Gamechangers. Market Trends and the Strategies Behind Industry Leaders

Contents

Chapter 1: A comprehensive review on macroeconomic indicators of India, challenges faced, and measures taken by Government from 2013-2023.

Chapter 2: A comprehensive review of Smartphone Industry in India.

Chapter 3: Case Study on Monopolistic Coffee Firm and its Customers.

Abstract

This book presents a multi-dimensional exploration of market dynamics, industry evolution, and strategic business behaviour through a blend of macroeconomic review, sectoral analysis, and case-based study.

Chapter 1 offers a comprehensive examination of India’s macroeconomic indicators over the decade from 2013 to 2023. It delves into key variables such as GDP growth, inflation, fiscal deficit, unemployment, and trade balance, while also addressing the economic challenges faced during this period — including global slowdowns, policy transitions, and pandemic-induced disruptions. The chapter further analyzes the strategic fiscal and monetary measures adopted by the Indian government to stabilize and stimulate the economy.

Chapter 2 provides an in-depth review of the smartphone industry in India, one of the fastest growing and most competitive sectors in the country. It tracks the evolution of the industry, identifies major market players, evaluates consumer behaviour, and examines trends such as the rise of budget smartphones, increasing digital penetration, and the role of 'Make in India' in shaping the supply chain.

Chapter 3 presents a case study on a monopolistically competitive coffee firm, ZenEspresso (hypothetical company), operating in an urban Indian market. It illustrates short-run and long-run market equilibrium scenarios and highlights strategies for differentiation and brand positioning in a crowded marketplace. This case sheds light on the practical application of microeconomic principles in real-world business strategy.

Collectively, this book is a valuable resource for students, researchers, policy analysts, and business strategists aiming to understand the interplay between macroeconomic policy, industry dynamics, and strategic decision-making in the Indian context.

Chapter 1: A comprehensive review on macroeconomic indicators of India, challenges faced, and measures taken by Government from 2013-2023

Zakir Hussain¹, Nazleen Sulthana², Lingareddy Joji Reddy³, Kandala Vijaya Lakshmi⁴, Nityananda Ghosh[1]

¹Department of Chemical Technology, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

²Department of Environmental Sciences and Mathematics, St. Pious X (ICSE), Alwal Hills, Old Alwal, 500010 Secunderabad, Telangana, India

³Department of Biotechnology, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

⁴Department of Mathematics, Statistics and Computer Science, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

Abstract

Macroeconomic factors play a major role in defining the financial performance and financial health of a country. The macroeconomic indicators such as GDP growth, unemployment rate, inflation, interest rate, trade balance, exchange rate, and government bonds were critically analyzed for the last ten years period. Moreover, the various challenges faced by the Indian economy and the measures taken by the Indian government were critically appraised.

Macroeconomic Indicators:

(A) GDP Growth:

Illustrations are not included in the reading sample

Figure 1: India’s GDP growth rate from 2013-2023 [1-3]

Gross domestic product (GDP) is the aggregate of the total value of goods and services produced by every producer who lives in the economy (country), including any taxes imposed on goods and less any non-product value subsidies. It is computed using the following formula, which fails to allow for the depreciation of manufactured assets or the diminution and deterioration of natural resources [4].

GDP = C + I + G + (Ex-Im)

C= Consumer spending

I = Investments

G= Government spending

Ex-Im = Net exports

Ex is the total exports and Im is the total imports

India’s GDP growth is shown in Figure 1 which shows a mixed trend and be studied in various timeline brackets as follows:

v From 2013 To 2017: During this time, India’s GDP grew at a rather rapid pace, with annual growth rates ranging from 5.5 to 8.3%. This is due implementation of several economic reforms and initiatives by the government that encouraged investment and manufacturing firms and a big boon including the “Make in India” campaign and the establishment of the Goods and Services Tax (GST).

v From 2017 to 2019: During this period, India’s GDP growth slowed slightly. Demonetization in late 2016, as well as the first disruptions caused by the GST implementation in 2017 (lack of widespread awareness of the new tax system among various stakeholders), both had some short-term negative effects on economic activity. Nonetheless, growth remained above 6%.

v From 2019 to 2020: It was a great challenging and testing time for India’s GDP since the GDP growth rate declined to a very low value in the year 2020. This can be ascribed to slowed economic growth, which is caused in part by global economic concerns and a drop in consumer demand.

v From 2020 to 2021: It was a shock to India as its GDP growth rate for 2021 was negative (-5.83), a historic reduction. This is due to COVID-19 and lockdown restrictions across the globe and countries. We can breathe a sigh of relief after seeing the GDP of numerous developed economies fall due to the pandemic crisis. The COVID-19 pandemic had a severe and long-lasting impact (emotionally and economically) in India. The lockdown was imposed to contain virus spread resulting in a fall in GDP sprucely in the first quarter of 2020. There was reduced production, stimulus packages were offered by the government to its people as supportive measures resulted in such a crisis period. Slowly during the next quarters, the GDP started improving as the restrictions were lowered.

Post-pandemic recovery: In late 2020 and early 2021, India began to show indications of recovery as lockdowns were progressively removed and economic activity resumed. To aid recovery, various government stimulus initiatives and reforms were implemented.

v From 2022 to 2023: India’s GDP growth rate for 2022 was 9.05%, indicating rising trends and a rapid return from the global financial crisis. The GDP growth rate in India in the year 2023 was 7%, indicating a downward trend from 2022.

