BRAC University The Candidate is aware that a plagiarism

MBA Programme check will be made and an oral assessment

may follow.
Fall 2021

ECO 501: Managerial Economics

Sections: 1 & 2

Assignment 2
Name: Md.Rakin Zarif Badruddoza
ID: 21364130

INSTRUCTIONS. PLEASE READ CAREFULLY

1. There are THREE pages in this Script: Page 1/3; Page 2/3; and Page 3/3
2. Distribution Date: TUE Nov 30, 2021 after Class of Section 2
3. Submission Date: 6pm, SUN Dec 5, 2021
4. Submission Platform: Google Classroom or Email: ext.asrarul.islam@bracu.net
5. Submission Format: Word or PDF
6. FILE NAME:
Example For Section 1
21-3- Sec 1- Assign 2- ID- Name
21-3- Sec 1- Assign 2- 20264027- Tahmim Hossain
Example For Section 2
21-3- Sec 2- Assign 2- ID- Name
21-3- Sec 2- Assign 2- 21264052- Nehazee Ahmed
7. Name, Section, ID have to be mentioned clearly in the above box
8. The script shall be checked for plagiarism
9. I shall mention who will be orally assessed in the next class.
10. Try to think on your own
11. Good Luck

QUESTION:

Identify two factors that give a firm market power under monopolistic competition. How do
these factors interact?

Explain with a relevant case study in the context of Bangladesh (or your home country if you
are not from Bangladesh).
YOU MAY WRITE FROM BENEATH THIS LINE YOU
CANNOT EXCEED PAGE 3/3

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 Answer to the question no 1
Monopolistic competition is a market condition in which there are many suppliers of a particular product,
but each seller's product is distinct from the product of every other seller in the eyes of the consumer.
I identified two factors that give a firm power under monopolistic competition is,
1. Product Differentiation

2. Brand loyalty

Product differentiation: Product differentiation refers to all characteristics that aid in distinguishing
one firm's product from that of another. This distinction can be realistic (technical) or artificial
psychological (non-technical).
How Product differentiation can get a firm power:
In monopoly market firm take different steps for create an image in customer mind for capture the market
share, they do advertise, short videos, promotional activities and take different marketing tools and step
for reaching people with their products. They set an image of their product and try to differentiate from
others. Cost minimizing, quality products, also helps them to capture power and having benefited for
doing business in the monopolistic competition.
For Example, in prince Bazar recently I visited and saw that their bakery items are highly-priced rather
than the others bakery items. People still buy it and almost all items have demand but especially bakery
cakes like Ovaltine cakes are sold highly and people love it & in beverage items “Prince Borhani” are
sold high in numbers. The reason is they differentiate their products (quality, reliability, taste, packing)
which helps them to capture market power and create an illusion about the brand. With this power, they
set a high price for these items and still people love it to buy. Still, outside confectionary shops people can
get other bakery cake in 120/- but they love to buy this cake in 180/- & other companies like (Arong,
Muktar) sell Burhani in 60tk but they sell it 80tk per litter. Which is costly but they differentiate their
products by quality, taste, and brand it as a brand. People are having it and it gives them market power
under monopolistic competition. And this in the Simple type of product differentiation.
Another example is, LUX soap is top selling products because they have variation. They produce
different soaps which is highly differentiate than other soap & LUX can find anywhere in the country. Its
visibility in all shops. People took it because easily available, price is not that much & also LUX have
good brand value. They hold the maximum soap market share in soap market of Bangladesh. No other
soaps can beat because for this differentiation.

Brand Loyalty: In this case, I think brand loyalty is another factor. Brand Loyalty can achieve by
providing quality services & product. It can be done by giving many promotions, incentives, customer
interaction, valuing customer choices etc. Loyalty does not come in a second. It has achieved day by day.
For example, People who use intel will not want to use Rygen. Because Intel is doing business for more
than decades and they set an image in customers' minds as “Intel is best”. Suppose someone wants to buy
a PC, Father or senior members refer to get Intel because they can trust Intel for using it from the very
beginning. Intel set their brand image to their customer that they are sophisticated with good quality chips
with standard performance. They capture the most part of the technology field share and do monopolistic
business day by day. After Rygen and others company came, it became tough to hold the market shares
but still intel can hold it for the brand loyalty. With that help they did not lose that much business.

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In the Bangladeshi context, when you go for having your monthly grocery Bazar, always you go to your
selected whole sale shops. You know this guy will give you fresh and solid products rather than other
shops may not provide you that much support or give you bad products. This is a sign of brand loyalty.
Sometimes this shop owners get highly benefited from you for having extra payment but still, you will go
next time because of trust. It gives them power. It also happens for the vegetable’s seller also. People go
them
People who use TOYOTA don’t want to buy HONDA. They know HONDA provides the best design
where Toyota will provide the same model with no change. Still, people trust TOYOTA for believing that
it will be long-lasting and cost-efficient with medium resale value in Bangladesh.
So, brand loyalty is giving power to a firm or person under monopolistic competition.

Relevant Examples in Bangladeshi context

I have already discussed. For further more discussion I will give some other examples,
Walton is the largest tech company in Bangladesh, they produce different products for different segments.
Before coming Walton, we can see China or others country capture the market and control the price of
products according their supply and demand. Walton breaks this monopoly by stepping in into the Deshi
market. They give low price products with quality service. They segmented their market according to that
they give products to their customers. For this reason, many electronic items price is low now and market
is sustainable.
Suppose in rural area usage of refrigerator is a high-end product not only rural in urban are low middle-
class people have to think twice before buying refrigerator. Walton offers only 17,500/- refrigerator with
many options (flowers designed, color various). People are buying it madly, in that case there is other
company like Minister doesn’t produces this refrigerator in this low price and service. Also, Walton has
AC, TV, Fan, Room heater, blender not only that customer can find Mosquito bat also. They capture the
all electronics products and set the good image of customer so that after perfect differentiae Walton
achieve loyal customer who did not buy China product, they buy electronics product from Walton.
Because they know Walton is a brand and they have excellence of service with good price products.
Recently Samsung refrigerator has decrease sales only because of not providing customer service. They
did not listen their customers, Walton took it as a stair and utilize it. It gives them power to play in
monopolistic competition.
bKash is the first MFC company. They were doing business in Bangladesh for probably 10years. They
were the one in the market and after NAGAD, UPAY came into its bKash still capture market for
variation services according customer needs, largest merchant holder, different level agent who provide
service & also digitally 24/7 high responsive customer service. NAGAD successfully capture some
portion of market after getting various kind of promo and activities like 9.99 cash out charge, but
customer always spend more for using bKash app just for brand loyalty, reliability and services.

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