PepsiCo,Inc. is one of the world’s top consumer product companies with many of theworld’s most important and valuable trademarks. Its Pepsi-Cola Company divisionincorporated in the United States of America in 1898 is the second largest softdrink business in the world, with a 21 percent share of the carbonated softdrink market worldwide. It Contains 18 brands and 163 varieties.
Types of product of Pepsico.Inc In the carbonated soft drinksindustry, when we confine to the cola market there are still a number of colasellers in the market but Coca-cola and Pepsi-cola seems to be the dinosaursthat capture majority of the market shares, thus they are known as oligopolists.Theymight seem like identical companies since they dominate the global sodaindustry.
These Twocompanies have been competing powerfully against each other for decades. They are selling cola drinks with similartaste and color, Hence they are perfect substitutes. The market is conquered bythese two industry leaders with a total market share of 72%.Coke’s market share is 42% andPepsi’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 theindustry (McConnell et al., 2009).
Demand and supply trend of Pepsico.IncSince Pepsi are perfect substitutes,the price elasticity of demand should be perfectly elastic. Rival firms withinthe oligopolistic industry, firms are mutual interdependence, where the profitgained is depending not only on the prices but on the other firms (McConnell etal., 2009).The assumption is that firms in anoligopoly are looking to protect andmaintain 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 raisesprice 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 makea move. They are both engaging in strategic behavior, where both of them haveto think before making a move and be aware of the reactions of another thatmight affect the company’s profitability.