Economics Assignment: Analysis of Nexba's Market Strategy in Australia

This economics assignment delves into the dynamics of the Australian soft drink market, characterized by oligopolistic competition. The report examines the strategies employed by Nexba, a soft drink company, to gain market share and achieve success. It analyzes the market structure, competitive landscape, and Nexba's approach to non-price competition, such as product differentiation and health-focused marketing, to overcome challenges posed by larger multinational corporations. The assignment highlights how Nexba strategically entered the market with healthier alternatives, navigating the complexities of the oligopoly and achieving sustainable growth. The report references the article "Nexba's expansion into the soft drink industry" and uses economic frameworks to interpret market behavior, including the concepts of market structure, demand, and supply dynamics, and the implications of price wars versus non-price competition in an oligopolistic setting. The conclusion emphasizes the importance of aligning business strategies with market characteristics for long-term success and profitability, positioning Nexba as a case study of effective market entry and strategic decision-making.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Article Summary........................................................................................................................3
Interpretation in the light of conceptual framework of economics............................................4
Oligopoly Market: Soft drink market in Australia.................................................................4
Strategy of Nexba...................................................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................8

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Introduction
The global business environment has changed immensely over the last few decades.
much of which can be attributed to the changes and the dynamics in the global economic
scenario. Events of international importance like that of Globalization, technological
revolutions, infrastructural development and trade liberalization in all parts of the world, has
led to the creation of a globally connected, more integrated, inclusive and complex business
environment, with increasing demand as well as supply side players in almost all the
industries across all parts of the world (Belz and Peattie 2012).
Due to the increasing number of businesses going global, the industries in all
countries experience severe competitive trends attributed to the increasing number of
suppliers, both domestic as well as international. The level of competition however varies
across different types of markets, depending upon the market size, number of sellers and
buyers, the product or service dealt with in the market as well as the market power of the
sellers and buyers and the barriers of entry and exit which are present in the market. The
business strategies are also designed by the sellers in a market accordingly (Patel, Pieper and
Hair Jr 2012). These are all part of the conceptual framework of “Market” in economics.
Keeping the above discussion into consideration, the concerned report tries to analyse
and interpret the market dynamics in the soft-drink industry of one of the globally dominant
economies, Australia. It also takes into account the performance and strategies taken by one
of the famous soft drink brand, Nexba, in the soft-drink market of Australia and highlights
the strategic moves which have led the company to success. For doing the same, the report
refers to the article, “Nexba's expansion into the soft drink industry” (Sbs.com.au 2018).

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Article Summary
The article, as a whole talk about the slow and steady growth of the concerned
company Nexba in the Australian market of soft drinks. As per the assertions of the article,
the company, which started at a very infant and family level grew slowly, crossing one hurdle
after another, much due to the correct decisions taken by the founders of the same.
The owners did a just job in setting up their own factory and also in differentiating
their products from the rest of the products as being one with healthier attributes. The fact
that the company sells naturally low sugar ice tea, helped the company to slowly gain
popularity among the increasingly health conscious population of Australia
(Foodmag.com.au 2018). With time Nexba diversified their products and also launched many
other soft drinks in the market of Australia. As per the perceptions of the owners of the
company, the Australian soft-drink market being dominated by big multinational companies
with huge capital strength and market power, directly starting with a same type of soft drink
could have made their company face impossibly tough competition from those multinational
giants, for which they infiltrated the market with a product different and healthier.
As per the assertions of the article, the above-mentioned game strategy of the
company concerned has helped the same immensely in terms of market penetration, increase
in clientele, sustainability and long-term profitability as Nexba can be seen to hit the shelves
of nearly all the premium supermarkets of Australia and is also on the verge of infiltrating the
markets of another globally influencing economy and one of the largest global markets, the
USA (Australia 2015). The company has always maintained their integrity and stand on
selling drinks with no sugar, thereby winning on the health quotient, as can be seen to be
discussed by the concerned article.

