Assignment # 01Analyzing Bangladesh Scenario, Identify (Rice, Poultry, Soap, Garments, Mobile

Phone) belongs to Which Market Structure and Why?

Prepared by:

Shamima NasrinID# 092051058

Prepared for:

Dr. Pinky ShahAssociate Professor

University of Liberal Arts, Bangladesh

Dhaka

Market

A market is any one of a variety of different systems, institutions, procedures, social

relations and infrastructures whereby persons trade, and goods and services are exchanged,

forming part of the economy. It is an arrangement that allows buyers and sellers to exchange

things. Markets vary in size, range, geographic scale, location, types and variety of human

communities, as well as the types of goods and services traded. Some examples include

local farmers’ markets held in town squares or parking lots, shopping centers and shopping

malls, international currency and commodity markets, legally created markets such as for

pollution permits, and illegal markets such as the market for illicit drugs.

In mainstream economics, the concept of a market is any structure that allows buyers and

sellers to exchange any type of goods, services and information. The exchange of goods or

services for money is a transaction. Market participants consist of all the buyers and sellers of

a good who influence its price. There are two roles in markets, buyers and sellers. The market

facilitates trade and enables the distribution and allocation of resources in a society

So it is an event or occasion, usually held at regular intervals, at which people meet for the

purpose of buying and selling merchandise. Means by which buyers and sellers are brought into

contact with each other and goods and services are exchanged. The term originally referred to a

place where products were bought and sold; today a market is any arena, however abstract or

far-reaching, in which buyers and sellers make transactions.

Market structure

In economics, market structure (also known as market form) describes the state of

a market with respect to competition.

Definitions and Features of Different Market Structure

Perfectly Competitive Market:

Perfectly competitive market describes a market in which there are many small firms, all

producing homogeneous goods. In general a perfectly competitive market is characterized by

the fact that no single firm has influence over the price of the product it sells. Because the

conditions for perfect competition are very strict, there are few perfectly competitive markets.

Perfect competition, in which the market consists of a very large number of firms producing a

homogeneous product. A perfectly competitive market may have several distinguishing

characteristics, including: Infinite consumers with the willingness and ability to buy the product

at a certain price, Infinite producers with the willingness and ability to supply the product at a

certain price. It is relatively easy to enter or exit as a business in a perfectly competitive market.

Prices and quality of products are assumed to be known to all consumers and producers.

Buyers and sellers incur no costs in making an exchange. Firms aim to sell where marginal

costs meet marginal revenue, where they generate the most profit. The characteristics of any

given market good or service do not vary across suppliers.

Some examples of Perfectly competitive market : Financial markets – stock exchange,

currency markets, bond markets, Agriculture.

Imperfect market falls in to three categories. They are briefly discussed bellowed.

Monopolistic Market:

Monopolistic competition is a common market structure where many competing producers sell

products that are differentiated from one another (that is, the products are substitutes, but are

not exactly alike, similar to brand loyalty).The "founding father" of the theory of monopolistic

competition was Edward Hastings Chamberlin . Monopolistically competitive markets have the

characteristics: There are many producers and many consumers in a given market, and no

business has total control over the market price. Consumers perceive that there are non-price

differences among the competitors' products. There are few barriers to entry and exit.

Producers have a degree of control over price. A firm making profits in the short run will break

even in the long run because demand will decrease and average total cost will increase. This

means in the long run, a monopolistically competitive firm will make zero economic profit. This

gives the amount of influence over the market; because of brand loyalty, it can raise its prices

without losing all of its customers. This means that an individual firm's demand curve is

downward sloping, in contrast to perfect competition, which has a perfectly elastic demand

schedule.Monopolistic competition, also called competitive market, where there are a large

number of independent firms which have a very small proportion of the market share.

Some examples of Monopolistic market: restaurants, cereal, clothing, shoes, and service

industries in large cities, professions – solicitors, doctors, etc., building firms – plasterers,

plumbers, etc.

Oligopoly Market:

In Economics, an oligopoly (from Ancient Greek oligoi which means "few" and polein which

means "to sell") is a market form in which a market or industry is dominated by a small number

of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of

the actions of the others. The decisions of one firm influence, and are influenced by, the

decisions of other firms. Strategic planning by oligopolists needs to take into account the likely

responses of the other market participants. This causes oligopolistic markets and industries to

be a high risk for collusion. A oligopoly market may have several distinguishing characteristics,

including: An oligopoly maximizes profits by producing where marginal revenue equals marginal

costs. Oligopolies are price setters rather than price takers. Barriers to entry are high. The most

important barriers are economies of scale, patents, access to expensive and complex

technology and strategic actions by incumbent firms designed to discourage or destroy nascent

firms. "Few" - a "handful" of sellers. There are so few firms that the actions of one firm can

influence the actions of the other firms. Oligopolies can retain long run abnormal profits.

