Difference Between Price And Non Price Competition Economics Essay

Q. Clarify the difference between price and non-price competition and elasticity and the contexts which bring about it. (50)

Visit an area excellent market or departmental store. Focus on the section where shampoos are shown on the market. Observe and assess the area allocated, brands, different brands under the same company, charges, etc. Elaborate on the economical concepts based on your observation and learning. (50)

MARKET: Market is a place where customers and vendors interact to operate goods, services, contracts and instruments for the money or barter system. Consumer oriented companies should comprehend the value consumers give for a product the marketers use this for pricing something. On the market we can see two types of competitions.

In order to reduce the potential risks and boost the profits a company has two ways

Price competition.

Non price competition.

Price competition is only competing based on price which may involve price chopping. This may not involve in maximization of profits because price cut by one organization will induce others to do the same, in a way every player is more or less having the same market talk about and no income or less profits. A monopolistic market is very competitive and a price competition will are present or can maintain only in the short run like the monopolist, the monopolistically firm maximizes short run profit by following a MC=MR guideline. As under the monopoly, if the price equals the ATC curve, the company earns a short run normal revenue. If the purchase price is below the ATC curve, the company suffers a short run loss, and when the price is below the average varying cost curve curve, the firm shuts down.

In the words of Nicolson "Non price competition is the competition by sellers for sales through apart from price cutting".

In the long run the monopolistically competitive firm, unlike a monopolist, will not earn an monetary revenue in the long rum. Alternatively, such as a perfect competition, the monopolistically competitive organization earns only a normal profit in the long run. Associated with that the short run earnings and easy access attract new organizations into the industry. So in the long run competition is much more likely using the non

price factors. This identifies the try to attract the clients through changing the grade of the product, changing the marketplace place, intense publicity service etc. Non price competition is the competition through product differ.

Coming to the oligopoly market, because each oligopolist is a significant factor in the market, oligopolist's prices decisions are mutually interdependent. The purchase price one company asks significantly affects the others' sales. Hence when one oligopolistic company reduces it price, all others can be expected to lessen theirs, to prevent erosion of the market stocks. The oligopolist may have to second-guess other manufacturers' costs policies-how they will react to a big change in cost, and what that may mean for its own policy. In fact,

oligopolistic costs decisions resemble techniques in a chess game. The thinking may be so complicated that no one can predict exactly what will happen. Thus, ideas of oligopolistic price willpower have a tendency to be restricted almost only to the brief run.

Another line of thought due to the kinked demand curve model is that, if organizations are inhibited from changing their price competitive for some reason because of their conjectures about rivals reaction, they'll convert instead to non price types of competition, such as advertizing and product deviation, either individually or in blend. However, if a firm A boosts its advertising expenses, and that costs is successful in attracting more buyers, there could be some increase in the full total market for the merchandise but the primary gains will be at the trouble of rival's products. Competing organizations can, therefore be expected to complement any upsurge in advertising expenditure in an attempt to hold on to their market any increase in advertising expenditure so that they can sustain their market share for a similar reason that they might match any price reductions. In the long run, all organizations would be confronted with higher advertising costs, however, not much to show for this in term of extra sales or income. Conversely, if A lower its advertising costs, it would lose sales to its competition who, having benefited from the situation, would appear to own little motivation to

match A's reduced level of expenditure. So again, it could be argued that changes in either path from the position quo will tend to be unprofitable.

However, it can also be argued that organizations will tend to be more ready to risk a rise in advertising expenses when compared to a price reduction. A price reduction is, in a way, a crude weapon that may be easily matched by rivals, whilst advertising has a far more qualitative dimension that can less easily be countered. If a firm, therefore, has a good advertising idea or new improved upon product to advertise, it might be willing to attempt an advertising campaign to exploit the situation even in the almost certain knowledge that its action would provoke retaliation from challengers, whilst remaining reluctant to engage in a cost warfare. The qualitative aspect to advertising may also lead company to be less prepared to be to act collusively, either formally or informally to reduced advertising expenditures than to rise price. Hence the issues raised in receving two portions will tend to be less constraining influence on advertising and product habit than on price change.

ELASTICITY

The change in demand or source curve relative to the change in price is called as curve's elasticity. Different products have different elasticies depending on the essentiality the elasticity differs from product to product. The merchandise which have the features of reaching the necessities are not so venerable to price, because people any way would buy those products.

A good is said to be highly elastic if an iota change in cost leads to great change in demand or supply. Just as an inelastic good is something where any change in cost would not result the demand.

The formula for elasticity is

Elasticity = percentage change in variety / ratio change in price

If elasticity (e) >= 1, then the curve is said to be elastic.

If e < 1, then your curve is said to be inelastic.

Basically the demand curve is a poor slope, and if there is a large reduction in the quantity demanded with a tiny upsurge in price, the demand curve appears flatter, or even more horizontal. This flatter curve means that the nice or service in question is flexible.

The inelastic demand small change in volume anticipated to large change in cost.

Elasticity for resource : change in cost results in a huge change in the amount supplied. Elasticity in this case would be greater than or add up to one.

big change in cost only ends up with a change in the number supplied.

Determinants of Elasticity
Many factors affect elasticity, a few of which are

Necessities versus Luxuries - To find a substitute is incredibly difficult so demand will change very less.

Availability of Close Substitutes.

Definition of the Market - bigger the marketplace more is the opportunity of finding the substitutes

Time Horizon.

Relative Size of Purchase.

