Insight on the single serve espresso world

          For this blog entry I’ve decided to write about the new marketing and expansion ploys of the Nespresso division of Nestle which were described in the article, “Nespresso Coffee Develops a Taste for TV” in The New York Times.  This company sells personal espresso makers worldwide.  A recently emerging trend in the past few years has been personal coffee makers with brands such as Keurig and Tassimo dominating the market.  Nespresso is showing a form of horizontal differentiation in this market with their espresso, as opposed to coffee, makers.  Nespresso will be targeting the same crowd as their American competitors, but with the increasing sales of personal coffee makers and the differentiation they are exhibiting, they shouldn’t run into too much trouble. Another interesting aspect of the small kitchen appliance world is that television advertising, which Nespresso is planning, is not a common occurrence.  This can be seen in that from 2007 to 2011, the only year in which Keurig advertised on television was last year.  Until now Nespresso has run some ads in regional newspapers and magazines, but nothing as extreme as they are planning, as they put it, they must change their advertising techniques “to address increasing consumer demand, which we have been getting across the nation.”

The News on Solar Panels

          There are many ways to acquire electricity these days whether it’s nuclear power plants, burning fossil fuels, or harnessing the elements.  Nuclear power plants can be dangerous, fossil fuels burn unclean and are a finite resource, but how about the sun? Not only is solar energy free once it is set up, the government will allow a tax deduction of up to thirty percent of your installation costs, and it has no negative externalities such as many other energy sources, that is, unless you are part of a homeowners association.   The article from the Buffalo News, “Casting a Panel on Home Solar Panels” highlights some of these problems.  In some states homeowners associations are forcing residents to take down their solar panels because according to these neighborhood officials to the north of Atlanta, “the panels would look out of place and might lower home values.”  Around two dozen states have taken action against this and are outlawing homeowners associations from forbidding solar panels.  For example, Texas adopted a law that prevents homeowners associations from totally blocking these panels, residents can install panels on roofs or in fenced in areas.  This prevents the negative externality of having to see these panels, but still allows for them to be installed.

The Uprising of Natural Gas

            This article, “Growing natural gas supply to fuel jobs,” from USA Today, discusses some of the effects using natural gas could have on our country.  I have always heard the negative externalities of using natural gas such as those from hydrofracking, but it also has positive aspects that outweigh the negatives.

            My last blog entry was about some of the negative externalities we come across from using coal as our main source of energy.  It does not burn clean, pollutes our environment, and is blamed for global warming.  The main negative externality I’ve heard about natural gas is that it can take its toll on the land it is taken from because of hydrofracking.  But, according to this article, using natural gas can promote saving money because of its cheaper prices, and can fuel a boom of created jobs in the manufacturing industry.  This makes me think that if you take both benefits experienced, and negative externalities incurred by coal and natural gas, natural gas is the way to go.  If enough of our attention shifts to natural gas, it could cause a boom in the manufacturing business regarding chemicals, steel, and agriculture.

Limiting Coal Plants Pollutants

                This blog entry is about the USA Today article “Rule means coal plants must limit pollutants.”  It discusses the new limits President Obama is putting on carbon pollution that coal using power plants can release into our atmosphere.  It also discusses some of the effects this could have on the coal industry.

                Carbon emissions from coal are said to be a large part in the global warming scare.  If there is too much in the environment it can also be bad for humans.  Because the action of burning coal affects others in a negative way it is said to have negative externalities.  Normally these externalities can be worked out between the parties involved assuming property lines are well drawn out, and transaction costs aren’t too high, but in this case the 3^rd party is too large, and the individual effects are too small.  Because it involves so many people in a small way, nobody would take action against it, so this is an example where government interaction would be beneficial.

                These regulations could have the exact outcome they want, but not necessarily in the way they wanted.  These regulations would push up prices for power plants and could make it harder to conduct business, which could shut some of them down, which would decrease coal burned, and push producers towards coal substitute goods, such as natural gas.  It would also decrease the amount of emissions from existing ones through better carbon pollution capturing equipment.

