Price And Non Price Competition In Shampoo Industry Economics Essay

terms And Non Price Competition In Shampoo Industry Economics assayPrice competition is nonhing nonwithstanding competing on the basis of toll which whitethorn involve harm cutting. This may not involve in maximization of winningss because expenditure cut by one fast(a) result force another(prenominal)s to do the same, in a way some(prenominal) player is much than or little having the same commercialise luck and no profits or little profits. A monopolistic trade is very competitive and a footing competition will endure or sewer sustain only in the brief ply like the monopolist, the monopolistically firm maximizes brusque fit profit by sp ar- measure activity the MC=MR rule. As under the monopoly, if the equipment casualty extend tos the ATC contract, the firm authorises a short run normal profit. If the impairment is be low-toned the ATC trim down, the firm suffers a short run loss, and if the price is below the average variable cost curve curve, the firm shuts down.In the words of Nicolson Non price competition is the competition by sellers for sales by means of other than price cutting.In the spacious run the monopolistically competitive firm, unlike a monopolist, will not earn an economic profit in the long rum. Rather , like a perfect competitor, the monopolistically competitive firm earns only a normal profit in the long run. The modestness is that the short run profits and easily entry tempt new firms into the industry. So in the long run competition is more likely using the non price factors. This refers to the attempt to attract the customers through changing the caliber of the proceeds, changing the grocery parentage place, intense promotion utility etc. Non price competition is the competition through output differ.Coming to the oligopoly mart, because each oligopolist is a major factor in the market, oligopolists determine decisions argon mutually interdependent. The price one producer asks significa ntly affects the others sales. thus when one oligopolistic firm trims it price, all the others can be expected to lower theirs, to prevent erosion of their market shares. The oligopolist may open to turn-guess other producers pricing policies-how they will react to a vary in price, and what that superpower mean for its own policy. In fact, oligopolistic pricing decisions resemble moves in a chess game. The thinking may be so complicated that no one can predict what will happen. Thus, theories of oligopolistic price determination fly the coop to be curb almost exclusively to the short run.Another transmission channel of thought arising from the kinked need curve model is that, if firms are inhibited from changing their price competitive in some way because of their conjectures about rivals re exertion, they will turn instead to non price forms of competition, such as advertizing and merchandise variation, any separately or in combination. However, if a firm A increases its advert expenditure, and that expenditure is successful in attracting more buyers, there may be some increase in the total market for the harvest but the main gains will be at the expense of rivals products. Competing firms can, therefrom be expected to match any increase in advertising expenditure in an attempt to retain their market any increase in advertising expenditure in an attempt to retain their market share for exactly the same reason that they would match any price reducings. In the end, all firms would be faced with higher advertising costs, but not much to show for it in term of extra sales or profits. Conversely, if A reduced its advertising expenditure, it would lose sales to its competitors who, having benefited from the situation, would front to have little in centive to match As reduced take of expenditure. So again, it can be argued that changes in either direction from the post quo are likely to be unprofitable.However, it can also be argued that firms ar e likely to be more willing to risk an increase in advertising expenditure than a price reduction. A price reduction is, in a sense, a crude weapon that can be easily matched by rivals, whilst advertising has a more qualitative proportionality that can less easily be countered. If a firm, therefore, has a heavy advertising idea or new improved product to market, it magnate be willing to embark on an advertising campaign to consummation the situation even in the almost certain experienceledge that its action would provoke retaliation from competitors, whilst take a breathering reluctant to engage in a price war. The qualitative dimension to advertising may also track firm to be less willing to be to act collusively, either formally or informally to reduced advertising expenditures than to rise price. consequently the issues raised in receving two sections are likely to be less constraining influence on advertising and product behavior than on price change.ELASTICITYThe change in demand or tote up curve relative to the change in price is called as curves e furthermosticity. several(predicate) products have dissimilar elasticies depending on the essentiality the elasticity differs from product to product. The products that have the functionality of meeting the necessities are not so venerable to price, because people any way would buy those products.A good is said to be passing elastic if an iota change in price leads to great change in demand or supply. In the same way an inflexible good is something where any change in price would not work the demand.The equation for elasticity isElasticity = percentage change in bill / percentage change in priceIf elasticity (e) = 1, then the curve is said to be elastic.If e Basically the demand curve is a negative slope, and if there is a large decrease in the sum of money demanded with a mild increase in price, the demand curve looks flatter, or more horizontal. This flatter curve means that the good or serv ice in question is elastic.CUsersSrujanaDesktopuntitled folder 2economics12.gifThe inelastic demand small change in measuring due to large change in price.Duntitled folder 2economics13.gifElasticity for supply change in price results in a huge change in the do supplied. Elasticity in this case would be greater than or equal to one.Duntitled folder 2economics14.gifbig change in price only results in a minor change in the quantity supplied.CUsersSrujanaDesktopuntitled folder 2economics15.gifDeterminants of ElasticityMany factors influence elasticity, some of which areNecessities versus Luxuries To find a substitute is extremely difficult so demand will change very less.Availability of Close Substitutes.Definition of the commercialise bigger the market more is the chance of finding the substitutesTime Horizon. carnal knowledge Size of Purchase.SHAMPOO INDUSTRYHair care products consist of copper oil, laves, conditioners and hair color. The size of the shampoo market reached Rs 8 50 crore and 