Assumptions about perfect knowledge vary but the knowledge of various economic actors can

be generally described as selective. Buyers have only imperfect knowledge as to price, cost and

product quality. The distinctive feature of an oligopoly is interdependence. Oligopolies are

typically composed of a few large firms. Each firm is so large that its actions affect market

conditions. Therefore the competing firms will be aware of a firm's market actions and will

respond appropriately. Oligopoly, in which a market is dominated by a small number of firms

which own more than 40% of the market share.

Some examples of oligopoly market: Supermarkets, Banking industry, Chemicals, Oil, Medicinal

drugs, broadcasting

Monopoly Market:

In general sence Monopoly is the market, where there is only one provider of a product or

service. In economics, a monopoly (from Greek monos which means “alone or single”

and polein which means” to sell”) exists when a specific individual or an enterprise has

sufficient control over a particular product or service to determine significantly the terms on

which other individuals shall have access to it. Monopolies are thus characterized by a lack of

economic competition for the good or service that they provide and a lack of viable substitute

goods. The verb "monopolize" refers to the process by which a firm gains persistently greater

market share than what is expected under perfect competition.

Some examples of Monopoly market: Microsoft (USA), salt commission (China), Major League

Baseball (USA )

Pure monopoly: A government-granted monopoly (also called a "de jure monopoly") is a form

of coercive monopoly by which a government grants exclusive privilege to a private individual or

firm to be the sole provider of a good or service; potential competitors are excluded from the

market by law, regulation, or other mechanisms of government

enforcement. Copyright, patents and trademarks are examples of government-granted

monopolies.

Natural monopoly: A monopoly in which economies of scale cause efficiency to increase

continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire

market demand at a lower cost than any combination of two or more smaller, more specialized

firms.

Determinants of Market Structures

Market Structure

No. of Sellers

Nature of Product

Market Share of Sellers

Control of the Seller

over the Price

Entry and Exit

Examples

Perfectly Competitiv

Numerous

Homogeneous

Insignificant

No Control

Free Wheat, rice

e

Monopolistic

Large Differentiated

Small Some Control

Not Free

Restaurants, movies

Oligopoly Few Differentiated/ Homogeneous

Large May or May not

Depends on the Market

Food oil, SIM Card

Monopoly One Unique Hundred Percent

Full Control

Restricted

WASA, Microsoft

Market Structure of Lux Beauty Soap in Bangladesh

Unilever:

Unilever is a multinational consumer product manufacturing giant operating in over hundred

countries all around the globe. Unilever Bangladesh is the Bangladesh chapter of Unilever,

where the company holds 60.75% share whereas the Government of Peoples Republic of

Bangladesh holds 39.25% share.

Unilever’s one of the most popular bran d is LUX. They segment LUX’s market according to

geographical location. It further differentiates these segments into Socio Economic Cluster

(SEC) which takes into account the criteria of education and profession which ultimately

measurer the financial ability of consumers. Unilever targets the urban and sub urban middle

class and middle class segment of the population.

Overall History of Lux:

Lux soap was first launched in the UK in 1899 as a flaked version of Sunlight Soap.

Subsequently it was launched in the US in 1916, and marketed as a laundry soap targeted

specifically at 'delicates'. Lever Brothers encouraged women to home launder their clothes

without fear of satins and silks being turned yellow by harsh lyes that were often used in soaps

at the time. The result was a gentler soap that dissolved more readily and was advertised as

suitable for home laundry use. Lux is currently a product of Unilever. The name "Lux" was

chosen as the Latin word for "light" and because it was suggestive of "luxury."

Lux toilet soap was introduced as bathroom soap in the US in 1925 and in the UK in 1928 as

a brand extention of Lux soap flakes by Lever Brothers. Subsequently Lux soap has been

marketed in several forms, including handwash, shower gel and cream bath soap.From the

1930s right through to the 1970s, Lux soap colours and packaging were altered several times to

reflect fashion trends. In 1958 five colours made up the range: pink, white, blue, green and

yellow. People enjoyed matching their soap with their bathroom colours.

As of June 2009 Lux is sold in over 100 countries.

Lux in Bangladesh:

The origin dates back to 1964, when the first Manufacturing Operations were set up as a part of

Lever Brothers Pakistan operations. After independence, it was incorporated as a separate

Company under the laws of Bangladesh. Later on the Company diversified into different

categories.The company’s manufacturing operations are based in Chittagong where they have

soap manufacturing unit and a state of the art Personal Product manufacturing plant offering

people a chance to pamper them for a modest price.

Lux at the Present Time:

In the early 1990s, Lux responded to the growing trend away from traditional soap bars by

launching its own range of shower gels, liquid soaps and moisturising bars. Lux beauty facial

wash, Lux beauty bath and Lux beauty shower were launched in 1992.

In 2004, the entire Lux range was relaunched in the UK to include five shower gels, three bath

products and two new soap bars. 2005 saw the launch of three exciting new variants with

dreamy names such as “Wine & Roses” bath cream, “Glowing Touch” and “Sparkling Morning”

shower gels.      

