ASSIGNMENT

MICRO ECONOMICS FOR

MANAGEMENT

SUBMITTED BY:

R.CHANDRASEKHRAN

SEC. (D). REG. NO-6120

PGDM:2010-12

Contents

Introduction

About Shampoo

Brands

Allocation Of space

Pricing

Economic Concepts

Conclusion

Introduction

I visited More retail outlet situated in Suchitra on 5th December

2010, to know more about the economic concept of shampoo I

have focused more on the section where shampoo products are

displayed. The main objective of the visit was to observe and

analyze proportion of space allocated for the shampoo, different

type of brands under same company, price etc. based on certain

concepts of economics. Following are some of the economic

concepts that I have observed:

Needs and wants,

Consumer choice & behavior

Proportion of income spend

on shampoo

Elasticity of demand

Types of market

Type of competition, etc.

ABOUT SHAMPOO

Shampoo is a hair care product used for the removal of oils, dirt, skin

particles, dandruff, environmental pollutants and other contaminant particles that

gradually build up in hair. The goal is to remove the unwanted build-up without

stripping out so much sebum as to make hair unmanageable. Even though most

modern shampoos include a conditioning component, shampooing is frequently

followed by the use of conditioner which ease combing and styling.

The word Shampoo is derived from the Hindi word “Champi”. Hair

Shampoos and Conditioners are targeted at Upper middle class now, also middle

class and house wives, Upper class rural consumers, Teenagers - they are the major

segment.

Major Brands

On More retail outlet the main Brands of Shampoos available are from three

companies namely

Hindustan Unilever Limited

Procter and Gamble

Cavin Kare Ltd

The brands available from Hindustan Unilever Limited in More were

Clinic Plus

Sun Silk

Dove

The Brands available from Procter & Gamble in More were

Pantene

Head and Shoulders

The Brands available from Cavin Kare in More were

Nyle

Chik

Space allocation for shampoo products

In More retail outlet while comparing with other products Shampoos are having

around 5% space for displaying. Out of those 5% Space in shelves Hindustan

Unilever products took the major space of around 3% and P&G along with Cavin

Kare takes 1.5% space. Mostly Sun silk and Clinic Plus are the two brands which

tops the Chart with major space in More retail outlet. In detail 3% for HUL,1% for

P&G,0.5% for Cavin Kare and 0.5 % for Others. In HUL sun silk is having 2% and

clinic plus is having 1% of the space in shelves of

More retail outlet.

Pricing of Different Shampoo Brands in More

retail outlet

Clinic plus Price Types

7.5 ml -Rs. 2

25 ml –Rs 10

100 ml – Rs 30

200 ml – Rs 55

300 ml – Rs 90

Sun silk Price Types

8 ml-Rs 2

25 ml – Rs 7

100 ml- Rs 25

200 ml- Rs 60

300 ml- Rs 90

400 Ml- Rs 120

Dove price types

Sachet – Rs 3

Intense Moisturizing (12 oz) - Rs90

Head and Shoulders price Types

7.5 ml – Rs 3

200 ml- Rs 70

400 ml- Rs 135

Concepts of economics

Needs and Wants

• Needs are basic human requirements

• Wants are needs directed to specific objects or services that might satisfy

the need

Analysis:

Needs of Shampoo are consistent. Mostly teenagers and Youngster or more

then 30 years ageed consumer use shampoos. Wants of consumer in

Shampoo are like that mostly teenagers go for Shampoos which gives

Fragrance and moisturizing power with reasonable price. Consumption of

Shampoos by Teenagers is much more than Middle Ages or old ages.

Middle age people are mainly prefers Herbal and ayurvedic product rather

than fragrance and moisturizing. Mostly middle aged people follows the

same brands without going for further change where as Teenagers are often

intended in change trying all new

products of shampoos available in

market. Out of all available

shampoo from different companies,

Sun silk of HUL is mostly preferred

by the female customers : teenagers and middle age people, as it satisfy their

needs and wants simultaneously rather than any other brands.

Consumer behavior & choice

Consumer behavior explains how consumers allocate incomes among deferent

goods and services to maximize their well being. Consumer choice means

choosing of a product or service among all available brands that maximize their

satisfaction. It depend on several factors like age, education, socio-economic

background and even religious beliefs.

