Monopolistic Competition - Example

Monopolistic Competition Contents Contents Industry Overview 3 Product differentiation 3 Product quality & price 5 Entry and Exist barriers 5 Influence of product development 7 Influence of advertising and branding 8 Conclusion 8 References 10 Industry Overview The accessories and apparel industry manufacture and design garments for woman men and children. It is a vital segment in Fashion industry. The fashion trend of the customers increases the demand of this industry. Different companies in apparel and accessory industry continuously update its product for meeting the need and preference of the customers. The changing need and demand of the customers are the key drivers of this industry. The expenditure of manufacturing and production of apparels are also an important factor affecting this industry. The productivity of this industry depends on the specialty of the product, its advertising, effectiveness of the companies operation, location of the companies. Apparel and accessories industry has a steep competition (Borowski, 2013). This industry creates alliances with different companies and builds a strong competition. The industry experiences various successful promotional strategies and many specialized market which help the apparel and accessory manufacturer to increase its revenue. This fashion drive industry has to continuously update itself regarding the latest fashion trends. The firms of this business work under high pressure to cope up with the new trends of the market. The manufacturer involved in this industry needs to response quickly to different demands of the consumers. It is the main challenge of apparels and accessory industry. The important factors involves in the business of this industry are raw materials, textile plants, apparel plant, export chain and customers. Online sale contributes in the development of this industry. Product differentiation Adidas mainly deals in sports products. The company sale apparels, footwear, bags, balls and many other different sports accessories. It is a multinational company. Through its different type of product the firm caters different consumer segments. By developing varieties of product the company increases its profitability and market share. Adidas differentiate its product by improved its design and technology (Moser, 2007). The superior technology used by the company manufactures a perfect high quality of product which makes the company different from others. The company targets the customers of different generation by developing new trends in its products. It has increased and improved its range and style of apparels which differentiate the company from its competitors. Adidas manufactures a superior quality of sports product. The company follows the latest fashion trends and develops its product according to changing need of its consumers. Initially the company produced its product only for the sports person like jerseys of different players, their shoes etc. Adidas product at that time was only related to sports. But with the increase in competition the brand is selling different types of product for common mass which may or may not be related with sports. It has expanded its apparels section. The company has lowered down the prices of its many products to increase its sale. Adidas also manufactures seasonal garments and accessories to meet the need of its customers. Product quality & price Adidas manufactures the product of superior quality. The company is very conscious about the product material and the chemical components used in the product. For its superior quality of product Adidas has become one of the leading brands of sports apparels and accessory industry. It manufactures a lot of sports goods. The company has a rigorous product testing process. Its strong cooperation with its suppliers helps in random testing of the product which results in delivering perfect flawless products. Adidas has a dedicated team who monitors the quality and criteria of its sports accessories and apparels. For the superior quality Adidas shoes became is very famous since a long time. The main feature of its product is high level of comfortless which acts as an extra edge to the product quality. The company uses competitive and skimming prices. The competitive prices of Adidas are similar with its major competitors like Nike, Puma and Reebok. The product of Adidas which is recently introduced by the company is uniquely priced by following skimming strategies. The apparel’s of this company are highly priced for maintaining brand equity in the market. The company does not use penetrative pricing strategies because the customer can have negative impression about the brand’s product quality. Adidas has fixed its product price in such a way that it creates a psychological impact on its targeted high end customers. The company regularly evaluates the price of its products for holding its position in the competitive market. Entry and Exist barriers The apparel/accessories industry is a highly mature and competitive market. All the firms entering into this industry has gained strong market position. The leaders operating in this industry has been able to establish them well. There are certain leaders of this industry who has facilitated overall development such as Reebok, Nike and Adidas. These firms through their newly developed products and combined price ranges offer tough competition to new entrants. The entry of new players is greatly hindered by cutthroat competition. Economies of