MONOPOLISTIC COMPETITION - NIKE

SUBMITTED BY:
VIJEESH M
MBA 1 – A (GENERAL)
0201MBA123
INTRODUCTION

Market Structure in economics, depicts how firms are differentiated and categorized based
on types of goods they sell and how their operations are affected by external factors and elements.
Market structure makes it easier to understand the characteristics of diverse markets.

TYPE OF MARKET STRUCTURE:

A variety of market structures will characterize an economy. Such market structures

essentially refer to the degree of competition in a market. There are other determinants of market
structures such as the nature of the goods and products, the number of sellers, number of consumers,
the nature of the product or service, economies of scale etc. We will discuss the four basic types of
market structures in any economy.

One thing to remember is that not all these types of market structures actually exist. Some of them
are just theoretical concepts. But they help us understand the principles behind the classification of
market structures.

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Monopolistic Competition:

Monopolistic markets competition are markets where a certain product or service is offered
by only one company. A monopolistic market structure has the features of a pure monopoly, where
a single company fully controls the market and determines the supply and price of a product or
service. Hence, a monopolistic market is a non-competitive market.

This is a more realistic scenario that actually occurs in the real world. In monopolistic
competition, there are still a large number of buyers as well as sellers. But they all do not sell
homogeneous products. The products are similar but all sellers sell slightly differentiated products.
Now the consumers have the preference of choosing one product over another. The sellers can also
charge a marginally higher price since they may enjoy some market power. So the sellers become the
price setters to a certain extent.

For example, the market for cereals is a monopolistic competition. The products are all similar but
slightly differentiated in terms of taste and flavor’s. Another such example is toothpaste.

Characteristic of Monopolistic Competition:

In a competitive market, numerous companies are present in the market and supply
identical products. Its demand curve is flat, whereas, in a monopolistic market, the demand curve
is downward sloping. Companies that are operating in a competitive market can sell any desired
quantity at the market price.

The following are the characteristics of a monopolistic market:

 Single supplier: A monopolistic market is regulated by a single supplier. Hence, the market
demand for a product or service is the demand for the product or service provided by the
firm.

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 Barriers to entry and exit: Government licenses, patents, and copyrights, resource
ownership, decreasing total average costs, and significant start-up costs are some of the
barriers to entry in a monopolistic market. When one supplier controls the production and
supply of a certain product or service, other companies are unable to enter the monopolistic
market. If the government believes that the product or service provided by the monopoly
is necessary for the welfare of the public, the company may not be allowed to exit the
market. Generally, public utility companies –such as electricity companies and telephone
companies –may be prevented from exiting the respective market.

 Profit maximizer: In a monopolistic market, the company maximizes profits. It can set
prices higher than they would’ve been in a competitive market and earn higher profits. Due
to the absence of competition, the prices set by the monopoly will be the market price.

 Unique product: In a monopolistic market, the product or service provided by the company
is unique. There are no close substitutes available in the market.

 Price discrimination: A company that is operating in a monopolistic market can change the
price and quantity of the product or service. Price discrimination occurs when the company
sells the same product to different buyers at different prices. Considering that the market
is elastic, the company will sell a higher quantity of the product if the price is low and will
sell a lesser quantity if the price is high.

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 NIKE

INTRODUCTION:
Nike was established on January 25, 1964, as Blue Ribbon Sports by Bill Bower man and

Phil Knight. It formally became Nike, Inc. on May 30, 1971. The company earns its name from

Nike, the Greek goddess of triumph. Nike markets its merchandise under its brand, as well as Nike

Golf, Nike Pro, Air Max, Air Force 1 and several other brands. In addition to manufacturing

sportswear and apparatus, the company operates retail stores under the Nike town name. Nike

sponsors many great profile athletes and sports teams around the globe, with the highly

documented symbols of "Just Do It" and the Swoosh sign (Suddaby, 2016). Nike, Inc. is an

American international corporation that is involved in the design, manufacturing and worldwide

marketing and sales of footwear. The company is headquarters are based in Washington County,

Oregon, USA. It is the world's foremost supplier of athletic shoes and apparel and a chief

manufacturer of sports equipment. The company has employed more than 44,000 people

worldwide. In 2017, the Nike brand is valued at $29.6 billion (Sheng, 2018).

The Nice, Inc. logo is as shown above. The Nike logo indicates that the company is shaped

to that it yields quality products at an affordable price to the people. The check mark is an assenting

symbol of convenience where it conspicuously indicates success. In spite of its variants in other

cultures and variants. This universality is what a global brand seeks for in building its recognition

and value. An athlete is no exclusion, and he or she always go for success and desires for

achievements(Whitby,2013).

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COMPETITORS:
Nike like any other company has direct and indirect business competitors. Nike competitors
entail any brand that is selling sports shoes and gear. The rivalry in the sportswear is compelling.
Nike competes with numerous athletic and leisure shoes and apparel companies all over the world.
The brand faces brutal competition in every aspect of the business like its product offerings,
technologies, marketing, pricing costs of manufacturing and customer facilities(Burgelman,2017).
These competitor companies include;

 Adidas

 Reebok

 Puma

 Fila

 New Balance

 Under Armour

 Asics

 K-Swiss

 Li Ning

Nike is ahead of even the 2nd upper most participant who is Adidas, and it is only rising in
acceptance. One of the motives for Nike's Popularity is its unrestricted roots in western nations,
where it gets its chief margins. (Wolfsmayr, 2015).

CONCLUSION:
Nike is an example of monopolistic competition because they have the aspects that a
perfect competition has, except their products are not exactly like their competitors such as
Adidas and Under Armour. Product differentiation is the real or perceived differences
between competing products in the same industry.