Analysis:

While talking about consumer behavior in Shampoo, there are not much significant

changes to be spotted. Most of the consumers are consistent in the way of

allocating income to spend on shampoo. If it is a new brand then mostly people

will buy promotional pack or sachet spending 2 to 3 rupees.

Coming to the Consumer choice, there are various companies and brands of

shampoo available in market. Hindustan unilever limited, Procter and Gamble,

Cavin Kare and many. Consumer’s choices differ according to respective

individuals or may be because of situations too. Identifying those each company

has different varieties in their products.

The main segmentation to satisfy customers is

Cosmetic

Anti-Dandruff

Herbal

Commonly available brands for Herbal shampoos are Nyle, Dabu

Vatika. Commonly available Anti Dandruff Shampoos are Clinic all clear,

Head and Shoulders and Dabur Vatika AD.

This analysis simply shows that consumers are having a wide

spectrum of shampoo brands to be chosen from.

Proportion of income spend by Consumer

Consumer will fix some proportion for spending money for deferent purpose out of

their available income according to the importance.

Basically People spend more money for food, education etc. The proportion for

beauty and hair care products will be depending upon their income. In the case of

general consumers the proportion for beauty products will be less.

Analysis:

The proportion of income spend on shampoos are comparatively lower than that of

what consumers spend on food and education. Mostly shampoos are priced

accordingly to meet middle class people and so the price tags are affordable for the

consumers. In Hindustan Unilever Limited the main brands available are sun silk,

Clinic, Dove and their pricing varies according to the bottle sizes.

Consumers don’t want to have separate proportion of income to buy

shampoos. It’s mostly included in and out of a person’s budget depending on the

need and wants. Hence the analysis shows that Proportion of income has less

impact when coming to Shampoos.

Elasticity of demand

Elasticity of demand measures the degree of responsiveness of the quantity

demanded of a commodity to a given change in any of the determinants of demand

Following are some of the determinants of demand for shampoo:

1, Price of shampoo

2, Income of consumers

3, Price of related goods (Complementary & substitutes)

4, Taste and preferences of consumers

5, Advertising.

Analysis:

Advertising has a major impact on shampoos and it plays a major role in the

success of the product. Mainly because there is a) lot of competition in the market,

low penetration levels, High potentials and untapped rural market. Mostly

consumers will be aware of the product only through watching advertisements

based on shampoos.

Taste and Preference of customers varies according to the quality and service

shampoos provided. Mostly people are inclined towards Sun silk as it provides

better quality than any other brands available.

Mostly the competitors of Shampoo enjoy a tight competition within themselves

and when the price of related goods increases too shampoos faces competition. If

in case the price of shampoo increases people can go for Soaps, conditioners and

ayurvedic powders.

Incomes of consumers are having less impact on shampoo because of its low price.

Apart from Premium products like Shehnaz Husain, Revlon Flex and L’Oreal all

other brands are affordable for consumers without making any change in their

family budget. No individual allocates separate income for shampoo in any

proportions.

Price of shampoo tends to remain constant due to increasing competitors. Mostly

top brands charge around 2 to 3 rupees for a sachet (7 ml) and an average of 125

rupees for 400 ml.

Different Types of Market & Competition

On the basis of competition prevailing in the market it has been divided into:

Perfect competition

Monopoly

Monopolistic competition

Oligopoly

Monopoly :

Monopoly is defined as that market form in which a single

producer controls the whole supply of a single commodity which has no close

substitute. Three points should be noted in regard to this definition.

There must be a single producer

There must be only one commodity produced by the firm for

which there is no substitute.

There are strong barriers for the firms to enter into the industry.

Oligopoly:

Oligopoly is an important form of imperfect competition. Oligopoly is

said to prevail when there are few firms or sellers in the market,

producing or selling a product. In other words, where there are four or

five firms producing and selling a product oligopoly comes into

existence. In simple words Oligopoly is defined as competition among

the few. The main features of Oligopoly are few sellers, inter

dependence, uncertainty, high cross elasticity’s, element of monopoly,

constant struggle, rigid or sticky price and kinked demand curve.

