Monopolistic in India

Competition

A Description with an example of HUL s Pepsodent

BY: Tanay Sharma MBA (2010-2012)

Domino¶s. with their prices. The real modern world is characterized by the presence of rival monopolists competing with one another. plastics. Piero Sraffa. For a long period the traditional theory of value was dominated by the study of market situations of perfect competition and monopoly. In the fast food industry in India. retail trade. McDonalds. He maintained that the actual conditions in the industry are neither those of perfect competition nor those of complete monopoly. textile trade. hosiery. It is a situation falling between ³Competition´ and ³Monopoly´. Monopolistic Competition refers to a market structure where there are many firms selling differentiated products which are close substitutes and there is existence of free entry and exit of firms. Characteristics of Monopolistic Competition Exhibits features of both perfect competition and Monopoly The elements of competition are there because the products are close substitutes. product policy and selling efforts. The firms under monopolistic competition produce commodities which are similar to one another but not identical.What is Monopolistic Competition? Perfect competition and pure monopoly are very unlikely to be found in the real world. Certain industries in the Indian market falling under the category of monopolistic competition are fast foods. The belief of classical economists that there prevails perfect competition was first challenged by a Cambridge Economists. household cleaning products such as dusters and brooms and even greeting cards. pickles. Pizza Hut and the various other fast food joints. steel utensils. garments. there are elements of competition present between Nirula¶s. but somewhere between the two. The elements of monopoly are present as each product (brands) of each firm is differentiated .

60 or 70. there is no feeling of mutual interdependence. packaging. This implies that deliberate rivalry is missing or that competition is impersonal. Yet all . the greater the degree of monopoly power involved. after sales services. It requires the presence of fairly large number. Even though each of the firm enjoys some monopoly privilege. each firm determines its price . Following are the important implications for the presence of a large number of sellers: y An individual firm has a relatively small part of the total market. Each firm behaves independently. advertising etc. y With a large number of firms in the industry. it has to compete with other firms in the market. Large Number of Sellers There are a large number of firms producing goods under monopolistic competition. say 25. 35.) Firms usually compete trough product differentiation by offering the consumer something different from and better than competitor¶s products. Product differentiation exists when the firm¶s product (offerings) differs or is perceived to differ from those of competing firms on any attribute (quality. Product Differentiation One of the distinguishing features of monopolistic competition is product differentiation. branding. that is.from the others. The greater the degree of differentiation. The economic impact of one firm¶s decision is spread sufficiently across the entire group so that the effect on any single competitor is almost negligible. It must not be assumed that there it requires existence of thousand of firms.output policies without considering the possible reactions of rival firms. so that each has a very limited (or no) control over the market price of the product.

Because the demand curve slopes downward. The model of monopolistic competition puts our situation into a more familiar form of demand and cost curves. New entry of firms will decrease the demand for an existing firm¶s product. If the existing firms are successfully differentiating their products and earnings supernormal profits. The illustration below shows a seller with a downwardsloping demand curve and a conventional marginal cost curve. The cross-price elasticity of demand may increase. In such a case the firm can expand its sales by decreasing its price.the firms are in competition because their products are close substitutes. As there are no barriers to entry or exit in the long run in a monopolistically competitive market. The firm has therefore some degree of monopoly power. as there are more close substitutes available in the firm¶s demand curve as the relative prices change. new firms will enter the ³product group´. Higher Elasticity of Demand The effect of product differentiation is that the firm has some discretion in the determination of the price. which it can exploit. With no barriers to entry under monopolistic competition. A new firm may enter into production and an old firm may come out of production. However the firm faces competition of close substitutes offered by other firms. the marginal revenue curve lies below it. new firms would replicate the existing products and marketing strategy of the successful firms. Product differentiation creates brand loyalty of the consumers and gives rise to a negatively sloping demand curve. The seller maximizes profit . Free entry and exit of the firms There are no restrictions placed on the entry as well as the exit of the firms. there are no economic profits in the long run. y The presence of a relatively large number of firms ensures that collusion by the firms to restrict output to raise price is most unlikely.

