Two Companies: Coca Cola and Exxon Mobil

Coca Cola

The Coca-Cola company started 110 years ago as a small, insignificant one-man business. Since then, it has grown into one of the largest companies in the world. The first chairman of the company was Dr. John Pemberton, and the current chairman is Muhtar Kent. The demand for this product has made this company into a 50-billion-dollar business.

Coca-Cola was invented by Dr. John Pemberton, an Atlanta pharmacist. He concocted the formula in a three-legged brass kettle in his backyard on May 8, 1886, by mixing lime, cinnamon, coca leaves, and the seeds of a Brazilian shrub. Coca-Cola, as he called the beverage, made its debut in Atlanta's largest pharmacy, Jacob's Pharmacy, as a five cent non- carbonated drink. Later, carbonated water was added to the syrup to make the beverage that we know today.

Coca-Cola was named by Frank Robinson, one of Pemberton's close friends. Dr. John Pemberton sold a portion of the Coca-Cola company to Asa Candler. He was forced to sell because he was in a state of poor health and was in debt.

In time, Candler acquired the whole company for $2,300. Candler achieved a lot during his time as owner of the company. On January 31, 1893, the famous Coca-Cola formula was patented.

Candler aggressively advertised Coca-Cola in newspapers and on billboards. In the newspapers, he would give away coupons for a free Coke at any fountain. Coca-Cola was sold after a while to Ernest Woodruff for 25 million dollars. He gave Coca-Cola to his son, Robert Woodruff, who would be president for six decades.

Woodruff introduced the six-bottle carton in 1923. He also made Coca-Cola available through vending machines in 1929. That same year, the Coca- Cola bell glass was made available. He started advertising on the radio in the 1930s and on television in 1950.

Currently Coca-Cola is advertised on over five hundred TV channels around the world. The best-known trademark in the world is sold in about one hundred and forty countries to 5.8 billion people in eighty different languages. This is why Coca-Cola is the largest soft drink company in the world. Coca-Cola is worth more than 58 billion dollars on the stock market.

For more than 65 years, Coca-Cola has been a sponsor of the Olympics. One way to see all of the achievements of the Coca- Cola company is to visit the World of Coke in Atlanta. It houses a collection of memorabilia, samples of the products, exhibits, and many other exciting items.

Cost of production of coke is very low because it is nothing, but water mixed with some sweetener and some secret inexpensive ingredients. Demand for coke is growing. Rich and poor, young, and old, everyone likes Coca Cola.

Exxon Mobil Corporation

Over the last 125 years Exxon Mobil has evolved from a regional marketer of kerosene in the U.S. to the largest publicly traded petroleum and petrochemical enterprise in the world. Today it operates in most of the world's countries and is best known by the familiar brand names: Exxon, Esso and Mobil. The company makes the products that drive modern transportation, power cities, lubricate industry and provide petrochemical building blocks that lead to thousands of consumer goods.

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products. The company manufactures and markets petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and other specialty products. It also has interests in electric power generation facilities. As of December 31, 2011, the company operated 37,692 gross and 31,683 net operated wells. Exxon Mobil Corporation has a strategic agreement with the Rosneft Oil Company for investment into oil and gas fields in the Russian Federation. The company has operations in the United States, Canada, South America, Europe, Africa, Asia, and Australia/Oceania. Exxon Mobil Corporation was incorporated in 1882 and is based in Irving, Texas.

Finding, drilling, refining, shipping and selling to customers all contribute to the cost of petrol. Petrol is costly to produce and supply.

Petrol is the main product that Exxon Mobil markets throughout the world. Petrol is used by cars, trucks, tractors, ships, planes, and many other vehicles. Petrol is also used to run many mills and factories. In addition, petrol is used in many power plants to generate electricity. Petrol is very important for the modern world. We know that we have limited supplies of petrol and one day we shall run out of petrol. Yet, we pay the same price for a liter of petrol as we pay for a liter of coca cola.

As far as demand for petrol goes most of the petrol is used to run the cars. To own and run a car there are some restrictions. A car driver must be an adult and must have a driving license. Petrol is also sold from specially designed petrol pumps which are costly to build and operate. In contrast, Coke is sold everywhere and can be bought by anyone. One does not have to be an adult or owner of a car to buy coke.

Questions:

1.What is the price elasticity of demand for petrol? Is it elastic or inelastic? How about Carbonated drink? Explain.

2. What is the Income Elasticity of demand for Carbonated drink and Petrol? Which one has the higher income elasticity?

3. What is the cross-price elasticity of demand between Coke and Pepsi?

4. What is the Cross Price Elasticity between Carbonated drink and Petrol?

5. Compare these two companies and which one has a higher fixed cost?

6. Which one advertises more and why?

7. Which business is a better business and if you are going to invest in stocks of these companies which one would you prefer and why? You will be investing for a very long time; you must take this into consideration.