Question

I need question 3 writing 3/4 of a page of information.

CHAPTER9 Market Structure Oligopoly 249 petition between Kodak and Xerox is Kodak had not tried to enter The stations with little estra cost. The supermarket tiles may also help Nestle enter grocers' competi- s office market for a while, but it has troduced color inkget multifunction devices that eam print 22 color pages a minute, fast enough to etract some of the small-business offices that Xerox also targets tive prepared-foods section, so that consumers can easily purchase ice cream along with their deli and hot foods. Nestle agreed to sell a number of Dreyer's secondary brands as part of the FTC approval. However, Nestle-Dreyer's will be able to how the oligopoly models presented in this Discuer apply to the behavior of Xerox and Kodak more licensing agreements with the wider distribution network, and the combined company cribes the ice cream industry in will be able to turn more of Nestle's candies into a. Describe how the ice cream industry fits the b. How does the government influence oligopolis- c. Do oligopolists always compete on the basis of Dreyer's ice cream civen the Federal Trade Commission's approval of Nestle's acquisition of Dreyer's Grand Ice Cream two multinationals, Nestle SA and Unilever, oligopoly model. tie behavior? price? Explain. oh to engage in ice cream wars. are id Unilever, which controls the Good Humor,Ben & Jerry's, and Breyer's brands, holds 17 percent of the U.S. market, while Nestle, owner of the 4. The following describes the toothpaste market in fall 2003:5 aagen-Dazs and Drumstick brands, will control a similar share after buying Dreyer's. Ice cream has long been produced by small local dairies, given the problems with distribution. Most Americans eat ice cream in restaurants and stores, although 80 percent of the consumption of the big national brands occurs at home. Both Unilever and Nestle want to move into the away from-home market by focusing on convenience stores, gas stations, video shops, and vending machines, a strategy the rivals have already undertaken in Europe. In fall 2003, Procter &Gamble Co. [P&G] launched an $80 million marketing campaign to promote a new Crest product, Whitening Expressions. P&G is trying to regain market share from Colgate- Palmolive Co. While Crest had success with its battery-operated toothbrushes and Whitestrips, the at-home tooth-whitening kits, it trailed Colgate in the toothpaste market with a 23 versus a 27 percent market share. Colgate achieved the highest market share in 1998 when it introduced its Total toothpaste, which promised to fight gum disease and whiten teeth. This battle has pushed other competitors out of the market. Unilever recently gave up its toothpaste business, selling its Close-Up and Mentadent brands. Five national brands-Haagen-Dazs, Nestle, Ben& Jerry's, Breyer's, and Dreyer's-are developing new products and flavors, focusing on sin serving products that carry profit margins 15 to 25 percent higher than the tubs of ice cream in supermarkets. The higher profit margins can open new distribution outlets. Although traditional freezer space is very costly, Unilever, Nestle, and Dreyer's have been pushing for logo-covered Colgate is also introducing new products including different children's toothpastes and a new Total- Colgate Total Advanced Fresh Toothpaste. Both companies face the challenge of trying to get con- sumers to buy more of a product they use regulary already. They are focusing on characteristics such as beauty and taste. P&G is using celebrity chef freezer cabinets in stores, given the higher proft margins Under the FTC settlement, Nestle will be allowed to keep Dreyer's distribution network which delivers ice cream directly to more than 85 percent of U.S. grocers. Unilever must use Emeril Lagasse to promote Whitening Expressions In focus groups, it also put microchips into toothbrushes and found that consumers brushed 20 percent longer with Whitening Expressions tharn with regular Crest. Research also showed that two new flavors, citrus and cinnamon, appealed to the Hispanic and African-American communities where Crest had lagged behind Colgate. middlemen to deliver most of its Good Humor and Breyer's products. Nestle can expand from Dreyer's supermarket base to cinemas and gas ssSarah Elin, Crest Sp es Up To Wall Street Journal, September 15, 2003. luas e war with New Tam," Deborah Ball, ฯ eCrean Rivals Prepare to wage a New Cold war, Wall Street Journal, June 26,2003 34

Answer 1

3a)Oligopoly market is one where small number of multinationals dominate the market. Their products are homogeneous or differentiated.In an oligopolistic market only two large companies compete for market share. Each firm keeps close watch on the other and always tries to have advantage over the other.The ice cream industry fits the oligopoly model because two multinationals ,Nestle and Unilever occupies about 34% of the market. Further these two companies are interdependent.

b) By allowing Nestle to purchase Dreyer's Grand ice cream, the government has influenced oligopolistic behaviour. Also   the market power of Nestle was increased by the government to be at par with that of Unilever.Nestle was allowed to retain Dreyer's distribution network by Federal Trade Commission but at the same time ,FTC compelled Nestle to sell a number of secondary brands  belonging to Dreyer. However this step proved to be beneficial to Nestle.

c) Even though both the companies compete on price,it is not always mentioned that the basis of competition is price.Rather it is focussed that both the   firms try to take over away-from-home ice cream market which are located in gas stations, video shops etc.Price is one important factor of competition but apart from price the ice cream industry's competition strategy involves its distribution network,accessibility to super markets etc.Both Nestle and Unilever are trying to make new single serving products as these products carry higher profit margin.To make more profit, Nestle is also making effort to change its candies into different ice cream flavours.