The Monopolistic Competition Of The Shampoo Market Economics Essay

The demand curve shows the relationship between monetary value and measure demanded and is one of the most basic and of import tools for analysing consumer ‘s side of the market.

Monetary value Competition

In monetary value competition, the house ‘s attempt to capture the market by take downing the monetary value since lower monetary value will increase demand. Hence houses try to crush each other in monetary values. Consumers normally shift to the lowest priced trade name hence monetary value rivals will normally hold monetary values really near to each other.

Non – Monetary value Competition

In Non -Price Competition houses try to increase gross revenues and market portion by viing with challengers in countries like stigmatization and advertisement.

The house builds trueness towards the trade name by stressing merchandise characteristics, service, quality etc. The steadfast brand sure that the consumer must be able to separate trade name through alone merchandise characteristics and perceive the differences in trade names and see them as desirable.Another signifier of non-price competition is patents through which the house makes it hard for rivals to emulate the differences between houses and there merchandise. The house tries to extinguish its monetary value difference with its rivals through non-price competition, where by it off-sets the monetary value difference by the sensed benefits of its merchandise.



Demand Curve for two different trade names of the same merchandise

The above image shows the demand curve of two viing houses where one house ‘s demand curve is shifted out to the right by emphasizing typical properties, hence consumers perceive and desire peculiar attributes thereby holding a greater demand for one houses merchandise at the same monetary values.

Example which distinguish Price and Non- Price Competition

For case, two eating houses selling the same sort of culinary art and located right following to each other will hold really similar or may be precisely same monetary values on their Menu Cards. Hence, these eating houses are prosecuting in monetary value competition. Since they are selling precisely the same culinary art and are located right following to each other, if one monetary value to bear down the higher than the other it will lose all its clients. This is a signifier of monetary value competition.

Now see two eating houses selling wholly different sort of culinary arts. One is a Chinese eating house and the other is a Grecian Restaurants, so we can anticipate that even if both are situated right following to each other they might be bear downing wholly different monetary values for their nutrient and still acquiring clients. This is a instance of non-price competition because each eating house has its ain differentiated merchandise that it can afford to sell at a different monetary value and still acquire clients.

Merchandise Development

It fundamentally focuses on making a good trade name image. Non-price competition typically involves promotional outgos, ( such as advertisement, selling staff, the locations convenience, gross revenues publicities, vouchers, particular orders, or free gifts ) , selling research, new merchandise development, and trade name direction costs.


In economic analysis, the most of import index of the grade of competition is the ability of houses to command the monetary value and utilize it as a competitory arm.

Perfect Competition

In perfect competition there are many Sellerss offering the same merchandise hence an single house has virtually no control over the monetary value of its merchandise. That is they all are monetary value takers.

Perfect competition is a theoretical market construction. It is chiefly used as a benchmark against which other market constructions are compared. The industry that best reflects perfect competition in existent life is the agricultural industry.


In Monopoly a house has all the market power because it the lone marketer in this type of market. It has the power to set up the monetary value at whatever degree it wants, capable to possible restraints such as authorities ordinance. It ‘s the masterful monetary value shaper.

In perfect competition and monopoly, there is neither monetary value competition nor non- monetary value competition.

Monopolistic Competition

It is that market signifier which is a signifier of imperfect competition as manufacturers viing each other and selling merchandises that are differentiated from one another ( means merchandises are non precisely similar, they are the replacements ) .In this type of competition houses can act like monopolies with regard to their ain merchandise and utilize the market power to bring forth net income. Finally in Monopolistically competitory markets other houses enter the market and the benefits of distinction lessening with competition ; the market becomes more like perfect competition where houses can non derive economic net income. Some illustrations of industries in market under monopolistic competition include eating houses, cereal, vesture, places, and service industries in big metropoliss.

In Monopolistic competition the market state of affairs could be both Price and Non- Price Competition.An illustration Nokia sells its Music Express phones in somewhat higher monetary value than the other music phones of other companies because of its differentiated characteristics.


Oligopoly is a market state of affairs in which there are merely a few Sellerss ( of merchandises that can be differentiated but non to any great extent ) ; each marketer has a high per centum of the market and can non afford to disregard the actions of the others.