Because monopolistic competition was seen as both common and economically inefficient. average revenue (which is demand) must just equal average cost. It was this distance that seemed especially important to the developers of monopolistic competition. average profit is zero. positioning themselves to take away customers from the most profitable sellers. which is price P2. If there are any profits. In the long run.by selecting that output at which marginal revenue equals marginal costs and charges as much as he can. which results in many products that are similar but not identical. First.1 Second. Furthermore. The model of monopolistic competition was considered important when it was introduced for two reasons. and so total profit must also be zero. it was argued that market systems were inherently inefficient. the graph contains a gray area of welfare loss. . there can be no economic profit because there is free entry into the industry. The distance between sellers can be in the minds of buyers. Both the single sellers of monopoly and the many sellers of price-taking competition are uncommon in comparison. When average revenue equals average cost. others will enter the industry. Product differentiation. monopolistic competition describes more than traveling costs in a geographical sense. the situation it described seemed the most common form of industry. notice that because price exceeds marginal cost. an unexploited value that neither firms nor customers obtain. also creates a distance between products. The zero profit condition implies that at equilibrium.

personal selling. but its makers were slow to add fluoride to its formula . public relations (excluding publicity and sales promotion) can influence the sales of the firm¶s product.Selling Efforts In addition to price and nature of the product. Pepsodent was a very popular brand before the mid '50s. Selling costs can change the position and slope of the demand curve. This concept of monopolistic competition can be clearly understood by throwing some light on some popular product that falls into this category and satisfies the criteria of monopolistic competition. An Introduction to Pepsodent I want to do!It is one of the oldest toothpastes on the market today and still touted as a favorite by those who swear by the brand---Pepsodent. Selling efforts are undertaken to inform. by Church and Dwight in USA. its market share and methods adopted by it to differentiate itself and sustain in the market will explain that why it follows monopolistic competition. They can cause the demand curve to shift outwards and become more inelastic. Pepsodent is a brand of toothpaste with a wintergreen flavor. It was formerly owned by Unilever (but. since 2003. the selling effort (in terms of advertising. persuade and to remind customers to purchase and to remind customers to purchase the firm¶s products.). An overview of this product and study of its promotion policies. now sold mostly in discount stores and chains. The well-known minty-flavored toothpaste. One such product is Pepsodent toothpaste. has stood the test of time and still has many faithful users.

an ingredient found in some varieties of tea and such soft drinks as root beer and sarsaparilla. and several other countries. Finland.Milk. Pepsodent advertisements spotlighted the toothpaste's distinguishing features. Teeth. and to an ingredient known as IMP for preventing tooth decay. and Colgate's eponymous product. It had a minty flavor that was derived from sassafras. Advertisements also pointed out the presence of irium (otherwise known as sodium lauryl sulfate) as a mechanism for fighting tooth decay. Teeth. Pepsodent is still sold as a Unilever property in India.Milk. The following are certain type of products that Pepsodent deals with: y Complete + Gum Care y Complete 12 Pepsodent y Herbal Pepsodent y Pepsodent . Indonesia. Chile. Strawberry y Pepsodent Sensitive y Pepsodent Whitening y Pepsodent Cavity Prevention .to counter the rise of other highly promoted brands such as Crest and Gleem toothpaste by Procter & Gamble. sales of Pepsodent plummeted. Orange y Pepsodent . Today Pepsodent is a ³value brand´ marketed primarily in discount stores and retails for roughly half the price of similarly-sized tubes of Crest or of Colgate.

Inc.. the Pepsodent brand is now owned by Church & Dwight Co. records are sketchy. Pepsodent toothpaste fights germs to protect teeth against cavities and gives strong teeth. fresh breath and healthy gums. Economic Times.Pepsodent India Pepsodent is a 15 year old brand that offers various oral care solutions to specific need based solutions. Pepsodent was launched in 1993 in India and since then the brand has raised the benchmark on Oral Care solutions in India. Key facts y y Endorsed by FDI ( the largest dental association globally) Among the most trusted brands in India (Brand Equity.Pepsodent as an oral care expert offers solution to specific problems like bleeding gums and sensitive teeth. Pepsodent has a range of toothpastes and toothbrushes that could take care of specific oral care needs. Claims that Pepsodent toothpaste was effective in fighting tooth decay made it an impressive and sought-after toiletry item in the early 20th century. . although prior to that. let¶s take a look at the product more precisely along with some description of its global whereabouts. Overview History Documentation of Pepsodent's roots goes back to at least the late 1920s. Formerly owned by Unilever. India) Now. Further claims that Pepsodent whitened teeth with a special ingredient known only as "IMP" gave the minty toothpaste a glamour appeal to the jet set.

