Question

Define the industry related to the product or service produced by the company you selected for your microeconomic/macroeconomic analysis papers. The company I chose is Procter & Gamble and the product I decided to focus on is the Gillette brand. Consider the following questions: What are the main companies in the industry? What is the level of market concentration in the industry? To what extent are the products/services from this industry homogenous? How would you characterize the barriers to entry in the industry? How would you characterize the market structure of this industry? How does the market structure affect the business strategy and performance of the company you selected? To what extent may the market structure in the industry lead firms to engage in anticompetitive behaviors?

Answer 1

1. Gillete major competition includes Unilever and Dollar Shave which constitute considerably good market share in terms of revenues.
2. The products are extremely homogeneous in terms of shaving space for both men and women with slightest of differences
3. Entry barriers to industry are high as it requires significant capex and opex for research and development and distribution which form major chunk of costs.
4. Market structure of industry is Oligopolistic as firms operating in this space are few and have maximum concentration evenly spread vetween them an dhigh HHI Index.
5. Oligopolistic market structure helps firms to maintain sizeable margins as well as competitive rates and stability in growth. However continued innovation and distribution is must else customers switch easily to better product offering brands.
6. Anti competitive behaviours are only possible when innovation and first mover advantages is reserved with any one firm and hence in this case it is not possible. As competitors are fast enough to imitate and can reduce rates anytime to make it hypercompetitive and grab market share.