In some state of affairss, the houses may use restrictive trade patterns ( collusion, market sharing etc. ) to raise monetary values and restrict production in much the same manner as a monopoly. There can be monetary value and non-price competition in oligopoly. For illustration: In the Indian market gasoline pumps is an illustration of oligopoly.


In economic sciences, snap is the ratio of the per centum alteration in one variable to the per centum alteration in another variable. It is a tool for mensurating the reactivity of a map to alterations in parametric quantities in a unit-less manner. In add-on to the monetary value and non-price competition, the demand for merchandise depends on snap of demand. There are three types of Elasticity ‘s which could impact market demand from the consumer ‘s side. These are:

– Own Price Elasticity,

– Income Price Elasticity,

– Cross Price Elasticity.

Own Price Elasticity

Own monetary value Elasticity is the per centum in monetary value of that peculiar good to the per centum alteration in quantity demand of that good, other factor staying same. Higher the value of snap of demand more antiphonal is the measure demand to the alteration in monetary value.

OPed = % alteration in monetary value of good / % alteration in quantity demand of that good

In ain monetary value if snap is greater than 1 demand is said to be elastic ; if between nothing and one demand is inelastic and if it is peers to one, demand is unit-elastic.

Income snap of demand

The income monetary value snap is calculated as the per centum alteration in the measure demanded due to the per centum alteration in its income. Higher the value of snap, more antiphonal is the responsive is measure demanded to the alteration in income.

IPed = % alteration in monetary value of income / % alteration in income

Income snap measures whether a good is a normal or an inferior good. When income snap is positive, merchandise considered as normal good, because if income rises people will buy more merchandise. Hence, it is positive. On the other manus in instance of inferior good with the addition in income causes people will buy less merchandise, hence it is negative.

Cross monetary value snap of demand

The cross monetary value snap is calculated as the per centum alteration in the measure demanded of measure demanded by the per centum alteration in the monetary value of some other good. Higher the value of snap, more antiphonal is the measure demanded to the alteration in monetary value.

CPed = % alteration in quantity demand of one good / % alteration in monetary value of other good

Cross monetary value snap is complementary when consumer displacement to other merchandise due to increase in monetary value. Hence, it is negative. For illustration: If monetary value of gasoline additions consumer will buy less figure of autos.

Harmonizing to the entire outgo method ;

Ep & lt ; 1

Monetary value of Ten additions so the outgo on Ten additions. Therefore the outgo and demand on Y lessenings. Cross monetary value snap of X and Y i s negative, therefore they are regards.

Now Taking Ep & gt ; 1… we can happen out the relation of replacements.

Therefore ain monetary value and cross monetary value snap is non wholly independent of one another.

Ans 2

In store name “ All Needs ” which is mini Vishal mega marketplace, one went through the shampoo subdivision of that store, where I observe how the agreement of Shampoos is done. The first thing one notice when they enter the shampoo subdivision are the most normally used shampoos like Fructis, Sunsilk, Clinic Plus, Clinic All Clear, Pantene, Baby Johnsons & A ; Johnsons Shampoo, Head & A ; Shoulders. L’Oreal has its ain separate subdivision. The high monetary value shampoos like Vela, L’Oreal are placed at the topmost subdivision.There was a separate subdivision of Anti-Dandruff Shampoos of assorted trade names.The conditioner and other least used shampoos like Sesa, Ayur, Vatika, Medicare, Halo were displayed at the lower subdivision. Shampoo Sachets and little bottles were displayed at the lowest subdivision.

Retailers ‘ has focus on the demands of the consumer and consequently displayed shampoos. They figured out that work forces demand aroma, childs demand aroma and bubbles, in-between income subdivision demands normal trade names like Sunsilk, All Clear, Head & A ; Shoulders which are easy low-cost and last long. Low income people by and large demand Sachets of shampoos or Herbal shampoo like Himalaya, Chik, Ayur. High income people demand shampoos like L’Oreal, Wella.

Consequently Retailer of ‘All Needs ‘ have arranged the shampoos in the undermentioned mode:

“ Upper section is focused on upper category people and joint household, where 1st they have arranged L’Oreal and so Wella, so 700ml and 400ml bottles of Dove, Head & A ; Shoulders, Sunsilk, Elvie.

Middle Segment is focused on in-between category people where they have largely displayed 200ml, 300ml bottles of Clinic Plus, Sunsilk, Fructis, Himalaya.

