Individual Project

THE STUDY OF MARKET STRUCTURE OF THE PRODUCT MAGGI

SUBMITTED TO:
NEHA KUKRETY Ma’am

SUBMITTED BY:
YONIKA B –
0211MBA220
 MARKET STRUCTURE OF THE PRODUCT MAGGI
Introduction
In 1863, Maggi was founded by Julius Michael Johannes Maggi in Switzerland. Julius Maggi
developed a flavours recipe to bring added taste to meals. This signified the establishment
of the Maggi brand and its product line that is convenient products.
In 1882, due to his well-known for nutrition-oriented approach, a physician called Dr.
Fridolin Schuler and the Swiss Government met up with Julius Maggi and told him about the
problem of the labouring classes who were suffering from malnutrition. After that, he was
asked to seek for a solution in order to improve the nutritional values of meals. Therefore,
he created the protein based vegetable food products, which were two instant pea soups
and an instant bean soup. These two products were quick to be prepared, easy to be
digested and sold in a low price. The products were successfully overcame the problem of
woman who were lack of time in preparing meals as more and more woman were working
outside. By the turn of the century, the Maggi company also produced other types of
products such as bouillon cubes, sauces and flavorings.
In 1947, Alimentana S.A., the manufacturer of Maggi seasonings and soups merged with
Nestlé to form Nestlé-Alimentana S.A. Today, MAGGI® has been offering high quality,
convenient, innovative, and nutritious products. MAGGI® products help us to prepare
nutritious and delicious meals. Its bouillons, soups, seasonings and sauces are useful while
cooking and add flavour into our food.
Market structure of MAGGI 2-Minutes Noodles – Monopolistic Competition
Monopolistic competition characterizes an industry in which many firms offer products or
services that are similar (but not perfect) substitutes. Barriers to entry and exit in a
monopolistic competitive industry are low, and the decisions of any one firm do not directly
affect those of its competitors.
KEY TAKEAWAYS
● Monopolistic competition is closely related to the business strategy of brand
differentiation.
● Monopolistic competition occurs when an industry has many firms offering products
that are similar but not identical.
● Unlike a monopoly, these firms have little power to curtail supply or raise prices to
increase profits.
● Firms in monopolistic competition typically try to differentiate their products in
order to achieve above-market returns.
 ● Heavy advertising and marketing is common among firms in monopolistic
competition and some economists criticize this as wasteful.

