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Cross elasticity of demand
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=== Potential strategies === ==== Horizontal integration ==== In markets with few competitors, cross elasticity between rivals are likely to be high,<ref>{{cite web |title=Cross elasticity of demand {{!}} Economics Online {{!}} Economics Online |url=https://www.economicsonline.co.uk/Competitive_markets/Cross_elasticity_of_demand.html |website=Economics Online |access-date=26 April 2021 |date=13 January 2020}}</ref> this makes firms in the market vulnerable to [[price competition]]. Horizontal integration, usually [[mergers]], could reduce said risks by reducing competition in the market. For example, when [[Anheuser-Busch InBev]] (the world's biggest brewer at the time) acquired [[SABMiller]] (InBev's closest rival) in 2015, it was one of the biggest takeover of a British firm, creating the world's first global brewer.<ref>{{cite news |title=SABMiller agrees AB Inbev takeover deal of Β£68bn |url=https://www.theguardian.com/business/2015/oct/13/sabmiller-agrees-ab-inbev-takeover-68bn |access-date=26 April 2021 |work=the Guardian |date=13 October 2015 |language=en}}</ref> The takeover created a brewing empire that produces a third of the world's beer. ==== Vertical integration ==== Firms may gain better control of the market by merging with suppliers of complementary products. Developing their own complementary products is another possible solution. For example, Google developing [[Google Pixel]] is an attempt by Google to capture the smartphone market share by integrating both its software and hardware features for improved performance while being more resource efficient.<ref>{{cite web |last1=Inc |first1=Spiceworks |title=Snapback: Google Pixel and the move towards vertical integration |url=https://community.spiceworks.com/topic/1860664-snapback-google-pixel-and-the-move-towards-vertical-integration |website=The Spiceworks Community |access-date=26 April 2021 |language=en}}</ref> [[File:Google Pixel and Pixel XL smartphones (30155267665).jpg|thumb|Google Pixel and Pixel XL smartphones]] ==== Alliances and collusion ==== Competitors may pool resources to create a joint alliance, such as [[Sony-Ericsson]] in October of 2001. [[Sony Electronics|Sony]] had a share of less than 1% in the mobile phone market; while Ericsson was the third largest market share holder. Unfortunately, [[Ericsson]] relied heavily on a single supplier, and when a fire broke out at a [[Royal Philips Electronics|Phillips]] factory, Ericsson couldn't fulfill their orders. Sony wanted a greater market share and Ericsson wanted to avoid going out of business, hence the Sony-Ericsson joint venture was formed.<ref>{{cite web |title=History of sony ericsson as a company |url=https://www.auessays.com/essays/business/history-of-sony-ericsson.php |website=AUEssays.com |access-date=26 April 2021 |language=en}}</ref> Firms entering into a price fixing agreement in order to avoid [[price wars]] means they are involved in a [[collusion]]. The chances of collusion to occur is higher in markets with few competitors such as [[Oligopolistic|oligopolistic markets]]. It is illegal according to [[antitrust laws]], even though collusive agreements may be implicit, its implication with cartels are the same.
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