Oligopolist Swot Analysis

6. Advertising:

Advertising is commonly used by firms operating under monopolistic competition as a way to create product differentiation and thus to acquire some degree of market control and thus charge a higher price.

Advertising is information provided by a company about its product or operation, usually through media such as television, radio, newspapers, magazines, and the Internet, to promote or maintain sales, revenue, and profit.

Advertising is frequently used by monopolistic competition to accomplish two related goals i.e. ‘product differentiation’ and ‘market control’. To the extent that a firm can inform buyers about physical differences or create the perception of such differences, then product differentiation increases.

6.1 Product Differentiation:

Monopolistic competition cannot exist unless there is at least a

A price reduction may achieve strategic benefits, such as gaining market share, or deterring entry, but the danger is that rivals will simply reduce their prices in response.

This leads to little or no gain, but can lead to falling revenues and profits. Hence, a far more beneficial strategy may be to undertake non-price competition.

Pricing strategies of oligopolies

Oligopolies may pursue the following pricing strategies:

Oligopolists may use predatory pricing to force rivals out of the market. This means keeping price artificially low, and often below the full cost of production.

They may also operate a limit-pricing strategy to deter entrants, which is also called entry forestalling price.

Oligopolists may collude with rivals and raise price together, but this may attract new entrants.

Cost-plus pricing is a straightforward pricing method, where a firm sets a price by calculating average production costs and then adding a fixed mark-up to achieve a desired profit level. Cost-plus pricing is also called rule of thumb