Advantages and disadvantages for MAGGI company of being monopolistic competition

firm
Advantages
Easy Entry and Exit
Monopolistic competition is an easy entry and exit market because this market face low
barriers to entry Unlike a monopoly market, MAGGI® easily entered into a monopolistic
competition market and start the business because the products produced are not sole
control of any other company. Therefore, MAGGI® can attract the consumes to buy its
products as long as they can satisfy the consumers’ needs. Besides that, while entering into
this market, MAGGI® does not face much problem on government franchises and licenses as
well as the patents and copyright as the company will not be restricted to enter into this
market.
Price takes
MAGGI® has the authority to set the price for its products in order to maximize its revenue.
For example, MAGGI® can increase the selling price when they increase the quality of
products to the consumers. The company also can increase the selling price when the input
price becomes higher so that they will still earn a constant revenue but not facing a loss.
Unlike in the perfect competition market, the consumers might still choose to buy its
products even though the price has been increased as long as the products can satisfy the
consumers.
Differentiated products will attract buyers to stay loyal
The differentiated products of MAGGI® will attract more buyers and maintain the current
consumers to stay loyal since the products have the unique features compare to others.
Normally, the consumers will not easily switch to another brand when they are attracted by
its special characteristic of the products. This will result in a constant revenue since the
consumers might consume the products continuously for a long period of time if they do not
find any substitute that is better than the current consuming products.
Disadvantages
Many competitors
Since monopolistic competition market is easy to entry and exit, many companies might
enter into this market and thus MAGGI® has to face many competitors. For example, the
competitors for MAGGI® are Sajimee, Ibumie, Adabi, Mamee, Cintan and Tesco. The
consumers might easily switch to buy the same type of products from another brands if they
think it is worth to buy it from other brands rather than from MAGGI®. Therefore, MAGGI®
has to consistently observe the strategies of its competitors so that MAGGI® can make
suitable action to face the competitor and make its customers to stay loyal.
Higher cost and expenses
Since MAGGI® face a huge numbers of competitors, it is compulsory for a monopolistic
competitor to take suitable strategies to attract more buyers. One of the ways is via
advertising its products. We can see that MAGGI® advertise its products through television
and do many different types of promotion such as buy one get one free, give food testing to
the customers, give discounts and organise a contest for the consumers and give out
something else as prizes. All these advertisement and promotion required a lot of cost and
expenses.
Need to produce differentiated products
In order to compete with other close substitutes, MAGGI® has to come up with
differentiated products, which is the products that have real or apparent differences with
other substitutes. MAGGI® must be creative and innovative enough to make their product
more distinctive and differentiate their products from other competitors in order to attract
more buyers and also maintain its current consumers. MAGGI® also has to do certain
research and improve its products from time to time to make its products more unique no
matter is on the quality, price or packaging.
Earn zero-economic profit in long-run
Unlike a monopolist, MAGGI® will not earn an economic profit but earn a zero-economic in
long-run. In long-run, more and more firms will enter into this market structure and the
some of the current market share of MAGGI® might be taken away by those new firms. This
shows the decrease in the consumers’ demand. Therefore MAGGI® will do more advertising
to recapture the market share. This will results in the increase of the long-run average cost.
The decrease of demand and increase of long-run average cost will continues in long-run
until MAGGI® earns a zero economic-profit.
Competitors of maggi noodles:
● Sunfeast YiPPee. This brand has been in business since 2010, but caught people's
attention only recently. ...
● Wai Wai Noodles. ...
● Top Ramen Curry. ...
● Knorr Soupy Noodles. ...
● Nongshim Ramyun Instant Noodles. ...
● Ching's Secret noodles. ...
● Patanjali Atta Noodles.
What can be said about barriers to entry in this market ?
Maggi was the most popular instant noodles brand in India, which children in particular
loved to snack on. The brand had a dominant position until suddenly in mid-2015 it got
engulfed in controversy. Several state food regulators found that Maggi contained
monosodium glutamate as well as lead well above the prescribed limits. Both these
substances were harmful especially for children. When Nestlé India was confronted with lab
test results it stuck to its position that they had a world class quality control process in place
and that their products were safe for consumption. Finally, the national food regulator
FSSAI, ordered a ban on the sale of Maggi including product recall. Consequently, several
state governments imposed temporary ban on the sale of Maggi noodles in their respective
states. The future of the company suddenly looked very bleak.
Nestlé India was slow to respond to this fast unfolding crisis. Further, their responses were
very brief and not adequately culture-sensitive. This led to the feeling in several quarters
that the company was probably guilty of wrongdoing. To set right things Nestlé's worldwide
CEO flew into India to douse the flames of the controversy and draw up an appropriate
strategy to bail out the brand. He address the media, put in place a new CEO for Nestlé India
and set brand Maggi on the path of recovery. However, Nestlé India was still facing a
number of critical issues. 
How does the rise of the internet affect this situation ?
When the Maggi ban was first heard of, social media went buzzing with hilarious memes as
well as genuine queries from consumers. According to an analysis done by Simplify360, it
was found that the general tone of the posts on the social media sites, tend to suggest a
high degree of disbelief and hurt that a trusted brand would stray from the path. Topics like
#Maggiban, #MaggiInasoup kept on trending for weeks. On June 5th, the global head of
Nestle decided to withdraw all the variants of Maggi from India, citing that the current
scenario is not conducive for the brand.

The brand which was earlier accused of keeping a ‘dismissive’ and ‘defensive’ tone on social
media, is now working towards changing it. It roped in US based PR specialist APCO
Worldwide to tide over the negative publicity. Even though, the last post on the Facebook
page of Maggi was on June 5th, the brand is making an effort to reply to each query posted
on its wall with a reply like ‘We have engaged with authorities and are trying our best to
come back soon’. On Nestlé’s Facebook page, as well, the brand has been posting
information like ‘We are one of the most active entities in the world when it comes to food
testing’ and ‘we have the same rigorous approach to food safety in India that we have
everywhere else.’ They are basically trying to clear the air on controversies surrounding
Nestle products.
Explain the concept of product differentiation ?
The noodles market can be divided into different groups depending upon the choice of
segmentation variable. For instance, there is domestic and professional segment for
noodles. The market could be divided on the basis of age of consumer, r consumption
quantity, geographic location and culinary treatment. Market segmentation is a matter of
perception. There are people who look at the market the way everyone sees, whereas a
limited few are able to uncover new customer groups who have not been uncovered by
generally followed basis of segmentation. Nestle chose to target the children segment.
Children frequently demand something to eat. Back then the market of snacks was not
evolved. Therefore whenever mothers were pestered they were forced to provide home
cooked snacks or light food like parantha, pulav, pakora, sandwich and vada.
 Essential to positioning was that Maggi must be perceived distinctively and of relevance to
target market. Maggi was positioned as ‘fast to cook and good to eat’ 2 minutes noodles. It
offered distinctive advantage to mothers in terms of ‘fast to cook’ proposition. The Maggi
noodles unique formulation reduced the long grind involved in making traditional quick
food. All that Maggi needed was two minutes boiling time and adding of a tasty masala
called ‘taste maker’. For kids, the brand offered ‘good to eat’ proposition.
Conclusion
In conclusion, market structure is important because it leads to strategic decision making.
Having a working knowledge of market structure impacts decision making because
organizations will learn the characteristics of their competition and how the market will
response to changes. This report discussed the four different types of market structures:
monopoly, oligopoly, monopolistic competition, and pure competition. It went into detail
about what each market structure was and gave every day examples of them. Additionally,
it will outlined the type of market structure AutoEdge fits into, how that market structure
impacts the level of competition, elasticity of demand, price, and position in the industry.