30,000 tonnes in volume terms. The shampoo Market is the fastest growing item with in personal product socio-economic class and it has expounded by nearly two and a half(prenominal) times in last few years, though the market is confined principally to the urban locations in India.Shampoo fashion in Indiashampoos remain in low penetration category when compared with soaps and detergents whose penetration level is more than 90 percent.As per industry estimates, the urban Markey penetration of shampoo was about 36 per cent whereas in the rural market, usage was of the order of 12 per cent of the total population. Thus, there is a abundant scope for expansion by converting non-users.In respect to function, shampoo are of the following typesa) All determination shampoosb) Special shampoos for dry, normal, oiy, tinted, and bleached hair formulated on the principle that these hair conditions require special productsc) Baby shampoos formulated to be nonsmarting to the ey esd) Medicated dandruff shampoose) seeming shampoosFactors for selecting a shampoo(Consumer point of view)Ease of applicationLatherManageability pleasantnessLusterLow level of irritation.Good stability.Economical.Look and feel of shampoo.Benefits offered by shampoo.Major barriers shampoo use in India arecommon beliefs that shampoos backtrack chemicals and so it could damage hairshampoo is viewed more as a glamour value and lack of conviction about the functional utility program of shampoo.Until pouch packet was introduced, a large section of the market assemble even the price quite high and not affordable.Over the last decade or so, marketers have tried different possible experiments to expand there market penetration. Initially major players have tried to bring out awareness and dispel some of the myths by heavy advertizing. Among many innovational strategies like offering of shampoo for particular major of hair or special formulations, small size packs, especially introducti on of sachets etc., shift from the screwball bottles to plastic bottle pouch pack lowering of unit price seams to have been most effective. For instance, CavinKare introduced a 50 paise sachet of Chik shampoo, when most other shachets were change at Rs 2. Such a lower price strategy was an winking success. HUL has also offered its 50 paise pack for Lux shampoo. The claims the 30 ml house of cards pack for Clinic Plus, is a cost effective alternative for sachet users.Innovation in featuresThe creation of an anti dandruff shampoos was the first step. Clinic plus, a word known to every one has bought the first anti dandruff shampoo in to the market. HUL experimented with Sunsilk to make different products for normal, dry, and oily hair. PG s cope Shoulders, Menthol and Pantene Lively Clean offer searching function benefits to the target users. This strategy enable those imperfections to gain volume as well as earn better margin.The company that I selected is PG (Proctor Gamble) which has the second largest market share in India. When I visited the departmental store I came crosswise a whole rack of PG products and when I keenly discovered the shampoos section there were three different brands. The first one was creative thinker Shoulders which basically aims at solving dandruff problems, when spoken with people I came to know that most of them are suffering from dandruff problems and their choice of selecting this particular shampoo was mainly because of the availability and the trust they have in the company no interrogate the company enjoys such a huge market share. This particular brand also has a pinch of conditioner features which is also a valid reason why people select this.The second brand I came across was PGs Pantene which mostly targeted at a niche market however I can confidently say that peoples choice of any shampoo is not on price, this is very dangerous to conclude but this was too homely in my study. The other observation that I made was many were hating Pantene because of the more usage of chemicals which are harmful to hair this can be profited by PG by reducing the amount of chemicals used. The demand curve of Pantene is falling in the recent years and the only reason that I found was the usage of chemicals that in turn lead to hair loss.The third brand that was a bit difficult to find was PGs brand Rejoice my study shows that not many people were opting for rejoice, in an other study Rejoice was be as number 1 in Asian market. The typical characteristics, which were evident, are like low price and attractive cover image.Key Strategies engrossedAs we now that PG is late entrant into the shampoo segment so its main target was to increase its market share. During its time of entry HUL was a huge company and had maximum market share in shampoo segment, so to compete with HULs product PG released a low price shampoo product. We can see that a Price competition took place. As time went on PG increased its produ cts category to compete heavily with HUL and this competition can be called as Non-Price competition. PG have shampoo products catering to all kinds of segments. When I visited the departmental store the products that were targeted for the niche market occupied a con spatial relationrable amount of space relative to the products that cater the needs of mass market. Pantene and capitulum Shoulders are the products specially for the niche market and Rejoice was for the mass market.Head and Shoulder priced at Rs.62 for 100ml and for 200ml Rs.120 and Rs. 3 for single sachet which contains around 6ml. Pantene shampoo sachet price is of about Rs. 3, for 100ml pack the price is Rs. 89, for 200ml pack the price is Rs.169,for 400ml pack the price is Rs. 325. Rejoice shampoo sachet price is of about Rs. 2 and for 100ml pack the price is Rs. 33.Space allocated Two major principles in the success of retail market are sales and profits. The sales volume and the profitability can be measured in the amount of space consumed for the particular product. Depending upon the product category the products are allocated. The amount of space is allocated based on the previous surgical operation of the particular product.If the demand for a particular product is growing then more space is allocated product or else the space allocated is decreased. Allocating the space concord to the number of sales done. Allocation of the space for the particular product differs from store to store. The characteristics of the product determine the space allocation in both quality and quantity of space.CONCULSIONMy keen observations made me to comment that Pantene has high price and low demand, Head Shoulders enjoys an equilibrium price and Rejoice has a very less demand when compared to other PG products which shows that supply is also on the lower side and hence less availability of Rejoice shampoo. Being it a Oligopolistic market PG spends a lot of amount on Non Price factors to have a Non-Pri ce competition with its main rival HUL.