SHAMPOO INDUSTRY:

Hair maintenance systems consist of hair essential oil, shampoos, conditioners and locks color. The size of the shampoo market reached Rs 850 crore and 30, 000 tonnes in amount terms. The shampoo Market is the speediest growing item with in personal product category and they have expanded by practically two and a half times in last couple of years, although market is confined mainly to the urban locations in India.

Shampoo usage in India:

shampoos stay in low penetration category when compared with soaps and detergents whose penetration level is more than 90 percent. As per industry estimates, the metropolitan Markey penetration of shampoo was about 36 % whereas in the rural market, use was of the order of 12 per cent of the total population. Thus, there's a considerable range for development by switching non-users.

In respect to operate, shampoo are of the next types

a) All goal shampoos

b) Special shampoos for dry, normal, oi!y, tinted, and bleached mane designed on the basic principle that these hair conditions require special products

c) Baby shampoos produced to be nonsmarting to the eyes

d) Medicated dandruff shampoos

e) Color shampoos

Factors for selecting a shampoo(Consumer point of view)

Ease of application

Lather

Manageability

Fragrance

Luster

Low degree of irritation.

Good stability.

Economical.

Look and feel of shampoo.

Benefits provided by shampoo.

Major barriers shampoo use within India are

common beliefs that shampoos contain chemicals therefore it could ruin hair;

shampoo is viewed more as a glamour value and lack of conviction about the functional effectiveness of shampoo.

Until pouch packet was introduced, a large section of the marketplace found even the price quite high rather than affordable.

Over the previous decade roughly, marketers have attempted different possible tests to increase there market penetration. Initially major players have tried to create recognition and dispel some of the common myths by heavy advertizing. Among many innovative strategies like offering of

shampoo for particular major of mane or special formulations, small size packs, especially launch of sachets etc. , change from the glass bottles to plastic material bottle pouch load up lowering of device price seams to acquire been most effective. For instance, CavinKare presented a 50 paise sachet of Chik shampoo, when almost every other shachets were sold at Rs 2. Such a lower price strategy was an instant success. HUL has also offered its 50 paise load up for Lux shampoo. The says the 30 ml bubble pack for Medical center Plus, is a cost effective alternate for sachet users.

Innovation in features:

The creation of any anti dandruff shampoos was the first step. Medical clinic plus, a phrase 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, dried, and oily locks. P&G' s Mind & Shoulder's, Menthol and Pantene Lively Clean offer different function advantages to the mark users. This plan permit those brands to gain quantity as well as earn better margin.

The company that we picked is P&G (Proctor & Gamble) which has the second greatest market show in India. WHILE I seen the departmental store I ran across a complete rack of P&G products and when I keenly witnessed the shampoo's section there were three different brands. The first one was Head & Shoulder blades which basically is aimed at fixing dandruff problems, when spoken with people I came up to know that almost all of them suffer from dandruff problems and their choice of selecting this particular shampoo was mainly as a result of availableness and the trust they have in the business no wonder the company enjoys such a huge market share. This particular brand also offers a pinch of conditioner features which is also a justification why people choose this.

The second brand I ran across was P&G's Pantene which usually targeted at a niche market however I can confidently say that people's selection of any shampoo is not on price, this is very dangerous to summarize but this is too evident in my own review. The other observation that we made was many were hating Pantene because of the more utilization of chemicals that happen to be harmful to mane this is profited by P&G by

reducing the quantity of chemicals used. The demand curve of Pantene is dropping in the modern times and the only reason that I found was the use of chemicals that in turn lead to hair loss.

The third brand that was a bit difficult to find was P&G's brand Rejoice my analysis shows that very few people were opting for rejoice, in an other analysis Rejoice was ranked as number 1 1 in Asian market. The normal characteristics, which were visible, are like low price and attractive cover image.

Key Strategies Soaked up:

As we now that P&G is overdue entrant in to the shampoo segment so it is main aim for was to increase its market show. During it's time of accessibility HUL was a huge company and got maximum market show in shampoo portion, so to compete with HUL's product P&G released a low price shampoo product. We can see that a Price competition took place. As time continued P&G increased it's products category to remain competitive intensely with HUL which competition can be called as Non-Price competition. P&G have shampoo products catering to a myriad of segments. ONCE I stopped at the departmental store the products that were targeted for the niche market occupied a considerable amount of space in accordance with the merchandise that serve the needs of mass market. Pantene and Mind & Shoulders will be the products specially for the niche market and Rejoice was for the mass market.

Head and Shoulder coming in at Rs. 62 for 100ml and then for 200ml Rs. 120 and Rs. 3 for sole sachet which has around 6ml. Pantene shampoo sachet price is of about Rs. 3, for 100ml pack the purchase price is Rs. 89, for 200ml pack the purchase price is Rs. 169, for 400ml load up the purchase price is Rs. 325. Rejoice shampoo sachet price is around Rs. 2 as well as for 100ml pack the price is Rs. 33.

Space allocated: Two major key points in the success of retail market are sales and profits. The sales size and the success can be assessed in the quantity of space used for the particular product. Depending upon the product category the merchandise are allocated. The amount of space is allocated based on the previous performance of this product.

If the demand for a specific product keeps growing then more space is allocated product or else the space allocated is reduced. Allocating the space in line with the number of sales done. Allocation of the area for this product differs from store to store. The characteristics of the product determine the space allocation in both quality and quantity of space.

CONCULSION:

My enthusiastic observations made me to comment that Pantene has high price and low demand, Head & Shoulders likes an equilibrium price and Rejoice has a very less demand in comparison with other P&G products which shows that supply is also on the lower side and hence less option of Rejoice shampoo. Being it a Oligopolistic market P&G spends a whole lot of amount on Non Price factors to truly have a Non-Price competition with it's main competitor HUL.

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