Topic:- Monopoly or monopolistic competition in Deodorant brands? After seeing so many outrageous deodorant advertisements on television we were wondering whether it affects the consumer behavior and we also wanted to find out whether Axe has a monopoly over this market or not. The aim of this assignment is to compare the parent companies of five deodorant brands with the help of ratio analysis. We are going to consider the time period 2007-12. Primary data was collected through a survey which will help us determine what thinking goes behind purchasing a deo between college students and the office going crowd. To conduct the ratio analysis we used secondary data by obtaining the balance sheets of the various companies. The market share and revenues of five major brands- Axe, Adidas, Nivea, Wildstone and Park Avenue will be analyzed.
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition. There are six characteristics of monopolistic competition (MC): * Product differentiation
* Many firms
* Free entry and exit in the long run
* Independent decision making
* Market Power
* Buyers and Sellers do not have perfect information
The deodorant market in India is estimated at Rs 900 crore. Men’s deodorants dominate the category with a 70 per cent share estimated at Rs 650 crore. The segment is expected to grow 25 per cent annually to become three times its current size in the next five years. The overall deodorant market has grown by about 40 per cent a year in the past five years driven by introduction of new brands and aggressive media promotions. The market will continue to grow at 20-25 per cent thanks to low penetration and availability at low price points. Deodorant sales are seasonal — maximum sales happen in the summer months (April to September). About 90 per cent of the market is concentrated in the mass segment (with deodorants priced between Rs 125 and Rs 175 for a 150 ml pack). With new players entering the category at popular price points, the mass segment, with brands like Axe, Adidas, Nike and Reebok, will continue to grow faster and command higher share in the deodorant market. The size of the premium and above segments, which have brands like Burberry, The Body Shop, Kenzo and Ralph Lauren, will double by value in the next five years. (http://www.business-standard.com/india/news/kit-the-men%5Cs-deodorant-market-in-india/443714) Method
We will be using the financial tools of various ratios to determine which company has been more successful in this market. Survey
The survey was conducted on 200 males in the college and office going crowd the results were as follows. 1. Which Deodorant do you use?
As we can see from the above graph that Axe has a majority amongst the people surveyed while the others are below 10%. This gives us a picture of the domination of Axe in this market and same is the case when market share all over India is observed.
2. Reason for buying the particular brand.
From the above graph we find that the decision of people in the age group of 15-25 behind buying a particular deodorant is not its fragrance but its price followed by easy availability and advertising. This shows us that main factor which affects a consumer’s decision, in this...