Question

Market commonality among rivals may affect the likelihood of initiating and responding to competitive actions. Explain how and give one example of two firms with high market commonality and their competitive behaviour. 300 words

Answer 1

Market commonality means that two firms are providing their products and services to the same target market. When the market is the same, the actions of one company affect the actions of its competitors. For instance, when the price is lowered by a company, it makes the competitors do the same in response, or else the majority of the consumers would shift towards the first company. It means that one of the companies takes the initiation for an action and it persuades its competitor to take a similar action to remain relevant in the market. An example of this case can be Jio and Airtel. Jio and Airtel are telecommunication companies. When Jio launched its offers for unlimited calls with more data per day, Airtel had to come up with a similar kind of offers to remain in the market. Airtel also started providing offers that provide unlimited calls and more data per day. Since both companies have a similar market, they have to keep up with each other’s actions. These companies continuously strive to remain ahead in the race. After Jio’s move, the telecommunication industry had revolutionized and suddenly every other person had started buying Jio sim cards. Although other companies had also started coming up with similar offers but Jio had already captured the majority of the market. So, Airtel came up with advertisements which show that it is providing the fastest speed for the internet. But, these two rival firms still design their services in relation to each other. Thus, it is true that the rival firm having market commonality function in response to each other’s actions.