" Marketing Makes Lasting Impression Another popular Pepsodent advertisement was an oversized neon sign projecting a girl on a swing that hung in New York in Times Square in the 1930s." Entertainers also helped give the toothpaste a boost. reclaiming their position as the number-one toothpaste in the U. It was referred to in a popular 1949 musical called "South Pacific. the toothpaste dinosaur is still . never existed in the toothpaste and was actually a radioactive material.S. In addition.Advertising Boosts Sales Marketing efforts to sell Pepsodent toothpaste were very successful. "You'll wonder where the yellow went when you brush your teeth with Pepsodent." Comedian Bob Hope also saw the opportunity in being associated with the popular toothpaste and named his 1938 variety show the "Bob Hope Pepsodent Show." Pepsodent's Descent In the 1950s. the ingredient that Pepsodent claimed for years that it fought cavities. The mistake proved to be a costly one for Pepsodent. and sales sky rocketed thanks to a well-known slogan of. Pepsodent Holds On Although Pepsodent never fully bounced back from the decline." Singer Cole Porter also mentioned the tasty paste several times in his recordings. a new ingredient that Pepsodent manufacturers had yet to add to their popular paste. Pepsodent toothpaste sales began a steady decline due to the fierce competition of several other companies that were marketing toothpastes with fluoride. The larger-thanlife advertising sign was so successful. and Pepsodent was the sponsor of the famous 1929 radio show "Amos and Andy.. it was depicted again in the 2005 remake of the movie "King Kong. in 1994 claims were made that Irium.

now operates 42 projects in 38 countries. in October 2002. Pepsodent also includes a range of toothbrushes. all while protecting the tooth's enamel and promoting good gum health. Promotion policy Pepsodent packs included a Germ Indicator in February-May 2002. Pepsodent. the international organisation which represents nearly one million dentists globally. the Church and Dwight Company claims the product is a proven cavity fighter that helps remove plaque and creates white smiles. Marketed today as Pepsodent Complete Care toothpaste. recently announced its collaboration with the Indian Dental Association (IDA) in conjunction with World Dental Federation (FDI) to help improve the oral health and hygiene standards in India.being sold in 2010 as a lower-priced brand and costs about half of what leading toothpastes today sell for. Unilever and FDI. This unique partnership aims to increase oral health education and promotion in countries in both the developed and developing world. The Pepsodent-FDI collaboration. demonstrating that this makes their teeth vulnerable to germ attack. Pepsodent has always worked in the direction of an overall awareness of dental health. This project is part of a wider global collaboration between Pepsodent¶s parent company. As a follow-up. The relaunch campaign in October 2003 widened the context to "sweet and sticky" food and leveraged the truth that children do not rinse their mouths every time they eat. Pepsodent offered Dental Insurance to all its consumers to demonstrate the confidence the company has in the technical superiority of the product. Unilever¶s leading oral care brand. Pepsodent connects directly with kids and their parents. Pepsodent's most recent campaign aimed at educating consumers on the need for germ protection through the night. which allowed consumers to see the efficacy in fighting germs for themselves. . established in 2005.

Going forward. The campaign will launch in a few days and. according to HUL. and particularly night brushing amongst children. the programme will focus on increasing awareness of good oral habits and concentrate on the importance of twice daily brushing. (to distinguish it from other brands). The industry is the single shop single toothpaste brand promoted by Shahrukh.Hindustan Unilever has roped in Shah Rukh Khan to promote its flagship oral care brand Pepsodent that has been losing market share to rival Colgate. This will enhance their long run profits and this can be explained by the graph below: The graph shows pepsodent firm in a monopolistically competitive industry in long run equilibrium. The Oral Health initiative will feature many practical elements including dental check-ups. and even smaller brands like Babool and Anchor. live demonstrations with audio-visual aids and the distribution of oral health educational materials. It will also involve schoolteachers and . Profits are zero owner(s) is (are) earning a return equal to their next best opportunity. what clinched the deal for Shahrukh is µhis superstar and devoted dad¶ image. This will be Khan¶s second association with HUL ² he endorsed Lux soaps ² and the first time that the company had to bring in a celebrity to endorse flagship Pepsodent. The new partnership in India will build on existing programmes that Pepsodent and the IDA have been running in schools targeting behaviour change amongst children. And as a result of the popularity of the TV sitcoms "Friends" and "Frasier" there is an increase in patronage of this brand.

