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Monopoly against indirect competitors Essay

Paper type: Essay Pages: 10 (2266 words)

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A. Introduction People have encountered and are still dealing with Monopolized companies on a daily basis. From using electricity up to using additives on food preparation. Monopolies dominate the market by being the sole producer of their product, having control over price and lack of competition. Rare is the chance of coming across with a Pure Monopoly nowadays. Although there are still some less pure forms of it such as government owned utilities as well as ‘near-monopolies’ in which a company has a bulk of sales in a specific market.

The Monosodium Glutamate which is the signature product of Ajinomoto Co. Inc. nearly fit to the example of being a near-monopoly in our country, the Philippines; having the largest bulk of sales when it comes to additives. Ajinomoto being the signature producer of Monosodium Glutamate, was first marketed in Japan in 1909, having been discovered and patented by Kikunae Ikeda. He found that the most important compound within seaweed broth for common use was actually a glutamate salt, which he identified with the taste umami, a word meaning ‘pleasant taste’ or ‘savoriness’.

As the simplest such salt for human consumption, the popularity of MSG helped the company rapidly expand to other countries, having branches in USA, China and other countries. With East Asia becoming a staple consumer of glutamate in its various forms at a rather quick pace, Philippines had Ajinomoto as a Monopoly producing the main additive households use on their cuisine. Although Ajinomoto had been the sole producer of additives used by Pinoys without more ado when it transpired, it didn’t thoroughly gain the repute of being a Pure Monopoly after a few ages.

With the emergence of other additives such as Maggi Magic Sarap, which offers more than what Ajinomoto can, not too long ago, competition arose when it comes to substitutes and prices. Maggi Magic Sarap became an instant hit to Pinoy households since it offers not only MSG but also real meat and spices not tendered by Ajinomoto, making them a remake of the infamous MSG signature producer. Taking into account the problem that may arise in the product’s situation, here is the Research Paper entitled “MONOPOLIES AGAINST INDIRECT COMPETITOR” in partial fulfilment of the requirements of ECON ____.

For the progress in the field of the topic, for the presentation of new knowledge and information, and for the challenge to future researchers in the same problem are all these raised unto. The Researchers B. Theoretical Framework Pure monopoly has been defined as: “A monopoly in which there is only one seller, there are no substitutes for a product or service, getting into and out of the market is difficult, and there is almost complete control over prices” by Mcconnell. Consequently, according to him, monopoly power is the ability to control price and/or market share.

In microeconomics, the theory of consumer choice relates preferences (for the consumption of both goods and services) to consumption expenditures; ultimately, this relationship between preferences and consumption expenditures is used to relate preferences to consumer demand. The following are some of the factors that are deemed to affect the demand of consumers on a certain product in general: income, consumer preferences, price of related goods, availability of closely related goods, and advertisement or popularity.

According to the researches done in the USA, when it comes to products that are directly consumable, specifically those products that are under the umbrella of edibles, certain important factors are being considered by many consumers. These factors relate to matters that affect their health. These include the nutritional value, as well as the ingredients of that product. Incorporating these facts, it can be impliedly construed that even monopolists are the sole sellers of a single product in the market; they too can face indirect competition.

This indirect competition is brought primarily, aside from price, of the above stated factors affecting consumer demand. C. Statement of The Problem The study aims to answer the general problems: General Problem: * What is the effect of All-in-One seasonings to the marketability of Monosodium Glutamate? Specific Problems: * By how much does the percentage of the marketability of Monosodium Glutamate decline due to the presence of all-in-seasonings? * How do consumers perceive the difference in price between Ajinomoto and Magic Sarap? D.

Significance of The Study To determine the effects of indirect substitutes to Monopolistic Firms and their products. E. Scope and Limitations This research covers 50 respondents comprised of 20 retailers and 30 consumers represented by cafeterias and carenderia; said respondents came from District 4 Sampaloc, Manila. The cafeterias and carenderias subject to the survey and interview must have operated for at least five years, having them experience both Ajinomoto and Magic Sarap. Chapter Two Review of Related Literature According to D. N.

