Inc. is one of the world’s top consumer product companies with many of the
world’s most important and valuable trademarks. Its Pepsi-Cola Company division
incorporated in the United States of America in 1898 is the second largest soft
drink business in the world, with a 21 percent share of the carbonated soft
drink market worldwide. It Contains 18 brands and 163 varieties.
Types of product of Pepsico.Inc
In the carbonated soft drinks
industry, when we confine to the cola market there are still a number of cola
sellers in the market but Coca-cola and Pepsi-cola seems to be the dinosaurs
that capture majority of the market shares, thus they are known as oligopolists.They
might seem like identical companies since they dominate the global soda
industry. These Two
companies have been competing powerfully against each other for decades.
They are selling cola drinks with similar
taste and color, Hence they are perfect substitutes. The market is conquered by
these two industry leaders with a total market share of 72%.
Coke’s market share is 42% and
Pepsi’s 30% ( (Russell, 2012)
This is known as an oligopoly market;
where there are a small number of large firms competing with each other in the
industry (McConnell et al., 2009).
Demand and supply trend of Pepsico.Inc
Since Pepsi are perfect substitutes,
the price elasticity of demand should be perfectly elastic. Rival firms within
the oligopolistic industry, firms are mutual interdependence, where the profit
gained is depending not only on the prices but on the other firms (McConnell et
The assumption is that firms in an
oligopoly are looking to protect and
maintain Pepsi-cola market share and that rival firms are unlikely to match another’s price increase but may match a price fall. If Pepsi-cola raises
price and others leave their prices constant, then we can expect quite a large substitution effect making demand relatively price elastic.
Pepsi-cola would then lose market share and expect to see a fall in its total revenue.
They have to consider the reaction of each other when one of them wants to make
a move. They are both engaging in strategic behavior, where both of them have
to think before making a move and be aware of the reactions of another that
might affect the company’s profitability.