Introduction

The biscuit industry is a part of the larger food processing industry and is concerned
with the manufacturing of various types of biscuits and cookies. Biscuits are a popular
snack item all over the world, and the industry has seen significant growth in recent
years due to increased demand for convenience foods and changing consumer
preferences.

The biscuit industry involves a range of processes, including the preparation of dough,
baking, packaging, and distribution. Manufacturers typically use a variety of
ingredients such as flour, sugar, eggs, milk, and flavourings to create different types of
biscuits. The industry also involves the use of advanced technology and equipment to
ensure consistency in quality and production efficiency.

The biscuit industry caters to a broad customer base, including retail consumers, cafes,
and restaurants. Biscuits are popular among people of all ages and are consumed as a
snack item or as a part of a meal. The industry is highly competitive, with many
players offering a variety of products to meet the diverse needs of customers.

Overall, the biscuit industry is a significant contributor to the global food economy
and is expected to continue to grow in the coming years. The Biscuit production
market is a Monopolistic competition Market

What is monopolistic competition market?

Monopolistic competition is a type of market structure in which many firms compete

by offering similar, but not identical, products or services. In this market, firms have
some degree of market power, which means that they can influence the price of their
products or services. However, because there are many firms competing in the market,
no single firm has complete control over the market or the price.

In a monopolistic competition market, each firm tries to differentiate its products or

services from those of its competitors through branding, advertising, product design,
and other means. This differentiation allows firms to create a perceived unique value
for their product or service, and to charge a premium price for it.
One key characteristic of monopolistic competition is that firms are able to enter and
exit the market relatively easily. This means that new firms can enter the market and
existing firms can exit the market without facing significant barriers to entry or exit.

Monopolistic competition is found in many industries, such as restaurants, clothing,

and electronics. It is often contrasted with perfect competition, where many firms
compete by offering identical products or services, and with monopoly, where a single
firm has complete control over the market.

Features of Monopolistic Competition

 Many buyers and sellers: Like perfect competition, there are many buyers and
sellers in the market. However, there are fewer in Monopolistic Competition.
Consumers have a wide variety of choices which is not offered by other market
structures such as a monopoly or oligopoly.
 Slightly differentiated products: Firms that operate in a monopolistic market
have very similar products but are slightly differentiated to add value over the
competition. Clothing markets are a prime example. There are many types of
clothes, each with a slightly different style. This differentiation can be seen in
four ways: Physical, Marketing, Human capital, and differentiation through
distribution.
 Maximise profits: Firms in a monopolistic market seek to maximize profit. In
economics, this is where marginal costs equal marginal revenue. By doing so,
the firm produces right up to the point whereby it becomes unprofitable to
produce any more goods. To produce any further would create a loss for the
firm. So up to this point, the firm is making a profit on producing an additional
unit to sell.
 Low barriers to entry and exit: new entrants are easily able to enter as there
are none or very insignificant barriers to entry. The cost to start a new business
is low and the risk involved in failing is also comparatively low. So, the
incentive to enter the market is high, whilst few tools are needed. In other
words, there are many more people who are able and willing to compete.
 Potential supernormal profits in the short term: Monopolistic firms can
make supernormal profits if they can benefit from a gap in the market. Looking
at clothing, for example, one company may create a new design that has never
been done before.
If it goes down a hit with the customers, the firm benefits from high levels of
demand. These lead to supernormal profits in the short-term until other firms
become aware. They then try to make similar products, thereby reducing the
level of profits of the original firm.
 Normal profits in the long run: Over the long-term, profits shrink as new
entrants enter the market to compete. Due to low barriers to entry, new firms
can see any supernormal profits that are made and come in to take their share.
So, whilst some firms may benefit from new products in the short-term, these
supernormal profits are brought back down again with the introduction of
competition.
 Imperfect information: In perfect competition, the customer can gather
information relatively easily as all products are the same. At the same time, the
cost to gather information in a monopoly structure is relatively low as there is
only one firm. By contrast, in monopolistic competition, many firms offer
slightly different products – which makes information gathering more time
consuming and costly. Insurance is a prime example – which is why several
comparison sites have come into existence.
 Non-price competition: The market offers slightly different products, so
businesses compete on product/service quality. This can come through shorter
wait times or more attentive employees. At the same time, firms will also
compete on other non-price factors such as location, branding/advertising, and
quality.
Graph of Monopolistic Competition

