these locations provide for major distribution.Amusement Parks, Museums, Civic Centers- Areas like Disneyland and 6 Flags over Texas are the biggest types of distribution forms. Amusements Parks hold concerts and special events where the official beverage of the theme park are displayed profoundly. Within the park are restaurants and food courts that are also limited to selling the official beverage adding to the large number of distribution methods. In a recent article provided by Beverage World, Six Flags Entertainment Corp. and The Coca-Cola Company have announced a 10-year extension to their partnership agreement, designating Coca-Cola as Six Flags official beverage sponsor for all domestic parks. (Coke, six flags, 2012) With a partnership agreement of this magnitude, competition is increased due to the large number of exposure and distribution that is provided. Coca Cola has had this same contract with 6 Flags for the last 50 years. either media that is released or furnished by 6 Flags Over Texas, (i. e. twitter, Facebook, Yahoo) will automatically provide the Coca Cola-Official Drink stamp. With a consistent strategic placement in a venue such as ginormous as an amusement park, it can be said that all of Coca Cola distribution channels undoubtedly cover important areas to contribute to the 1. 8 billion serving per day in over 200 countries. Promotion conference StrategyA communication strategy is the way in which a company relays information for the products or services to reach the consumers h ands and attention. The Coca Cola Company has several strategies which it employs to reach their target market. In order to reach the mitigate target market a strategic and precise strategy must be applied. Although specific, detailed marketing information could not be obtained, in 2006 roughly $2. 6 billion dollars were used for advertising expenses in spare-time activity of reaching a solid communication strategy. In 2000, only $1. 7 billion was spent on advertising. (Coca-Cola FAQ. 2012) In my summary the amount of advertising investments paid in relation to dividends generated will be defined.According to a recent article by Forbes Magazine, The Coca Cola Company is at the top of all beverage companies, and ranked 3 among the most powerful brands in the world. Forbes Magazine also estimates Coca Colas advertising expenses at around 3. 2 billion (Badenhausen, 2012) In order to form a powerful communication strategy, the target audience must be defined. The following target mark et is what Coca Cola has found to be beneficial for the companies growth. . Young athletes- young athletes are a good source to start with. By change magnitude product awareness at a young age, you recommend taste bud recollection and a higher return. Young athletes are easier to inspire with promotional ads, billboards and authoritys from professional athletes. More of the sports drinks and water fits into this category.High School Athletes- High school athletes are constantly looking up to professional collegiate athletes. Adding the endorsement incentive to these young athletes is a primary step in increasing product consumption. Sponsorships Collegiate Athletes- here athletes are influenced by professional figures and the hopes of the Olympics. bit deals are larger here since the competition is fierce with hungry rising, mature individuals. Sponsorships Pro Athletes- Endorsements are the main source of advertising. Professional athletes are the main element of advertising an d sports drinks are seen everywhere. Young Adults- Non Athletes- Clubs, bars, and nightclubs are the focal point in order to attract this demographic.Professionals- very open form of market. basically all elements of the previous demographics factor into the professionals. This is an ongoing form of demographic that reach from the adolescent to present day professional. Large Audience- there is no specific market here as it applies to the whole general consumer base as a whole. It is the maximum exposure that creates a large audience base. Olympians- The whole universe participates in these events and are a great source of advertising. Here endorsements here are extremely valuable as athletes are in a world wide arena and competition is extremely fierce. Other- made up of all elements comprisedSales Strategies Coca Cola has several different sales strategies that have actually worked for them numbers wise. According to an article posted by The Packaging Digest in 2011, a recent s ales strategy boosted sales by 8% to 2. 2. billion world wide, and actually increased the product price by 3%. (Crocker, 2011) This is a proven method that has given results. The placement of products is strategic. When shopping for health foods, one of the most popular fruits being the bright yellow bananas, you will find Dasani , eco friendly recycled water bottles right under them. Pairing items like this is a tactic that has proven effective since 2011.Another strategy is one that Coke Zero uses to place their products in the beer section, to encourage the designated driver to consume their products. Finally, the 2 liter coke that is found in the grocery stores near the pre-cooked chicken is also a strategy to make it easier for you to grab and go. Making it easier for people to shop high-velocity is key. Vending machines and coolers with the product before check out are some of the sales strategies that Coca Cola uses to increase sales in a market of $1 products. The competiti on is actually pretty fierce for the overall beverage dollar, It requires a lot of marketing and promotional support. (Crocker, 2011) Sales ApproachIn order for a product to remain within the realm of competition it is necessary for your product to remain as fresh as it was as when you opened it. Coca Cola claims that their approach is quite simple in this feeling according to a recent article in the Forbes Magazine. Jeff Tripodi, CMO of Coca Cola, claims that their strategy is innovation. (Dan, 2012) Having a state of the art dispensing machine will increase sales, further connecting with your consumers will also increase your chances at success. One of the recent forms of innovation are the Freestyle dispensing machines that can pour 125 different beverages with a complete(a) pour each time. Building a strong cultural link with your geographic area you plan on promoting to is a huge electropositive in improving overall sales.In order to promote sales a great promotional mix is required to ensure that all advertising expenses are maximized and yield awesome results. The following is promotional mix that includes all of the avenues thru which sales are promoted. Promotional Mix Advertising- commercials, billboards, visual advertisments, vending machines Sales Promotion- Battle of Bands, My Coke Rewards Personal Selling- Coca Cola Representatives Social Media- Facebook, Twitter Communication Channels / Media A recent article on Coca Colas webpage, March 27, 2012, announced the acceptance speech of the companies induction to the Advertising foyer of Fame. With over 120 years in the beverage business, there is no doubt that Coca Cola has held some very important marketing campaigns.Their first campaign came in the 1920s, with The Pause That Refreshes, then with Things Go damp With a Coke in the 1960s, and present day Open comfort. Today over 845 million people are connected to Coca Cola via Facebook, 6 billion cell phone subscriptions, and 2. 5 million con nected regularly via the webpage. (Remarks in acceptance, 2012) In order for these communication channels and effective marketing efforts to be maximized, a diverse array of marketing efforts are taken into account in the following channels. Promotional Tasks Internet Sporting Events Billboards TV Advertising Press Concerts Sales Promos Promotional SWOT Analysis SWOT Positive Negative Strengths Weakness Internal Globally recognized Product shipment could be damaged Established distribution Recalled products costly Established Market shares Endorsements could cost face of the company with a Brand identity simple mistake Opportunity Threats unlimited partnerships Pepsi is the biggest competitor External unlimited new product offerings the product is inexpensive and slowly lose consumers to globally recognized brand competitors offer beverages for all carbonated or un. the caffeine and diet craze could prove costly. Conclusion to Promotional Analysis The Coca Cola C ompany deals with promotional aspect of their business on a mass communication level. The company usually doesnt know the type of people with whom they are trying to communicate with but rather who their target market is.Careful management of this delicate area can ensure that messages are being met and no clutter of message or mixed signals occurs. The promotional campaigns that the Coca Cola Company is operating grew 20% to 10. 2 billion dollar in the year 2011 so that you can declare that it is extremely effective and does work. The Coca Cola Company is equal by everyone who drinks it and when they do, they are literally providing advertising with a profit rather than at an expense. Coca Cola originated in the U. S. A. and has built a brand that has represented many countries during the Olympics. For that reason Coca Cola has had a successful and rich lifespan.They have allowed the people that drink the product the opportunity to share in many of its triumphs during the Olympi cs and built a brand that is represented by the people who enjoy Coca Cola. 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