Dwivedi, in his book Microeconomics: Theory and Applications, one potential reason of indirect competition is the rivalry between monopoly goods and other goods produced by other monopolies and competitive firms, for claiming a considerable share in consumers’ budget. When it comes to the problem of Ajinomoto and its indirect competitors which are the other all in one seasoning who, despite of not trading a pure MSG product, is still selling additives which not only contain MSG but also other ingredients that consumers would have wanted to use on their cuisine.

They may not be complete or direct competitors but the variation when it comes to MSG makes the other firms, such as Maggi or Knorr, an indirect substitute to the MSG produced by Ajinomoto. Also, according to Dwivedi, the second source of potential competition comes from the availability and price of inferior substitutes. Such as in the case of Ajinomoto, competition arose for this MSG producer could sell in the market in a lower price than other all in one seasoning, making it the preferred product of most consumers when it comes to prices.

Although, all in on seasonings offer slightly higher priced additives, consumers also supposed that the slight increase in price is compensated with the variation offered by the said firms, another indirect price competition. It only proves that competition do arise even when a firm dominates the market with the product they offer although in a much indirect manner than other structures. Chapter Three Research Methodology I. METHODOLOGY A consumer survey will be conducted on markets that trade prepared cuisine such as cafeterias and carinderias in order to assess whether they’re using Ajinomoto, an MSG, or Magic Sarap all-in-one seasoning.

The consumer survey on cafeterias would consist of the following questions: 1. What do you prefer to use? * Ajinomoto * Magic Sarap 2. Consumer’s reasons for choice (can select more than one): * Price * Taste and preference * Availability * Nutritional Value * Advertisement/ Popularity * Components/ Ingredients * Others 3. By how often do you use your preferred product? * Once a week * Twice a week * Thrice a week * More than thrice a week * Everyday 4. Do you also use the other product? * Yes * No 5. If yes, why? * Price * Taste and preference * Availability

* Nutritional Value * Advertisement/ Popularity * Components/ Ingredients * Others 6. How do you react on the entry in the market of Magic Sarap? * Shift usage from Ajinomoto to Magic Sarap * Continue usage of Ajinomoto * Shift to Magic Sarap then alter back to Ajinomoto Relatively, the store owners or vendors will also be asked, in the form of interview, about the marketability of the two products as an assessment of the reliability of the result of the consumer survey. The vendors will be asked of the following: 1. Which of the two do you prefer to sell?

* Ajinomoto (Vetsin) * Magic Sarap * Both 2. If your answer in the first question is both, which is mostly patronized by the consumers? * Ajinomoto (Vetsin) * Magic Sarap 3. How do you react to the entry of Magic Sarap in the market? * Immediately start selling Magic Sarap, and sell less of Ajinomoto * Immediately sell less of Magic Sarap, but more of Ajinomoto * Remain selling Ajinomoto and none of Magic Sarap * Sell Magic Sarap and none of Ajinomoto 4. Is the entrance of Magic Sarap in the market more advantageous to you as a seller?

* Yes * No 5. If your answer is yes, why? (can select more than one) * More profit * Increase in the number of buyers * Other CHAPTER FOUR PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 4. 1SURVEY RESULTS AND ANALYSIS An analysis and presentation of the results of the survey is being laid down in this chapter. The results covers the respondents of consumers residing in District 4, Sampaloc, Manila . CONSUMERS VIEWPOINT 1. Consumer’s Preference Majority of the respondents of District Four are using Magic Sarap as their additives.

This can be reflected from the result of the survey which turned out to be in favor for Magic Sarap by 8 respondents; having 19 in favor of Magic Sarap and 11 signifying preference of Ajinomoto. In spite of Ajinomoto’s extensive existence in the market, the presence of all-in-one seasoning (Magic Sarap) tend to outweigh their market share. | AJINOMOTO| MAGIC SARAP| Preference of consumers| 11| 19| A clear view of the result can be drawn from a graphical presentation of the data gathered. 2. Consumer’s reasons for their respective preference.