Short-run Curve: In the short-run, firms in monopolistic competition are able to

make a supernormal profit .As with all profit maximising firms, they will continue to
produce until Marginal Revenue equals Marginal Cost. This means that if it is no
longer profitable to produce a product, then the business will not do so. As we can see
from the graph below, average costs increase as new entrants enter the market. This is
because firms are unable to benefit from economies of scale.

To begin with, the firm making supernormal profits will increase production so that
Marginal Costs = Marginal Revenue. However, when new businesses enter, they will
take customers away; meaning the original firm will have to reduce production. In
turn, this can lead to a more inefficient production process which increases the
average cost to all businesses.
Long-run curve: Over the long-run, average costs increase due to higher levels of
competition, and profits fall to normalised levels. Firms will still aim to profit
maximise, thereby increasing production until Marginal Revenue (MR) = Marginal
Cost (MC).

This is shown on the diagram where MR and Long-run Marginal Cost (LRMC)
intersects. The firm will then sell at the price at the point where it intersects the
demand curve – which is at price PL. The long-run average costs then go through this
point. At this point, the firm will make no profit in the long run.
Case study of a Biscuit company

The biscuit industry is a multi-billion-dollar industry that encompasses a wide range

of products such as sweet biscuits, savoury biscuits, crackers, and cookies. Let's look
at a case study of a biscuit company, "Country Farmer."

Country Farmer is a leading biscuit manufacturing company that has been in the
industry for the last 15 years. The company offers a range of biscuits, including sweet,
savoury, and healthy options. Their products are available in supermarkets and retail
stores across the country.

Marketing Strategy:

Country Farmer focuses on creating a strong brand image by emphasizing the quality
and taste of its products. The company invests heavily in advertising and promotional
activities to increase brand awareness and customer loyalty. They also collaborate
with popular bloggers and social media influencers to promote their products to a
wider audience.

Product Development:

Country Farmer continuously innovates and develops new products to meet the
changing demands of the market. They conduct extensive market research to identify
consumer preferences and trends. Based on this research, the company introduces new
flavours and product lines. For instance, they recently launched a range of gluten-free
and vegan biscuits to cater to customers with dietary restrictions.

Manufacturing and Supply Chain:

Country Farmer has a modern manufacturing facility equipped with state-of-the-art

machinery to ensure consistent quality and efficiency in production. The company
sources its raw materials from reliable suppliers and maintains strict quality control
measures throughout the manufacturing process. They also have a well-organized
supply chain that ensures timely delivery of products to their retail partners.
Financial Performance:

Country Farmer has shown steady growth in revenue over the years. The company's
financial success can be attributed to its strong brand image, innovative product
development, and efficient manufacturing and supply chain management.

Conclusion:

The biscuit industry is highly competitive, and companies need to continuously

innovate and adapt to stay ahead of the competition. Country Farmer has managed to
establish itself as a leader in the industry by focusing on quality, innovation, and
customer satisfaction. The company's marketing strategy, product development,
manufacturing, and supply chain management have all contributed to its success.
Features of Monopolistic Competition in Biscuit Industry

Product differentiation

There is product differentiation in the biscuit industry. Biscuits come in various

flavours, shapes, sizes, textures, and packaging, which are all part of product
differentiation. Companies try to differentiate their products from those of their
competitors by using different ingredients, adding unique flavours, creating innovative
packaging, and advertising their product's health benefits, among other things.

For example, some companies produce biscuits that are gluten-free, organic, or sugar-
free, while others use natural ingredients or add vitamins and minerals to their
products. Some biscuits are marketed as snacks for children, while others are
marketed as healthy snacks for adults. The packaging of biscuits can also be different,
with some companies using bright and colourful packaging to appeal to children,
while others use more sophisticated and elegant packaging to appeal to adults.