the toothpaste market is estimated at Rs 3. said.on purchase of any pack of Pepsodent." Insurance cover under Pepsodent Dental Insurance will be provided for one year. Category Head . Market Share Pepsodent. HUL¶s toothpaste brands Pepsodent and Close Up together accounted for 22% share in 2009-10. HLL.5% share.rural health workers working to educate children about the benefits of better oral health and hygiene. 1000/. Pradeep said "Pepsodent Dental Insurance is a unique concept in this category and will further strengthen the equity of Pepsodent in the minds of the consumers. Under this initiative Pepsodent offers its consumers insurance cover against expenses for the extraction of a permanent tooth or teeth due to severe Caries and Periodontitis including cost of medication in relation there to. down from 24.000 crore." Elaborating further on the concept of Dental Insurance. Pepsodent now offers its consumers free dental insurance of Rs. India s largest General Insurance Company.5% . which comes into effect after a period of six months from the date of issue of the Pepsodent Dental Insurance Certificate. "Pepsodent Dental Insurance is a unique concept and first of its kind in the Oral Care category in India. Undertaken through a partnership with the New India Assurance. Hindustan Lever Ltd s leading oral care brand.Oral Care. According to market researcher AC Nielsen. Announcing the launch of Pepsodent Dental Insurance Pradeep Banerjee. Colgate leads the category with a 52. announced the launch of Pepsodent Dental Insurance. The initiative not only strengthens Pepsodent s proposition of being a germ-protector but also displays our commitment towards improving oral hygiene for our consumers. Caries and Periodontitis are two of the most widespread dental ailments in India. a first of its kind initiative in the oral care category in India.

which covers the waste generated± taking into account all the different kinds of packaging a product requires. It also takes into account an estimate of the recycling. social and economic considerations. Packaging Their approach: Their approach towards responsible packaging seeks to take into account environmental. reuse and recovery rates of the materials as used in a particular region. Use of leading-edge design techniques and choice of materials to minimise impacts. Meswak and Babool. In 2007 the company created a Sustainable Packaging Steering Team to define a strategy. The approach is based on three elements: 1. Some energy is always required to make packaging and some waste is inevitable even with highly effective reuse and recycling schemes. Guiding principles . This team is building on the work already carried out over the past few years by the Unilever Packaging Group. Assessment via our new vitality metric. Consideration of the whole product. Achieving truly sustainable packaging is a complex challenge. 3.6% share with its three toothpaste brands ± Red. While Colgate and Dabur¶s market shares inched upwards between 2008-09 and 2009-10. not just packaging in isolation 2.the previous year. HUL¶s shares in toothpaste have slipped. Dabur ranks third in the category with a 13.

Reuse: to reuse packaging from the materials we receive at our factories. shrink-wrap Reduce: to reduce the material we use in our packages and ensure they are the optimal size and weight for their contents. But it can also enhance a product's lifecycle impacts. . More on the five guiding principles: (4R) Remove: such to as eliminate. Enhancing design Innovative packaging design can minimise the environmental impact of packaging itself. Renew: renewable to maximise resources the and proportion to of packaging the from recycled feasibility and of investigate technical biodegradable and compostable materials Recycle: to increase the use of recyclable and single-material components in packaging for easy sorting and recycling at the end of its use. Sustainable Packaging Steering Team implements this approach across Unilever. cartons unnecessary and layers of packaging film. For example. outer where possible. renew and recycle. effective packaging can reduce product leakage and consequent waste during transportation.Underlying this strategy are five guiding principles that they seek to apply: remove. reduce. reuse.

They estimate that most of the paper purchased for European business comes either from recycled material or sustainably managed forests. Working with others Effective solutions require a partnership approach. especially in developing and emerging markets. which has over 160 . The approach is to: implement or support work with others design material improvements with litter to explore to create less sachets that use less material impact programmes which create incentives environmental awareness economic models for collection and reuse of our packaging. The company is working with the Rainforest Alliance to develop a sustainable sourcing policy for paper. These may end up as litter where there are no appropriate disposal facilities.Sustainable paper sourcing A significant proportion of packaging relies on paper. the situation in other regions can be very different as sustainable forestry practices differ greatly. While this is an encouraging picture for Europe. Unilever is a founding member of the Sustainable Packaging Coalition.use products. Litter in the developing world A particular concern is the volume of sachets we use to package single.

members. We are also members of EUROPEN (the European Organisation for Packaging and the Environment). Thus Pepsodent is a perfect example of a monopolistic competition in India as it is having all the characteristics of monopolistic competition in it and is adopting all the strategies to sustain in the market. . including packaging producers. users and retailers.

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