Explain in what ways Pepsi and Coke exhibit interdependence in the soft drink ma
ID: 1223798 • Letter: E
Question
Explain in what ways Pepsi and Coke exhibit interdependence in the soft drink market. This market structure has a number of defining characteristics.The purpose of this discussion is to provide evidence, or disclaimers, that (1) Pepsi is part of an oligopoly, and that (2) as such, Pepsi determines its marketing strategy by closely studying the strategy of Coca Cola Explain in what ways Pepsi and Coke exhibit interdependence in the soft drink market. This market structure has a number of defining characteristics.
The purpose of this discussion is to provide evidence, or disclaimers, that (1) Pepsi is part of an oligopoly, and that (2) as such, Pepsi determines its marketing strategy by closely studying the strategy of Coca Cola
The purpose of this discussion is to provide evidence, or disclaimers, that (1) Pepsi is part of an oligopoly, and that (2) as such, Pepsi determines its marketing strategy by closely studying the strategy of Coca Cola
Explanation / Answer
In the carbonated cola market, there are two giants existing , Coca-Cola and Pepsi . Coke and Pepsi are selling cola drinks with similar taste and color, thus they are perfect substitutes. The market is dominated by these two leaders with a total market share of 70%
In an oligopolistic set up, companies are mutually interdependent, where the profit gained depends not only on the prices but on the other firms . Coke and Pepsi have to consider the reaction of each other when one of them wants to make a move. For instance, if Coke cuts its price, it will capture more customers from Pepsi and Pepsi lose profits, Coke has to keep in mind about Pepsi’s reaction against the price change
Rather than going in for price cuts, oligopolists tend to have non-price competition. Both the firms will invest a lot on extensive advertising to differentiate their products and gain higher sales. Coke and Pepsi have created high barriers to entry in the market. In oligopoly, the smaller the number of producers, the more tough for new rivals to enter the market.
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