As a follow up question of the consumer’s preference, reasons for usage of the one they preferred is also asked. Results of the survey have shown that the dominating factor for their choice of preference is the price and its availability. An analysis of this question is separated as to those respondents whose preference is Ajinomoto and those corresponding to Magic Saraps’. With regards to those whose preference is Vetsin, the overriding factor for their choice is the product’s price and availability.

As compared to the consumers of Magic Sarap who tend to prefer it because of the product’s components or ingredients. | Price| Taste & Preference| Availability| Nutritional Value| Advertisement &Popularity| Components/ Ingredients| Others| AJINOMOTO| 10| 5| 10| 3| 2| 3| 8| MAGIC SARAP| 7| 11| 13| 14| 11| 17| 0| Graphical Presentation 3. Frequency of Usage Based on the survey conducted on consumers, it revealed that based on their preferred product, they use on more than one occasion a week as shown on the graph below making them important to everyday food of Pinoys.

Graphical Presentation 4. Usage of the other product Furthermore, it had also been concluded that 73. 33% or majority of the consumers also use the product other than their preferred choice while minority or 26. 67% remained loyal to their preference. Graphical Presentation 5. Reasons for using the other product. Below is the data showing the reasons of why the majority use the other additives despite of preferring more of their choice. Graphical Presentation 6. Reaction on the entry of Magic Sarap. Graphical Presentation Retailer’s Viewpoint 1.

Retailer’s preferred product to sell Retailers mostly prefer to sell both of the products in the market, MagicSarap as well as Ajinomoto, with 11 respondents, so as to improve profitability since they were substitutes. Whilst some prefer to sell only one of them, Magic Sarap, with 6 respondents who chose to sell their product is leading in contrast to Ajinomoto with only 3 respondents, proving the results of the consumer survey conducted. Product| Retailer’s Preference| Ajinomoto| 3| Magic Sarap| 6| Both Ajinomoto and Magic Sarap| 11| 2. Higher consumer’s demand Most retailers have opted sell both of the additives on the market but consumers will patronize only of them.

And in the interview, it had resulted to Magic Sarap leading at this point of time with 7 out of 11 retailers saying that this product is mostly bought from their retail stores and only 4 respondents having Ajinomoto as the favored product. 3. Reaction of sellers on the emergence of Maggi Magic Sarap Maggi Magic Sarap has just recently been in the market for additives, and before their appearance, Ajinomoto was the only additive that retailers have on their stores. 5 out of 20 respondents or 25% had gradually shifted to selling Magic Sarap by still selling Ajinomoto in lesser number than they sell the newly entered product.

While 40% of them (8 out of 20) also shifted in more gradual manner by selling more of their original selling product, Ajinomoto, and lesser of the Magic Sarap. 30% of them (6 out of 20) had ignored the entry of the additive and continued to sell Ajinomoto on their retail store while 5% or only one had stopped selling Ajinomoto and instead sold Magic Sarap. 4. Entry of Magic Sarap’s effect on sellers The sudden materialization of Magic Sarap had effected on retailers depending on how they responded to it. They may have sold or completely ignored it and it brought certain advantages and disadvantages to them.

60% (12 of 20) supposed that its entry had brought advantageous effects on them as a seller while the rest or the 40% (8 of 20) alleged it was disadvantageous. 5. Advantages of Magic Sarap on sellers Certain instances had resulted to sellers saying that Magic Sarap’s entry is advantageous. Most respondents who answered that it was more advantageous, which is 83. 33 % (10 out of 12), had said it’s because of the increase in profit it had brought to them. 91. 67% or 11 retailers chose the reason of increase in their buyers while 3 respondents or 25% had their own reasons of Magic Sarap’s advantageous effect.

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Monopoly against indirect competitors. (2017, Apr 30). Retrieved from https://studymoose.com/monopoly-against-indirect-competitors-essay

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