There is 1 separate section of Anti-dandruff shampoos of all trade names like Head & A ; Shoulders, Clinic All Clear, Dove Anti-Dandruff. This could be placed either at upper section or at in-between section.

Mixed Segment focal point on lower category subdivision where largely inexpensive and easy low-cost shampoos are displayed which is easy low-cost to all tough does non transport good quality. These shampoos are like all shampoo sachets and easy low-cost shampoo like Vatika, Clinic Plus, Chik, Herbal Shampoos like Aloe-Vera, Ayur, Dabur wellness shampoo.

After analysing the nature of the market, I have observed that people of high income category largely prefer to buy L’Oreal, Joint household purchase 400ml-700ml of Dove, Head & A ; Shoulders, Sunsilk, and Clinic Plus. Middle income Class people largely purchase 200ml-300ml bottles of Pantene, Dove, Sunsilk, Clinic All Clear, Fructis. Low income category people largely purchase sachets of shampoos and 100ml -200ml bottle of Chik, Ayur.

Therefore harmonizing to me there is some degree of income, monetary value and cross monetary value snap in shampoo demand. Therefore the Sellerss are taking all of these into history when finding what to bring forth and how to sell it. For illustration: low income category will likely hold more income sensitive demand and hence the manufacturers have come out with sachets and low monetary value – high volume merchandises. High income people on the other manus likely do non care about the monetary value alternatively they care about the merchandise characteristics, therefore the Sellerss are likely seeking to distinguish themselves on the footing of the merchandise features in this section.

Pricing scheme

There is intense monetary value and non-price competition in the shampoo market. If we look at the two major challenger companies viz. HUL and P & A ; G we notice the tendency that these two companies have been prosecuting in intense monetary value competition. The followers is an extract from a newspaper article:

“ ” WITH the monetary value war in the FMCG industry escalating farther, Procter and Gamble ( P & A ; G ) India on Thursday announced that it has slashed the monetary values of its popular Pantene scope of shampoos by 16 per cent.

An illustration of monetary value competition between houses in shampoo market of similar merchandise. It aims to capture big market portion of the market. In instance of non-price competition, companies spent a immense sum of money on advertizements every bit good as merchandise development. Therefore we have advertizements where celebrated people like film stars claim that utilizing a certain shampoo has benefitted their hair vastly. For Example: Bollywood Television actresses Shilpa Shetty and Neha Dupiya utilizing New advanced ‘ Pantene Pro V ‘ ; Asin Thottumka and Bipasha Basu for ‘Clinic Al Clear – Anti – Dranduff Shampoo ‘ .

Current Market Position

The current shampoo market in India is deserving Rs.930crore. The shampoo incursion is 40 % for urban and 10 % for rural markets. There is a batch of competition possibility in this market due to the immense untapped market.

The Top Companies of Shampoos in India are Hindustan Uniliver Ltd. , ITC ( Indian Tobacco Company, Dabar India, Paras, P & A ; G, Himalaya, L’Oreal Paris. The Top Shampoo trade names are:

‘Normal Shampoos – Clinic Plus, Chik, Dove, Fiama D’wills ‘ .

‘Herbal Shampoos – Ayush, Dabar Vatika, Nyle, Ayur, Himalaya ‘ .

‘Anti-Dandruff Shampoos – Clinic All Clear, Head & A ; Shoulders, Dabar Vatika ADVANCE ‘

‘Premium Shampoos – Revlon Flex, L’Oreal, Wella ‘


Harmonizing to my analysis shampoo market is a monopolistic competition where in market competition many viing manufacturers sell merchandises that are differentiated from one another both in footings of monetary value and trade names. If there are more replacement of shampoos it is more elastic. In this all merchandises are differentiated in some ways, therefore the house will merely be able to sell excess end product by take downing the monetary value. In physical differences of shampoos it could differ in colour, aroma, thickness, bottle design and lathering ability.

Hence each house has its ain clients ( by set uping some consumer trueness ) , modest alteration in the end product monetary value of any individual house has no perceptible influence on the gross revenues of any other house, i.e. one house can raise monetary value without losing all clients. Therefore, in add-on to monetary value competition there is non-price competition. Shampoo shapers have every inducement to seek out and supply merely the characteristics that consumers are truly willing to pay for. By publicizing it attracts people towards their merchandise.