Trends in auto makers

This entry is on the USA Today article “Buyers Find Fewer Cars Made to order.”  It discusses some of the newer trends in the automobile manufacturing industry.  The main point of this article is to point out the effects of some automakers decreasing the amount of customized packages of trim levels and options available.  It has both benefits and cons for the producers and consumers.

For producers, cutting the amount of customizability of the options for their cars can simplify production and inventory planning, but it can also discourage consumers from buying packages.  Because cars are made in assembly lines, less customization means less variance from making one car to the other.  This decreases costs of production.  But, because there is less customization available, this could discourage consumers from buying packages because they may want one thing, but not the others in the package.  This could decrease the demand for trim levels and options.

For consumers, less customization could mean lower prices, but it could also force them to purchase unwanted options with the wanted ones.  Because less customization lowers costs of production, it could lower prices which would increase the demand.  But, because it is more difficult to get a package with only the perks you want, it would decrease the demand for packages.

I think these changes will build a stronger auto making economy, and overall the demand for trim level and option packages will increase.

A look into Germany's economy

This post is about the recent article from the New York Times, "In Germany, Exports Mask Economic Weaknesses."  This article highlights some of the strong and weak points of the German economy.  The two main points that I will be focusing on are the how Germany relies on exports and what effects it has, and how government regulations and interference in their service sectors are creating a less than optimal business environment.

Exporting is a crucial factor in today's business world.  It allows for increased domestic producer surplus to those who export and increased consumer surplus to those who import.  According to this article, Germany's main strength is that their exports of such things such as automobiles and other machines.  Being an "export juggernaut" could keep any economy afloat, because it significantly increases the producer surplus of those who export than if they weren’t.  But, relying mainly on exports can leave a countries economy vulnerable to ups and downs in other major markets.

For this reason, Germany should try to improve the state of their current services economy.  The regulations they currently have in place, although better than in the past, still hurt their country.  An excellent example of this in the article is a man trying to keep his flower shop open on mother’s day from 9 a.m. to 4 p.m.  Because it was a Sunday, he could not do this and had to keep his shop open for fewer hours.  This would result in lost sales, which would leave the amount that he wanted to sell, and the amount consumers wanted to purchase unequal.  This keeps that market from reaching equilibrium and creates deadweight loss.

According to the article, if Germany removed these barriers to competition and other inefficiencies, they could add about ten percent to growth.  This would help their overall economy and better protect them from the flaws of primarily relying on exports.

Coffee Around the World

This post is about the New York Times article, "After a Year of Delays, the First Starbucks is to Open in Tea-Loving India this Fall."  This article discusses some of the pros and cons of Stabucks' desicion to bring their franchise to India.  Although I am not an expert in international coffe franchises, this article posed some interesting insight in the topic of microeconomic advantages and disadvantages involving the supply and demand curves related to the products these cafe franchises sell.  The topics this article can be related to for demand are taste, market size, and price of related goods.

Regarding taste, in the Unites States, it seems that Starbucks primarily focuses on coffee and coffee like products.  But, as stated in the article, India is primarily a country of tea drinkers whose current population prefers "cold sweet milkshakes, teas and other beverages to traditional coffee."  This would make one think that in order for starbuck to increase the demand for their products they would primarily focus on these types of drinks.

The second thing affecting demand in India is the market size.  According to this article, India has "experienced an explosion in cafes and restaurants over the last decade because of its growing middle class and a large youth population."  This increase in market size would push the demand curve for cafe products to the right, and would make this a good time for Starbucks to open stores in India.

A third and final aspect of demand touched upon by this article is the price of related goods.  It appears that Starbucks will be attempting to reach a different market than most of its soon to be competitors in India.  But, will this approach work?  Although India's market is growing it still may not be growing enough to purchase products from Starbucks.  A cafe chain in India called Cafe Coffee Day typically sells a cappuccino for roughly one dollar.  The real question is that will the quantity demanded for "premium" coffee, tea, and food be enough for this franchise to thrive in a new market.

Overall, Starbuck's decision to move stores to India seems justified as long as they shift to a more India friendly menu, get in the market soon before the supply grows to meet the increasing demand, and possibly sell a less expensive product.