scale are another factor that contributes towards reduction of new entrants within the industry. The new entrants can only have an edge over strong players in this industry when they are able to compete on efficient production, product quality and reasonable pricing. These elements cannot be incorporated efficiently without a well established manufacturer’s resources. In monopolistic competition these issues play a vital role in forming barriers for new entrants. Figure 1 clearly illustrates how the demand is effectively met by controlling mentioned factors by industry players. Figure 1: Monopolistic Competition (Source: Ambler, 2005) Traditional distribution channel is another entry barrier for new players. Industry leaders tend to dominate shelves at stores and this appears to be a negative aspect for new entrants. Retailers view less known brands to be highly risky in nature in comparison to well known brands like Adidas, Nike or Reebok. However to some extent Internet has been able to break down such barriers. Brick and mortar retail distributors constitute a high overhead costs and this is being diminished through evolution of Internet (Ambler, 2005). New players now can enter into markets without any such lump sum investment and enhancing profitability margin in terms of production. The exit barriers in this particular industry are relatively high. There are many elements that a firm must be aware of while leaving an industry such as ability to address obligations and indebtedness. These players should also be able to handle any lawsuit framed by stakeholders. Influence of product development Product development plays a critical role when it comes to acquiring large base of customers. In modern world, customer demand is high in context of apparel/accessories industry. Firms operating in this segment are a part of monopolistic competition. In such competition all players need to agree on price, product quality and distribution channels. This particular market condition which portrays intense competition creates a high demand for product development. Product development is all about introducing new features and characteristics within existing product line. The major players in this industry are Reebok, Nike, Adidas, etc., and in order to sustain growth, product development is an essential component. There is a great deal of product development influence on firms operating in apparels/accessories industry. Product development is centered towards providing competitive advantage to all organizations. Adidas utilizes the concept of product development in order to develop their competitive position in the industry. They introduce new features in their product line in terms of color, texture, types, etc., and this was sufficient enough to attract desirable percentage of consumer market. Product development encourages competition within the apparel/accessories industry and even provides a scope to easily connect with customers. It develops a platform on basis of which strong players can succeed towards becoming future industry leaders. Influence of advertising and branding Advertising and branding are two important aspects for any organization so as to sustain their business operations. In monopolistic competition where prices, product range are more or less similar, advertisement campaign is considered as a medium to gain attention of consumers. Branding or promotional activities in apparel/accessories industry is usually conducted through sponsorships. Firms such as Adidas, Nike, etc., are regarded as key sponsors in football events held across the globe. These brands are generally related with sports for their strong association with players. It can even be stated that branding is enhanced through framing an appropriate slogan for mass market. All forms of sports are sponsored by players belonging to this industry and game advertisement is also taken into consideration by these well known brands. Global marketing strategies are formulated by companies operating in this segment so as to ensure standardized product line for global customers (Franzen and Moriarty, 2008). In overall context it is clearly evident that branding or advertisements enable a company to be unique in intensely competitive environment. There is positive as well as negative influence of such activities. The firms are able to strengthen their brand image through these activities and intense rivalry results into lump sum investment in branding or promotion or advertisement campaigns. Conclusion Adidas is one of the leading companies in manufacturing and selling sports apparels and accessories. It faces a strong competition in the apparels and accessory industry. But still the company maintains its leading position of its business by expanding its product ranges. Monopolistic competition offers high entry and exit barriers. Branding and advertisements are vital aspects for organizations operating in this competitive market. As per the study product development is a medium through which firms are able to gain competitive advantage. References Ambler, T., 2005. Building brand relationships. Financial Times Mastering Management Series, 13(4), pp. 13-56. Borowski, A., 2013. Adidas Marketing Strategy - An Overview. München: GRIN Verlag. Franzen, G., and Moriarty, S. 2008. The Science and Art of Branding. New York: M.E. Sharpe. Moser. K., 2007. Mass Customization Strategies: Development of a Competence-based Framework for Identifying Different Mass Customization Strategies. New York: Klaus Moser. Read More