Microeconomics is the study of individual firms, consumers, and their market behaviors. As such, competition is one of the central aspects in a study of firms and their market choices. The leader of the international ice-cream market, Baskin-Robbins is faced with numerous challenges. Depending on firms’ marketing capabilities, rivalry can be a serious barrier to achieving their strategic objectives or the source of unique market opportunities.
The ice-cream market is run by few large firms, with millions of consumers purchasing ice-cream products on a daily basis. Apparently, Baskin-Robbins operates in conditions of oligopolistic competition, when “the market is dominated by a few firms, each of which recognizes that its own actions will produce a response from its rivals and those responses will affect it” (Rittenberg & Tregarthen, 2009). Really, interdependence is the distinguishing feature of oligopolistic competition.
Companies similar to Baskin-Robbins closely monitor the actions and decisions of their competitors. Moreover, in the ice-cream industry, which is worth unprecedented $20 billion in the U.S., increased gains from one ice-cream manufacturer are necessarily scooped from another one (Anonymous, n.d.). Therefore, each and every ice-cream producer, especially in the premium ice-cream sector, is willing to retain and expand its market share, to make sure that other rivals do not outperform them.
It goes without saying that Baskin-Robbins faces fierce competition in the U.S. and internationally. At the international level, Ben & Jerry, Wall, and Haagen-Dazs are its main rivals. The premium ice-cream sector is growing, too: in the United States alone, dozens of ice-cream producers are trying to beat Baskin-Robbins and win a better place under the competitive sun.
Haagen-Dazs, Carvel, Cold Stone, Dippin’ Dots, Dairy Queen, and Oberweis Dairy are fighting to become the next leader in the super-premium market niche. It should be noted, that Baskin Robbins faces three different types of competition.
First, direct competition is that which occurs among manufacturers of one and the same or similar products (Kurtz, McKenzie & Snow, 2009). Simply put, this type of competition normally occurs between Baskin-Robbins and its closest rivals, including Haagen-Dazs and Ben & Jerry.
Second, Baskin-Robbins is bound to fight with indirect competition, which comes from products-substitutes (Kurtz et al, 2009). For example, some people may prefer candy to ice-cream, and even the long history of ice-cream traditions in the United States will not secure Baskin-Robbins from these competitive risks. Eventually, Baskin Robbins constantly competes for consumers’ purchases (Kurtz et al, 2009).
More specifically, the firm competes for limited funds consumers are willing to spend on ice-cream (Kurtz et al, 2009). Given the tough economic conditions in the U.S. and the rest of the world, not everyone is ready to say good-bye to their dollars and spend them on ice-cream. Baskin-Robbins must be particularly compelling in its advertising messages, so that customers choose its products over those of its competitors.
How to increase Baskin-Robbins’ market power is a difficult question. The concept of market power in economics denotes firms’ ability to be profitable and charge prices above market equilibrium in long-term periods (American Bar Association, 2005).
Firms choose to increase their market power through acquisitions and mergers, changes in organizational structure, sophisticated branding strategies, and competitive pricing (Sawyer, 1985). In case of Baskin-Robbins, aggressive advertising and international market expansion will contribute to and strengthen its market position.
For example, Baskin-Robbins has recently signed a deal with the leading supermarket network of Great Britain: together with Morrisons, Baskin Robbins will market its best flavors in 500ml tubs all over England (Reynolds, 2010). As of today, Baskin Robbins is doing everything possible and impossible to acquire a major say in the international ice-cream industry, and most of its competitive strategies have already proved to be a remarkable strategic success.
American Bar Association. (2005). Market power handbook: Competition law and economic foundations. NY: American Bar Association.
Anonymous. (n.d.). Competition heats up with ice-cream franchises. Franchising.com. Retrieved from http://www.franchising.com/articles/competition_heats_up_with_ice_cream_franchises.html
Kurtz, D.L., MacKenzie, H.F. & Snow, K. (2009). Contemporary marketing. Boston: Cengage Learning.
Reynolds, J. (2010). Baskin-Robbins steps up competition in ice-cream sector. Marketing Magazine. Retrieved from http://www.marketingmagazine.co.uk/news/1008149/Baskin-Robbins-steps-competition-ice-cream-sector/
Rittenberg, L. & Tregarthen, T. (2009). Principles of microeconomics. Flat World Knowledge. Retrieved from http://www.flatworldknowledge.com/node/28239#web-28337
Sawyer, M.C. (1985). The economics of industries and firms. NY: Routledge.