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Oligopolistic interdependence is a term used to describe a market in which competing companies must pay close attention to acts taken by rival firms when deciding on pricing and production process. Oligopolistic interdependence is used to increase a company's strategic edge by understanding the practices of competing firms (Dolan, 2016).
Inside my neighborhood, there is a cell phone provider named MobiFone that sells mobile handsets at a 25% discount from the real retail price. The company is responding to its main competitor's cut in mobile phone prices. The rival company has reduced the price of mobile phones by 21%, and thus MobiFone has decided to reduce the price much lower than that of the main competitor to attract more customers. MobiFone has been involved in an aggressive sales promotion campaign because its main rival commands more than 50% of the market. Hence, MobiFone has to be innovative regarding the tactics that it uses in promoting its products.
The rival firm has reacted to MobiFone's new sales promotion strategy. The reaction regards the inclusion of extra unique services to the clients. The main competitor has introduced a two-year warranty on its mobile phone devices. The two-year warranty is one year extra from what MobiFone is offering on its mobile devices. Also, the rival firm has enrolled an intensive product promotion within the community whereby its agents are moving door to door to explain to the people the benefits associated with the purchase of its mobile phone products which is critical in maintaining a competitive advantage within the cell phone industry.
Dolan, E.G. (2016). Introduction to Microeconomics (6th ed.). Redding, CA: BVT Publishing.
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