Monopolistic Competition

Monopolistic competition is characterized by a relatively large number of sellers producing differentiated products (clothing, furniture, books). There is widespread nonprice competition, a selling strategy in which one firm tries to distinguish its product or service from all competing products on the basis of attributes like design and workmanship (an approach called product differentiation).(McConnell and Bruce, 2004, Chapter 23, pg. 3)

With this definition in mind a company that fits the Monopolistic Competition is Kellogg. For many years Kellogg has established itself as leader in the Food Industry and continues to differentiate itself from its competitors. In compliance to government regulations to crackdown on the advertising of unhealthy foods to youngsters, "Kellogg decided not to advertise any items with more than 200 calories per serving to children. As part of that commitment, the company introduced Pop-Tarts Toaster Pastries with whole grains and Frosted Flakes Gold, a whole-grain take on the classic with less sugar". Advertising Age, 2008, Vol. 79 Issue 8, p13-13. The change can be seen in the advertising of its products to reflect key nutritional information on Kellogg product boxes. A move that per Kellogg Executives that will gain the attention of adults particularly moms.

In the Simulation it was determined that Quasar multiple brands offers the opportunity to introduce variety in the market. As the new brand competes, Quasar's overall market share increases. The same expenditure on advertising of an existing brand may not give Quasar high returns as demand will have peaked but the same expenditure on advertising for a new product may be more profitable for Quasar as new market segments can be targeted.

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