Pepsi as an Oligopoly Market Product

Only available on StudyMode
  • Download(s) : 620
  • Published : March 10, 2012
Open Document
Text Preview
1.1 Introduction
Market is a particular products and services to be exchanged between a significant group of buyer and sellers for a price for market benefit. There are mainly two types of market.

1. Perfect or Pure Competition Market
2. Imperfect Competition Market
a) Monopoly Market
b) Oligopoly Market
c) Monopolistic market
d) Duopoly market
e) Monopsony Market

Among those markets we have chosen oligopoly market for our report. An oligopoly the domination of a market by a few firms & a duopoly is a simple form of oligopoly in which only two firms dominate a market. Where an oligopoly exists, a few large suppliers dominate the market resulting in a high degree of market concentration; a large percentage of the market is taken by the few leading firms. An oligopoly usual depends on high barriers to entry. It often leads to a lack of price competition (although there may be fierce competition in terms of marketing etc) which is the problem from the point of view of consumers. Because an oligopoly consists of a few firms, they are usually very much aware of each others' actions (e.g. changes to prices). This can lead to informal collusion as firms match prices to avoid provoking a price war. This has a similar effect to deliberate collusion, but is harder for regulators to control. This also means that when price cuts do occur, the market tends to have to follow the lead of any one firm. This leads to each firm experiencing a peculiar demand curve, the so-called kinked demand curve. An oligopolist faces a downward sloping demand curve but its price elasticity may depend on the reaction of rivals to changes in price and output. Assuming that firms are attempting to maintain a high level of profits and their market shares. •Competitors will not follow a price increase by one firm, so a firm that raises prices will lose market share and therefore profits. •Competitors have to match a price cut by one firm to avoid a loss of market share. That means that if one firm cuts prices, all will have lower profits. This means that the demand curve for the oligopolist is not straight. It is flatter above the current price, with a sudden change of slope at the current price. This means that an oligopolist usually has little incentive to change its prices. It may cut prices where there are prospects of market share gains (i.e. when its rivals will not follow). It may increase prices if it feels sure that competitors will follow (or when the margin increase is sufficient to make up for the large loss in market share). Prices in an oligopoly therefore tend to be higher and change less than under perfect competition. Examples of oligopolies may include the markets for petrol in the UK (BP, Shell and a few other firms) and soft drinks (such as Coke, Pepsi, and Cadbury-Schweppes).

1.2 Methodology and Source of Data
To report on PepsiCo Ltd. we have maintained some formalities. We visited the corporate office of PepsiCo Ltd. in October 23, 2011 to collect data about PepsiCo Ltd. They have provided some data about their functional management and business policy but that was not sufficient enough to prepare the report. We have collected other data about them from the corporate website of PepsiCo Ltd. and mainly prepared the report with our own effort.

1.3 Objective of the Study
Our objective of the study is to discuss the marketing objective and strategies of PepsiCo Limited in our country as an oligopoly product. We have also analyzed the position of Pepsi in the soft drink market of Bangladesh. This is done in order to minimize the gap between the textbook knowledge and real life practices.

1.4 Limitations
We have prepared a report on PepsiCo Ltd. as an oligopoly product in Bangladeshi market. We have focused different sites of PepsiCo Ltd. and mainly the marketing process of PepsiCo ltd. But we have some limitations too. We think we failed to focus the pin point of PepsiCo ltd. Lack of information. They...
tracking img