ECON 331: INDUSTRIAL ORGANISATION
TOPIC: ANALYSIS OF THE NEWSPAPER ARTICLES
1. PRODUCT DIFFERENCIATION
“Diversity is the staff of economic life.” The theoretical tool of dealing with diversity is product differentiation. (Rosen.2002). It is an important component of imperfectly competitive strategic interaction. Sometimes, producers create physical and psychological differences between goods that are nearly identical so that consumers do not regard them as identical products. Product differentiation is most commonly done in the FMCG sector in products such as soaps, cereals, detergents, etc. It results in greater number and higher quality of the available products.
There are two types of differentiation: natural and strategic. Natural differentiation arises due to sources like geographic variation, new technology, brands and trademarks and consumer taste and preference. Strategic variation, on the other hand, arises due to sources like additional services, factor variations and consumer ignorance. Horlicks, a 140 years old brand has not only succeeded in keeping the brand alive for more than a decade but has also incorporated both strategic and natural differentiation to enter the market with products such as noodles, biscuits, oats and health bars. Though these products are usually considered to be FMCG products, Mr. Zubair Ahmed, the managing director of GSK Consumer Healthcare proudly says “I am happy not being a typical FMCG company. As of today, Horlicks accounts for 46.4% of the approximately Rs. 5000 crore health foods drink category. The Indian subcontinent is the brands largest market accounting for 70-80% of the total volumes. GSK consumer health care has two major strategic plans to increase its shares. Plan A was to turn Horlicks from a malted milk brand to a healthy food brand including categories such as energy bars and noodles. This plan has already been successful and now Horlicks has come up with plan B which is to include breakfast and biscuits in its list of „healthy‟ food products.
For an oligopoly market, advertising is one of the major incentives for growth and development. Advertising has become one of the most notable forms of competition in today‟s industrial structure. In some industries, advertising competition surpasses price competition. According to the report by World Advertising Research Centre, the advertising expenditure is expected to increase by 33% to 52% in over the next decade, despite the current economic recession and downturns of other business aspects. (Wang, et.al., 2010). Different firms have different profit maximising advertising intensities. In the industry level, advertising intensity is represented by consumer‟s preference and the measure of market structure which reflects the joint distribution of the levels of advertising competence and market shares among firms. (Yang-Lee, 2002). In the present day‟s industrial scenario, relationships are becoming more one on one; communications are becoming faster and more frequent and customer loyalty cycles are becoming shorter. Branding is considered to be the only utopian solution to such a scenario. A recent example of advertising through branding is retiring of the brand ESPN and focusing on the six new Sports channel under the star sports banner by Star India Pvt. Ltd. Star sports is available in It is available in Pakistan, India, Bangladesh, Thailand, Malaysia, Singapore, Indonesia, Philippines, Vietnam, Hong Kong, and other Asian territories. It is also the official Asian station for the Barclays Premier League. Till 6th of November 2013, Star India broadcasted five sports channels in India: ESPN, Star Cricket, Star Sports, ESPN HD and Star Cricket HD. After 6th November, the
new channels are Star Sports 1, 2,3,4 and HD-1 and HD-2. The brand ambassador for these channels is Mr. M.S. Dhoni, the Indian cricket team...
References: Shah, G. 2013. We 're retiring brand ESPN to focus on 6 Star Sports channel. MINT,
6th November, p
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