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Monopolistic competition has been introduced by American economist Prof. Edward Chamberlin, in his book 'Theory of Monopolistic Competition' published in 1933.
Large Number of Sellers Product Differentiation Freedom of Entry and Exit Selling Cost Absence of Interdependence Two Dimensional Competition Concept of Group Falling Demand Curve
PRODUCTION COMPARISON
The scale of production provides McDonalds a competitive edge. It enables the firmto enjoy the low Raw Material cost.For the analysis, relative stats were taken from local market:
INGREDIENTS Price (in Rs. per burger) Bread Buns: Potato Patties: Mayonnaise : Salad: Paper Wrap, Napkin: Ketchup Pouch : Total ~ 2.50 7.50 1.50 0.50 1.00 1.00 14.00
Product as Barometer
Market penetration
McDonalds has control over price because of their products are differentiated & this advantage pushes them far ahead of others. Rarely Homogeneous In the markets with a large number of sellers, the products of individual firms arerarely homogenous. There are many Burger Points in India like KFC, Nirulas, Local burger points and McDonalds but whenever we hear the word Burger the only namecame in our mind is of McDonalds. Which is highly differentiated McDonalds in themind of consumers
Product Differentiation This product differentiation may reflect materials and workmanship of the good soldin a particular store, or it may be the result of effective advertisement. The manner inwhich the store displays the good can be another source of product differentiation.McDonalds introduced McAllu Tikki Burger where as KFC introduced StudentBurger. Here both sellers are selling the same product with different ingredients.McDonalds's offers drivethrough service while KFC doesn't.Product differentiation is the key to survival. Least costly branded burger fromMcDonalds is capable to beat even the local fast-food joints. Though they are notentirely homogeneous among producers, as McDonalds McAllu Tikki Burger is 99%the same quality food, but the ingredient selection makes it largest selling among thesegment.To survive, there is increasing need for Ads and promotional activities. Aggressiveads, inducing affordable economical like terms, are suited best to lure Indianconsumers, away from Hot Millions, KFC, Mr.Burger Nirulas and various other wellestablished Fast Food joints.
Location
Location is another source of product differentiation. Sellers in a nearby will be morelikely to obtain a consumers business than stores on the other side of town.McDonalds and KFC are not adjacent to each other they are far away from each other same in the case with the local burger points and with McDonalds.
Perfect Competition It assumes that there are a large number of small sellers like local Burger points.Thus the actions of any single seller do not have a significant effect on the other sellers in the market. Also there are many numbers of buyers and that resources can be easily be transferred into and out of the industry.
Monopoly The monopolistic competition resembles the monopoly models in that products of individual firms are considered to be slightly differentiated. That is, the product of one firm is assumed to be a close, but not a perfect, substitute for that of other firms.The result is that each firm faces a demand curve with a slight downward slopeimplying the individual firm has some control over price. Although increasing its price will cause the firm to lose sales, some consumers will be willing to buy at thehigher price because the product is highly differentiated from that of the competitors.Like McDonalds is selling their burger at Rs 20 where as KFC is selling its burger at Rs 25. Number and size distribution of sellers Number and size distribution of Buyers Product differentiation Conditions of early and exit
What
Pillsbury Entry As
Large
Effect
Number Of Sellers
On Demand and Profit On Products Of Individual Companies Further Fell Due To Large Amount Of Fat In The Product
Demand
Market
Again Gaining Up
Different
Strategies Used By Different Manufacturers For Their Product Free, Free From Artificial Stabilizers And Additives, Premium Price, Telling Ingredients, Supply Chain
Fat
Manufacturers