Lux was initially a premium brand. Lux was being projected as an aspirational brand and the

endorsements by stars further reinforced the positioning. The increasing competition in the soap

category forced Lux to rethink on its targeting strategy. The brand had a choice either to

compromise on market share and uphold the premium positioning or to retain the market share

and dilute the positioning. Lux wanted to ensure that the brand be positioned as premium but

also did not wanted to compromise on the share. Thus born International Lux which is the

premium variant and the affordable segment was catered by Lux beauty soap.

Earlier the brand used the positioning " Beauty soap of Film stars" . But as the customer

evolved, the positioning lost its charm because customers began to doubt whether the film stars

actually used this brand. Taking a cue from the customers, Lux changed the positioning

appealing to the need for becoming a star. The new positioning is communicated with the

tagline " Bring out the star in you".

Market Structure of Lux in Banhladesh:

Though LUX is produced in Bangladesh, Unilever maintains the same standard all around the

globe. Since the demand for the beauty soap market is to a great extent oligopolistic,

variations to price lead to a price war which can eventually break down company’s market

share. So the price is affordable by most of the people. Unilever Bangladesh has outsourced its

distribution channels to third party distributors which allow them distribute LUX in massive bulks

amounting to around ten million pieces. It undertakes the largest promotional activities in the

beauty soap industry.

Findings behind Oligopolistic Market Structure for Lux soap:

Market Competition:

The beauty soap industry has a few major producers of which Unilever holds market share of

slightly less than 50%. Other competing brands like Tibbet, Aromatic, Lifebuoy and Keya have

started to have strong consumer base, but LUX’s product features distribution and promotional

activities have created high brand loyalty for which it is still the market leader.

Market Share of Lux:

The beauty soap industry in Bangladesh consists of few major products. Unilever Bangladesh

Ltd is operating in the industry with its world famous brand Lux. Out of these giant companies

Unilever Bangladesh Ltd is the market leader with a share of around 43%.

Figure 1- shows the market share of all the companies in the sector. Unilever Bangladesh Ltd is

leading the market. The other competitors are very competitive are very competitive among

themselves but they cannot put a intense competition with Unilever Bangladesh Ltd, as they

have market share much less than Unilever Bangladesh Ltd.

Grounds behind LUX for which It supports Oligopoly

Small number of firms: in oligopoly there are just a few firms. There must be several

firms dominating the industry so that they really able to set the price. In our country, this

soap market has fewer industries which resembles with the oligopolistic feature.

Interdependence: when there are only a few large firms dominating, the industry, they

cannot act independently of one another. Each firm will react to what the other firms do

in terms of output and price, as well as to changes in quality and product differentiation.

In our country we can see, the price of every soap bar including Lux is within a certain

range and it is affordable by rural people also.

Barriers to entry: it is possible that certain barriers to entry have prevented more

competition in oligopolistic industries. Barriers may include legal barriers, such as

patents, control and ownership over critical supplies and so on. But there may be entry

barriers of a less overwhelming kind which may result in the presence of some

competitors but as many as would create a market structure of monopolistic competition.

May be that is why there are few soap industries in our country.

Limit pricing: in oligopolistic market there is more than one competitor and they all

share the goal of seeking to prevent yet more competitors appearing on the scene. The

concept of limit pricing is just such a concept. It refers to the possibility that oligopolists

jointly seek to agree on a price which is the highest they charge without prompting a new

entrant to appear. The higher the barriers to entry are, then the higher is the possible

level of the limit price.

Non-Price competition: by their very nature, oligopolistic firms do not usually exhibit

active price competition. It is an attempt by one oligopolistic firm to attract customers by

some means other than a price differential. Being a oligopolist competitor Lux followed

some strategies as non-price competition strategy –

o Advertising: the primary purpose of advertising is to shift the demand curve to the

right. This allows the seller to sell more at each and every price. Advertising may

also have the effect of differentiating the product and of making the product’s

availability better known.

o Quality variation: there is competition to create new quality classes and thereby

gain a competitive edge. Being the first in the market in a new quality class has

often meant higher profits. New product development ca promise higher sales and

profits in a way that avoids the alternative risk of engaging in price competition with

rivals.

o Branding: the use of brand names can be a powerful form of product

differentiation and highly effective in raising sales. The price premium which a

brand can command may make the brand name a significant asset for the firm.

Branding can be particularly important when new products are being developed.

Conclusion:

Prior to 2003, although the brand enjoyed success and has sustained its leadership position but

had been facing issues of stagnation. The stagnation is caused by the plethora of brands

competing for the market share and the scope for differentiation had reduced to almost nil. But

still Lux is prevailing leadership both in profit making and market share because of its marketing

strategy. In Bangladesh, there are few stronger brands and they are doing business too. But we

can see Lux is enjoying its winning for a long time because of its unique policy of advertising,

branding, and product feature that keeps its consumers amazed always. So we can say Lux is a

perfect example of Oligopoly market.

References:

www.wikipedia.org

www.unilever.com/ourbrands/personalcare/.lux.asp

www.unilever.com.bd

Report on “Competition Scenerio in Bangladesh”.

-Prepared by Bangladesh Enterprise Institute

www.bized.com.uk