Characteristics
Exemplification
Product differentiation
The formulae for tooth paste is same, but many companies sell the tooth paste with slight variations in *Colour * Taste (like sweet, plain, salty etc.) *Flavors(Neem, lemon, menthol, mint) *gel type * good aroma(smell) * Tube structure and size.(small, medium ,large packs) *Packing styles.(different designs) * Advertising with new terminology to prove their product better than competitors like (24 hour germ protection, recommended by American dentist association etc.) all top brand tooth paste are using the above techniques to increase their profits. *many firms in market give each firm the freedom to set prices without bothering about competitors. For example Pespsodent could cut prices and increase sales. Without fear that its actions will prompt retaliatory responses from competitors.
Many firms
* Each firm's actions have a negligible impact on the market. E.g. the impact of price change by pepsodent will have negligible impact on market as many buyers and firms (sellers) are present.
Advantages to consumers * Wider choice of similar products with slight variations. * With Product differentiation the consumers gets good quality products.
Disadvantages to consumers * sometimes consumers pay more for the same product with slight variation, thus believing it to be superior product but actually it is more or less same.
*Consumers can be misled by the advertising tactics of company about quality of * Additional the product. features like * Too much product aroma, flavor etc. differentiation can lead to in addition to basic customer confusion while function of the making choices. product. *competition among many firms leads to price reduction. *Competition of many firms increases product quality. *More choice to choose among different brands of many firms. *Can switch to different brands of many firms for a change(when bored with same product over the years)
*Difficult to choose among different brands of many firms. * many firms in market give each firm the freedom to set prices. Sometimes firms may set higher price for products which consumer is already accustomed. And consumer not willing to change brand because he got used to particular brand. E.g. many people are accustomed to Coalgate and not willing to change to other brand even if price increases.
Free entry and exit
Independent decision making
*In the long run there is free entry and exit. There are numerous firms waiting to enter the market each with its own "unique" product or in pursuit of positive profits and any firm unable to cover its costs can leave the market without incurring liquidation costs. This assumption implies that there are low startup costs, no sunk costs and no exit costs. The cost of entering and exit is very low. * New foreign brand tooth paste companies can enter the market at low cost. Eg sensodyne entered Indian market recently and at the same time loss making can leave the market .Eg .Loss making Balsara tooth paste exit the market by selling its brands to Dabur. Each MC firm independently sets the terms of exchange for its product. The firm gives no consideration to what effect its decision may have on competitors. The theory is that any action will have such a negligible effect on the overall market demand that an MC firm can act without fear of prompting heightened competition. In other words each firm feels free to set prices as if it were a monopoly rather than an oligopoly. Eg Close up can independently take decision to increase price and quality of the products without much effect on the market and competitors.
*By entry of new companies the customers can get new variety of products.
*If any brand makes exit and customer is already accustomed to it then they have to make switch to the other *By entry of new brands. players the competition *As more players enter increases which leads to market, to attract increase in quality and customers companies reduction in price. provide products at lower price, once *As entry costs are low, people get accustomed hence cost of to product then firms production is low which will increase the price at implies the cost of their will. products will also be The best example is low. babool, initially low price, which later increased price after some time of its entry.
*If company wants to increase sales it will lower the price, hence customer gets benefit
*In vice versa case if company increases price then customer has to pay more price.
*.Independently taking decisions to come up with new variations in product according to the customer requirement.
*If price increases, and customer is accustomed to particular brand it is difficult to change to other brand.
Managerial Economics
Industry –Tooth paste (FMCG).
S.No
Parent Company
Brands
1.
Colgate Palmolive
Coalgate Total, Coalgate Max fresh, Coalgate herbal, Coalgate active salt, Coalgate Max white
2.
Hindustan Unilever Limited
Close up lemon mint, close up deep fresh, close up fresh gel. Pepsodent 2 in1, Pepsodent germicheck, Pepsodent white, Pepsodent supersalt. Babool, Meswak herbal.
3.
Dabur
4.
GlaxoSmithKline
Sensodyne pro relief, Sensodyne sensitive
5.
ANCHOR health care
Anchor white, Anchor gel
6.
VICCO labs
Vicco vajradanti, Vicco ayurvedic herbal.
