Date post: | 22-Jan-2018 |
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CASE STUDY OF OLIGOPOLY ON AUTOMOBILE INDUSTRY
Presented by :-
Sumit Behura
Suchitra samantray
Farid Ahmad
Chinmaya Mohanty
Nilam priyadarsini Sethy
OLIGOPOLY
• Oligopoly is a market structure in which the
market or the industry is dominated by small
number of sellers.
• In other word Oligopoly means the market structure in which there are a few seller selling a homogeneous product or differentiated products.
FEATURESFew seller
Homogeneous or differentiated product
Barriers to entry and exit
High investment
Constant struggle
Lack of uniformity
Lack of certainty
Price rigidity
Selling homogeneous products - pure oligopoly .Example :industry producing cement steel ,petrol ,cooking gas , chemical, aluminium and sugar .
Selling differentiated product – differentiated oligopoly .Example : Automobiles, TV sets , soft drinks , computers ,cigarettes ,etc.
OLIGOPOLY IN AUTOMOBILE INDUSTRY• The Indian Car Industry Oligopoly• Hindustan Motors – the first Indian Car company to start production in
India - founded in 1942 by Mr. B.M. Birla; Ambassador – The flagship
car
• Establishment of other car manufacturing companies like Premier
Automobiles(1944); Premier Padmini – The flagship car, now also used
for cab services
Reasons for the Oligopoly structure
• In 1947, Government of India and private sector launched efforts to
create Automotive components manufacturing industry
• Slow growth in 1950s and 1960s; Reason: License Raj,
Nationalization, Socialistic approach, MRTP Act
• The Industries (Development and Regulation) Act passed in 1951 to
implement Industrial Policy Resolution of 1948 – one of the reasons
for closed market
• The Act empowered Government to prescribe Prices, Methods,
Volume of Production, Channels of Distribution
Impact of Oligopoly structure
• Impact on Automobile industry – Growth very slow because of
Low Demand and Low Economic Status of the country
• Government restrictions provided no motivation or incentive for
firms to do technological upgradation.
• Supply was low and there weren’t many competitors
• Impact on Consumers –Consumers did not have many choices;
the Demand was fairly low as Cars were still a Luxury and
availability of same models
The Causes of Transformation
• Sanjay Gandhi owned Maruti Technical Services Limited which was
liquidated
• After his death, Indira Gandhi government collaborated with Suzuki
Motors, a Japanese firm, for collaboration – Formation of Maruti
Udyog Limited and renamed later Maruti Suzuki in 2007
Effects of the Transformation
• New firms, including foreign players, entered with modern
engineering, efficient processes and modern shop-floor layouts
• Indian automobile industry grew at 14.31% per annum in 1991
era compared to 8.56% per annum during 1985-91
• Delicencing of sector attracted many major Global
automobile(GM, Ford, Honda, Hyundai etc.) to start assembly
in India
Automobile Industries associated with India
• Quite a few Domestic Indian Automotive companies: Tata
Motors, Mahindra, ICML, Hindustan Motors, Premier
Automobiles Ltd., San Motors etc.
• Foreign Automotive companies in India:
Manufactured or assembled in India: BMW India, Ford India,
General Motors India, Chevrolet, Honda , Hyundai Motor India
Imported to India: Audi, Bentley, BMW, Lamborghini, Land Rover,
Mercedes Benz, Nissan etc.
Price Leadership Model
• Intense competition amongst various players
• 30th December 1998 - Indica launched by Telco for `2,59,000 (petrol) and `2,85,000 (Diesel)
• 31st December 1998 – Maruti slashes prices by 5-12%; Maruti800 price slashed to `1,85,000 from `2,09,000
• Ratan Tata – “Even for those who do not own or buy an Indica,
good news, we’ve triggered price drops in Maruti and made the
car market a friendlier place”
Current Trends
• Tata has come up with ` 1 Lakh car – Tata Nano
• This again has created price war
• Nissan-Renault to develop a Rs 300000 car using India’s
“frugal engineering expertise”
• Bajaj to experiment with the idea of a small car
Market ShareIn the Passenger Car category, Maruti Suzuki is still the market leader with
around 50% market share
COMOARISION
•Considering huge market potential, production of passenger cars is projected to grow at
CAGR of 11% between 2010-11 and 2013-14.
Comparison:•1982
Number of manufacturers: 3
Vehicle sales: 20000
Number of models: 3
•2009:
Number of manufacturers: 15
Vehicle sales: 19,80,000 approx.
Number of models: 53