Final answer:
The large advertising expenditures of companies like Procter & Gamble and Colgate-Palmolive create a barrier to entry known as product differentiation, which requires new competitors to invest heavily to establish a comparable brand presence, further leading towards oligopoly conditions.
Step-by-step explanation:
The large expenditures on advertising by firms such as Procter & Gamble and Colgate-Palmolive is an example of the barrier to entry known as product differentiation. This type of barrier occurs when companies establish a strong brand identity through significant investment in marketing and advertising, which in turn makes it difficult for new entrants to compete without similarly large investments to create a comparable brand presence.
Firms may need to achieve a certain size to afford the requisite advertising and marketing to create a recognized brand name. Competing against well-established brands such as Coca-Cola and Pepsi illustrates the challenge of creating a brand and marketing effort that can compete with such giants. This further consolidates the market, leading towards oligopoly conditions where a few firms dominate.
Therefore, when firms like Procter & Gamble and Colgate-Palmolive invest heavily in advertising, they are effectively strengthening the brand differentiation that acts as a barrier to entry for potential competitors in the market.