Monopolistic Competition:

Monopolistic competition refers to a market situation in

which there are either many producers producing goods which are close

substitutes to one another or the product is differentiated. Monopolistic

competition is found in the industry where there are a large number of small

sellers selling differentiated but close substitute products.

Monopolistic competition is a situation where there may be

many sellers, but with differentiated products so that competition is no

longer on price basis. There is competition which is keen, though not

perfect, between many firms making similar products. The main features are

many firms, independent price policy, product differentiation, free entry and

free exit, selling cost, lack of knowledge, lack of mobility of factors and

more elasticity of demand.

Analysis:

In the case shampoo industry it is having a monopolistic competition because here

there is a large number of producers offer similar but differentiated shampoos

Following are the features of shampoo market on the basis of monopolistic

competition:

Large number of buyers and sellers:

In shampoo industry there are a large number of brands like sun silk clinic,

Dove, Head and Shoulders etc. And there is a large number of consumers’

including both rural and urban areas.

Differentiated product

Product differentiation generally means having minor changes in the same

generic product

Selling and advertisement cost

Imperfect knowledge about market

Unrestricted entry and exist

Demand and Supply

The word ‘demand’ refers to the quantity of a good or service that

consumers are willing and able to purchases at various prices during a period

of time. Demand in economics is something more than desire to purchase. It

implies both desire to purchase and the ability to pay for a good. A desire

will become demand only if a consumer has the means to buy things and

also he is willing to use the money.

Thus demand for a thing depends on

Desire to possess a thing

Means to purchase

Willingness to use those means for that purchase.

Law of demand:

The relationship between demand and price may be expressed in

the form of law of demand in the following words. It is also defined as the

law of demand as ‘the amount demanded increases with the fall in price and

diminishes with rise in price’

Supply

The supply refers to the amount of commodity that a producer offers for sale in

the market at a price during a given period of time. It is the price which affects the

supply of goods. Supply Increases with increases in price and decreases with

decreases in price. It is also defined as “a schedule which shows the various

amounts of products which a producer is willing to, and able to, produce and make

available for sale in the markets at each specific price in a set of possible prices

during some period of time.

Law of Supply

Law of stats that “other things remaining the same, the quantity

supplied of a commodity various directly with the price”, i.e., supply of the

commodity will increase with increase in price and decrease with decrease in

price. It shows a direct relationship between price and quantity supplied.

Analysis:

Demand for the shampoos remain constant and can tend to less but it is not

showing any increasing trend. As people can use many other substitutes available

for shampoo the demand does not tend to increase.

Supply of shampoos is also remaining constant. There is no increased trend in

supplying shampoos as the demand of shampoos remaining constant.

Conclusion

It has been observed that people use not only shampoos but home remedy is

also preferred because of its uniqueness of effectiveness. People also use more than

one shampoo or keep two shampoos. Most people have tried one or more

shampoos but hardly find any differences. Except for clinic all clear and Sun silk in

which respondents have positively agreed of best shampoo than others. People buy

those shampoos giving them maximum benefits. Female normally look for

shampoo matching with their hair type but male look for combination of benefits

i.e. 1st hair problem and then fragrances followed by price.

An advertisement is the one that influences a lot than any other factors. Most

people change their shampoos occasionally but there are people who never change

their shampoo i.e. they are satisfied with their current brand. Most people normally

buy sachets available followed by above 250-ml pack. Most people know of the

brands through advertisements. Next come magazines. And then the newspapers.

Satisfaction is maximum drawn with people using clinic and organic. These are the

brands, which attract most because of perceived quality and brand image. The

consumer of Sun silk is totally independent in making major decisions.

The ideas, associations and images that people have of a shampoo brand determine

the demand side of the brand equity equation. There are two ways in which

advertising is likely to influence perceived product performance. First, by guiding

the expectations about the shampoo experience - process called product

enhancement and second, by creating a halo of superiority around the brand via a

mechanic termed Interest – Status. By the analysis we can conclude that consumers

in the shampoo market are not much conscious about the price but its quality plays

important role.