Q. 215.0( 2 Votes )
‘Large companies with huge wealth, power and reach can manipulate the market in various ways.’ Justify the statement with suitable examples.
Multi-National Corporations are large companies established in a particular country and has offices, markets and produces and sells its products in many countries. They are large companies with huge wealth, power and reach who can manipulate the market in various ways.
• Brand intimacy: MNCs can create a sense of brand intimacy in the minds of the public though heavy advertisements. With the heavy advertisement expenditure and an attracting tagline, they can capture the market easily than companies having less resources. Advertising has created a sense of brand loyalty in the minds of people related to many products. They are not willing to substitute other products in its place. Thus MNCs can manipulate the market.
E.g. – Even though many brands of toothpastes are available in the market, mostly everyone will buy highly advertised brands. No one will bother to buy other local brands.
• Imaginary diversity: MNCs can create an assumption in the minds of the people about the characteristic differences in their products. With the heavy publicity, they can create an imaginary differentiation in their products, even though the inherent characteristic of their product may be the same relative to other products in the market. This is the main way by which MNCs manipulate their buyers.
E.g. – It can be found in the branding and marketing of soft drinks. They may have similar taste, colour and composition, but are sold under different brands.
• Artificial demand: MNCs try and create artificial demand for a commodity. Artificial demand is created by cutting down the supply of a product that is in high demand. This will increase the price of the product which can be again re-introduced at a higher price. They may also re-introduce the same product stating additional specifications in the new model.
E.g. – This is largely found in the telecommunication and mobile industry where artificial demand is created by controlling the supply and new specifications are added each day.
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