Product differentiation is an important strategy for biscuit companies as it allows them

to stand out in a crowded market and attract customers with different preferences and
needs.

Barrier to entry

One of the most significant barriers is the need for high capital investment in
manufacturing equipment and facilities. Biscuit production requires specialized
equipment such as mixers, ovens, and packaging machines, which can be expensive to
purchase and maintain. Established companies have already made these investments,
giving them a cost advantage over new entrants.

Another barrier is the need for economies of scale. Biscuit production requires high
volume to achieve profitability, and established companies have already built up their
production capacity to take advantage of these economies of scale. New entrants may
find it difficult to compete with the low production costs of established players.
Established companies also have brand recognition and customer loyalty, which can
be difficult for new entrants to overcome. Consumers are often loyal to their favourite
brands and may be hesitant to switch to a new, unknown brand.

Finally, there are regulatory barriers to entry, such as food safety and labelling
regulations. New entrants must comply with these regulations, which can be time-
consuming and expensive, and may require specialized knowledge and expertise.

Advertising and marketing

Biscuits are a popular snack food that is consumed by people of all ages, and the
industry is highly competitive. To stand out in the market, companies invest heavily in
advertising and marketing campaigns to promote their products and create brand
awareness

Marketing tactics used by biscuit companies include television commercials, social

media campaigns, print ads, in-store displays, and sponsorships of events and sports
teams. They also offer discounts, free samples, and other promotional deals to attract
customers and encourage them to try their products.

Overall, the heavy advertising and marketing in the biscuit industry is driven by the
need to increase sales and market share in a competitive market. While it can
sometimes be overwhelming, consumers have the power to make informed choices
about the products they buy and should always consider the nutritional value of the
snacks they consume.

Large number of buyers and sellers

Biscuits are a popular snack food and are consumed by people of all ages across the
globe. As a result, the demand for biscuits is high, and there are many manufacturers
and suppliers vying for a share of the market.

In addition to the large number of manufacturers and suppliers, there are also various
types of biscuits available in the market, such as sweet, savoury, and healthy varieties.
This creates a diverse range of products that cater to different tastes and preferences of
the consumers.
The presence of many buyers and sellers in the biscuit industry can be beneficial for
consumers as it leads to increased competition, which in turn can drive down prices
and improve the quality of the products. However, it can also create challenges for
smaller businesses that may struggle to compete with larger, established companies.

Non-price competition

There is non-price competition in the biscuit industry. Non-price competition refers to

competition among firms that involves advertising, product differentiation, brand
loyalty, and other forms of marketing activities that are not directly related to price.

In the biscuit industry, companies often compete through product differentiation,

which involves creating unique features and qualities for their products to make them
stand out from competitors. For example, some companies may offer biscuits with
unique flavours, textures, or shapes.

Companies also compete through advertising and marketing campaigns, which can
create brand recognition and loyalty among consumers. Advertising can also be used
to highlight the unique features of a product or to emphasize the company's
commitment to quality.

Additionally, companies may compete through distribution and promotion strategies,

such as offering free samples or discounts, sponsoring events, or partnering with other
companies to promote their products.

Limited competition

Advantages:

With limited competition, a biscuit manufacturer can enjoy higher profit margins as
there are fewer players in the market to drive prices down. The manufacturer can also
focus on product innovation and differentiation to capture a larger share of the market
without worrying too much about pricing pressures from competitors. It may be easier
for the manufacturer to secure shelf space in stores and supermarkets, as there are
fewer competing brands.
Disadvantages:

Limited competition can lead to complacency and a lack of innovation, which can hurt
the manufacturer in the long run if new competitors enter the market with better
products or pricing strategies. A lack of competition can also result in higher prices
for consumers, as there are fewer options for them to choose from. The manufacturer
may also face challenges in expanding its market share, as it may already have
captured most of the available demand in the market.