The following story, offered with tongue in cheek, illustrates a localized marke

Question

The following story, offered with tongue in cheek, illustrates a localized market that exhibits some characteristics of oligopoly, including strategic behavion Tracy Martinez's Native American Arts and Crafts store is located in the center of a small tourist town that borders on a national park. In its early days, Tracy had a minimonopoly Business was brisk, and prices and profits were high. To Tracy's annoyance, two "copycat" shops opened adjacent to her store, one on either side of her shop. Worse yet, the competitors named their shops to take advantage of Tracy's advertising. One was "Native Arts and Crafts"; the other, "Indian Arts and Crafts." These new sellers drew business away from Tracy's store, forcing her to lower her prices. The three side- by-side stores in the small, isolated town constituted a localized oligopoly for Native American arts and crafts. Tracy began to think strategically about ways to boost profit. She decided to distinguish her shop from those on either side by offering a greater mix of high-quality, expensive products and a lesser mix of inexpensive souvenir items. The tactic worked for a while, but the other stores eventually imitated her product mix. Then, one of the competitors next door escalated the rivalry by hanging up a large sign proclaiming: "We Sell for Less!" Shortly thereafter, the other shop put up a large sign stating We Won't Be Undersold" Not to be outdone, Tracy painted a colorful sign of her own and hung it above her door. It read Main Entrance. Tracy and the other two vendors are in an oligopolistic situation. If you were Tracy you have learned in this chapter, what other strategic moves would you consider implementing to counter the initiatives of the two "Copycats? from what

Explanation / Answer

It has been leant from this chapter that direct price competition is not beneficial in this oligopoly as the rivals sell close substitute and immitate the action of Tracy. Hence, strategy needs to be such in this market that the rivals cannot immitate.

Hence, one strategic move is to consider non price competition through innovation in the service. Tracy may increase the customer base by enhancing brand loyalty. Value added service can be beneficial. Free gifts, coupon can be a process of regaining mrket share initiallly. Bricks stores are old concept in business. Online selling service at differential prices would be effective policy to beat the consumers. In this process, Tracy could reach a wider customer group apart from the locality. Once, she is able to reach greater customer groups, she can able to know the variety in the preferences and can innovate products accordingly. This process would be difficult to immitate for the rivals.

Another strategy would be collusion with two ''copycats'' through an aggrement of charging monopoly price for the similar products so they each can divide the market share proportionately. However, this process depends on mutual trusts. Any betray can break the collusion and result in loss. Therefore, although this process is less costly, chance of sucess is less also.

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