1. 2.

Monopoly Perfect Competition

Presented By Apoorva Sah Gajanan Gharde Sunil Saurav Mamta Rawat Abhishek Dharmadhikari Gunjan Kumar

1. 2. 3. 4.

Number & Size distribution of sellers Number & Size distribution of Buyers Product Differentiation Condition of Entry & Exit.

In markets there are large no. of small Buyers and sellers,

individual firms have little control over price. By differentiating its product, a firm can gain some control over price If It is easy for new firm to enter an industry, existing firms may have little freedom in their pricing decision

Market Structure Characteristics Parameters Number & Size distribution of sellers Perfect Competition Many Small Sellers, No seller is able to exert a significant Influence over Price Many Small Buyers, No Buyers is able to exert a significant Influence over Price Product Undifferentiated. Decisions to buy are made on the Basis of price. Monopoly Single seller

Number & Size distribution of Buyers

Unspecified

Product Differentiation

No close Substitute

Condition of Entry & Exit

Easy entry & exit. Rresources are easily transferable among Industries.

Entry Prohibited or Difficult.

PERFECT COMPETITION In the Short Run : Perfect competition strategy The firm in perfect competition maximizes profit by producing at the rate of Output prices equals marginal cost Managers of a firm should shut down the operation if prices are below the avg. Variable cost. If price > Avg. Variable cost But < Total cost, the firm should continue to produce in the short run because a contribution can be made to fixed cost In the Long Run : Perfect competition strategy Economic profit is eliminated by the entry of new firms. the profit maximizing rate of output occurs where prices equals both marginal and avg. Cost Consumers who would have been billing to pay more than the market price receive a consumer surplus when they buy the product. In perfectly competitive markets 1. The value of the last unit exchanged equals to the opportunity cost of production 2.Capital moves to its highest valued use 3.Production takes place at minimum point on the Avg. Cost Curve

Monopoly In the Long Run : Monopoly strategy 1. As the only seller, a monopolist faces the market demand curve. The profit maximizing output is determined by the points where the marginal revenue equals marginal cost. 2. If the entry by other firms is difficult, even in the long run, the monopolist can earn economic profit.

In the Short Run : Monopoly strategy 1. Monopoly pricing results in allocative in efficiencies because not enough output is produced. 2. Monopoly pricing also causes a redistribution of income from consumers to the owners of the monopoly.

 Perfect competition serves as bench mark and a guide

for public policy The monopoly model may be applicable in situations where a producer has some power over price.

Why Hondo moved first time towards 1.Aggressive Pricing Strategy 2.Volume segment Compact car (which is 60% of car sales) 3.Focuses on developing Tier II & Teir III City Dealer Networks
It is rare to see Honda on back foot from 1990s till recently, Honda cars led by

Honda City, Commands a premium and enjoyed a long wait lists. But over the Past two years Honda has sound itself a cross road. Weighed down its global Woes Poor pricing Strategy Brand Arrogance Lack of focus on India Aggressive Rival such as Volkswagen & Ford.

Some facts About Honda City

Honda siel is the 6th largest car company in the world. Strongly focuses on Engg. &

Technology. The city , since its launch in the 1990s had ruled the market in India. In August Honda did the unexpected cuts of city and jazz ranging from Rs. 66000 to over 1.5 lakh Since 2006-2010 in 4 years, the India's market has doubled from 1 mn. to 2 mn. Cars annually, Honda sales nos. remained more or less stagnant at around 58000 more worryingly, in April to august 2011, sales dropped sharply by 13% in the market that grew by 2 % . In contrast the competitor like VW have surged from zero to 51000 in just two years. Post recession the Indian market bounced back but Honda had out priced itself from 4-20% and the impact was beginning to show. In 201-11, the car market grew at 30% , but Hondas sales fell by 4% So far Honda never looked at competitiors to set proices- it was always a cost plus model , where ABS and Airbags were std. features in every model in base version. Before Brio, the repurchase rate among honda city customer was a high 64%. Honda is far way from rivals in Quality & Engg. Excellance, even in US markets.

Analysis of The Four Models of Honda

City:- The leader for long. Has lost out to Vento & Verna.
CRV:- No diesel variant. High Price tag. So sales have kept low. Jazz:- Out priced in the market. Honda cut prices last month. Civic:- No Diesel variant. Premium pricing . Model fatigue. Didnt take off. Brio:- Price aggressively at 3.95 lakh. Signals a new turn for Honda in India.

Problems with Honda

Honda a Cautious conservative company that takes time to

make investments and hates to make compromises. If demand slump reduce production rather than knee Jerk reaction of rolling out discount. Honda also doesnt sell to taxi fleet or rental agencies in most countries. Hondas Import led model with low localization was simply not working out , But this brio model is almost 90% localized. Situation became worsen by the appreciating Yen and a problem that affected all the Japanese company post- financial recession. Petrol focused Honda & Small Cars and diesel are two big things that are different in India

The Brio Variant is fallen under the market of almost perfect competition, facts are below: Today there are 15 Auto players vying for 250000 monthly car sales

(petrol). From the ford Figo to i10,most all manufacturer reports a sharp dip in the sales of petrol variants and a surge I the Diesel ones. August 2010:- sales of petrol variant Figo-swift-Polo=40000 August 2011:- sales of petrol variant Figo-swift-Polo=25000 In July 2010, 39% of all compacts sold were diesel, the figure this august risen to 56%. It is not easy for a company positioned at the upper end of the car segment to step down and connect with tighter customer purse. In the compact car segment, the bench mark for the cost of operation is Maruti-Suzuki. Honda, and others, will have to get substantial competitive in repair and maintenance costs to win customers.

Name

Lau nch

Base Price

Monthly sales

Die sel

USP

Maruti Swift (Relaunch)

Aug. 2011

4.22 (Pertol)

12000+

Yes

A brilliant Package of Space & value with Marutis Solid Repo.

Nissan Micra

July 2010 Feb 2010

3.98

1345

yes

It is spacious with features like keyless go.

Fiat Grand Punto

4.3 (Ptl.)

NA

yes

Good Quality engine , Well built car with Itallian Styling.

Tata Indica Xeta

Jan. 200 6
Oct. 2007 Mar ch 2010 June 2011 Feb. 2010 Sept . 2011

3.34

7206(forFamily)

Yes

A good value-for-car from the Tatas

Hyundai i10

3.55 (Ptl.) 3.6 (Ptl.)

Na

No

good value-for-money

Ford Figo

5204

yes

Good looks, good interiors-a mix of many things

Toyota Liva

3.99 (Ptl.) 4.57 (Ptl.) 3.98 (Ptl.)

2816

yes

A Toyato Brand with Diesel option

VW Polo

2615

Yes

Build Quality, Hansome sporty look, German Genes.

Honda Brio

NA

No

Honda Brand Honda Quality.

Thanks