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Interpretation in the light of conceptual framework of economics
To understand the success of Nexba and its strategies, it is of utmost importance to
understand the notion of market. “Market”, in economics is that platform of interaction
between the demand side players and the supply side players, where the decisions regarding
quantity and price of different goods and services are taken based on the demand supply
dynamics (Baumol and Blinder 2015). In the theoretical framework of economics, markets
are of different types, the primary types being that of perfect competition, oligopoly,
monopolistic competition and monopoly. In this context, the market for soft drinks in
Australia can be termed as one with considerable oligopolistic trend.
Oligopoly Market: Soft drink market in Australia
An oligopoly market, in general, is characterized by the presence of many buyers and
a few generals (not more than 20), which in turn implies that each of the sellers enjoy a
considerable share of the market, thereby creating huge entry barriers for other players,
especially new ones. The products sold are differentiated usually and the profits of one seller
depends on the actions of the other.
Figure 1: Market share of soft drinks in Australia
(Source: Roymorgan.com 2018)

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As can be seen from the above figure, there are a few companies which enjoy huge market
power in Australian soft drink market, thereby giving it an oligopolistic trait.
Strategy of Nexba
Given such an oligopolistic trait in the market, Nexba had two options for competing
with the big names- price war or non-price competition. Price war in oligopolistic market,
though bwig quite popular, however, often leads the competing companies to sub-optimal
outcomes as can be seen from the kinked demand curve:
Figure 2: Oligopoly price war and kinked demand curve
(Source: As created by the author)
In such situations, a price cut by one of the competitors is followed by same strategy
by others but not vice versa (Baumol and Blinder 2015). This decreases the profit of the
competitors, landing them in a worse off position. Taking this strategy could have been thus
detrimental for Nexba as the company had high chances to lose against the big ones enjoying
economies of scale and cost efficiency.

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Thus, the company avoided this and infiltered in the market by non-price competition,
where they advertised the difference of their healthier and no-sugar products, which attracted
an increasing share of population of the country, given the fact that with increased awareness
of diabetes, many people have been opting for a healthier life-style (Nicholson and Snyder
2014).
Figure 3: More profit in non-price competition
(Source: As created by the author)
This in turn has helped the company to earn slow but steady increase in its revenue,
profit and market share in Australia.
Conclusion
From the above discussion, it is evident that the strategies taken by different types of
businesses in order to make their mark in their industry and to earn profitability and long-
term sustainability, are of huge importance and should be aligned with the kind of market
they are venturing in. In this context, Nexba can be termed as a considerably successful

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company, which took the right steps and right decisions of product diversification,
advertisement and non-price competition to infiltrate and sustain in the oligopolistic soft
drink market in Australia.

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References
Australia, A.S., 2015. Contemporary business strategies and learning models in the agrifood
industry.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Cengage
Learning.
Belz, F.M. and Peattie, K., 2012. Sustainability marketing: A global perspective.
Foodmag.com.au (2018). Nexba launches low sugar soft drinks - Food & Beverage. [online]
Food & Beverage. Available at: https://foodmag.com.au/nexba-launches-low-sugar-soft-
drinks/ [Accessed 11 May 2018].
Nicholson, W. and Snyder, C.M., 2014. Intermediate microeconomics and its application.
Cengage Learning.
Patel, V.K., Pieper, T.M. and Hair Jr, J.F., 2012. The global family business: Challenges and
drivers for cross-border growth. Business horizons, 55(3), pp.231-239.
Roymorgan.com (2018). Cola is king in Australia, New Zealand and Indonesia. [online] Roy
Morgan. Available at: http://www.roymorgan.com/findings/6169-cola-king-aust-nz-indo-
201504130100 [Accessed 11 May 2018].
Sbs.com.au (2018). Nexba's expansion into the soft drink industry. [online] Sbs.com.au.
Available at: https://www.sbs.com.au/news/small-business-secrets/article/2016/10/17/nexbas-
expansion-soft-drink-industry [Accessed 11 May 2018].