Finally, between 2013 and 2023, India’s GDP growth rate demonstrated a combination of strong expansion, slight setbacks, and a large reduction. The COVID-19 pandemic had a significant economic impact, although the government implemented several recovery measures.

B) Unemployment Rate: According to Forbes data [5], India’s unemployment rate is reflected in Figure 2. Unemployment is defined as a condition in which people who are ready and able to work are unable to find work. As shown in Figure 2 the trend in the unemployment rate can be discussed in various timelines as follows:

From 2013 to 2016: In 2013, the unemployment rate in India was around 5.42%. The following years had a modest increase (small increment), with the rate approaching the same by 2016.

From 2016 to 2019: Until 2018, the unemployment rate remained reasonably stable, with a nearly constant reduction, but it began to fall in 2016. In 2019, it was at 5.27%. The 2019 unemployment rate in India was 5.27%, a significant decrease from 2018. This was due to the central government’s announcement of the withdrawal from circulation (demonetization) of high-denomination currency notes (Rs. 500 and Rs. 1000) in 2016, which caused economic disruptions, particularly in the unorganized sector, resulting in temporary job losses, and the introduction of a new tax regime (a tax structure simplification) called good and service tax (GST) in 2017, which initially caused short-term economic disruptions, affecting businesses and individual employment prospects.

Illustrations are not included in the reading sample

Figure 2: - Unemployment Rate of India during 2013-2023

Early 2020 (pandemic impact): The 2020 unemployment rate in India was 8%, a significant increase from 2019. The COVID-19 has had a significant impact on India's unemployment rate. During the stringent lockdowns in the early months of 2020, the jobless rate rose to its highest levels in years, culminating in April 2020. This is due to employment losses and numerous job cuts by companies faulting ongoing pandemics and lockdown scenarios.

Late 2020 to 2021: By September 2021, the rate had improved but remained about 5.98%. The unemployment rate began to fall as the country gradually reopened and economic activities resumed. It did, however, stay elevated in comparison to pre-pandemic levels.

The unemployment rate in India in 2022 was 7.33%, up from 2021, and it is now 8.4% as of August 2023. India has faced inflationary pressures throughout the years, which has had an impact on the country’s current unemployment rate. Customers’ purchasing power can be diminished by price hikes, resulting in decreasing demand for goods and services. This can have a cascading (unexpected and strategic decline) effect on businesses, leading to cost-cutting measures like layoffs and cuts to staff, resulting in higher unemployment rates.

C) Inflation: The Consumer Price Index (CPI), a widely used Laspeyres index, measures inflation by tracking the annual percentage change in the expenses incurred by an average consumer when purchasing a predefined basket of goods and services, which can be adjusted or updated at predetermined intervals, typically in an annual basis. The data shown in Table 1 and the trends observed in Figure 3 can be discussed using four types of classification such as high inflation, inflation moderation, low inflation, and inflation up stick:

From 2013 to 2014: This can be classified as a high inflation period. India suffered unusually high inflation in the early part of this decade, which was mostly driven by fuel and food prices. Both the Wholesale Price Index (WPI) and the Consumer Price Index demonstrated an elevated level of inflation. This caused a greater political uproar and a negative trend in the then government.

Illustrations are not included in the reading sample

Figure 3: - Inflation Rates in India during 2013-2023

Table 1: - Inflation Rate in India during 2013-2023 [6]

Illustrations are not included in the reading sample

From 2014 to 2015: This timeline can be called an inflation moderation (disruptive change) period as inflation started to decrease from its high. This can be attributed to the greater responsibility of the newly formed government at the national level. Following the change in government in 2014, there was a focus on inflation reduction as promised during the election campaign. Inflation began to ease as the reserve bank started more aggressive measures, hiking interest rates, etc.

From 2015 to 2019: This can be called a low inflation period as inflation continued to fall, reaching record low levels (3.32 in 2017, 3.73 in 2019). In 2019, India’s inflation rate was 3.73%, a 0.21% decrease from the previous year. This can be ascribed to several causes such as decreased global oil prices (crude oil, natural gas prices, etc.), increased agricultural output because of productive monsoon season, and a special emphasis by the government on inflation control.

From 2019 to 2023: This can be classified as an inflation uptick (overall) and mixed period (2020-2021) and during this period inflation began to rise again in 2019 and 2020. Rising food prices, supply chain interruptions caused by COVID-19 during the starting period of COVID-19 in India, and higher fuel prices (initial stages) all contributed to this surge.

In 2020, the inflation rate was 6.62%, up 2.89% over 2019. In 2021, the rate of inflation was 5.13%, reflecting a 1.49% reduction over 2020. The pandemic had a huge economic impact on India, including inflation. Initially, there was deflationary pressure owing to decreased economic activity, but as the economy recovered, inflationary pressures emerged, most notably in food and fuel costs. In 2022, the inflation rate was 6.70%, up 1.57% from 2021. In August 2023, retail price inflation in India fell to 6.83%, after rising to 7.44% in July, the biggest increase since the beginning of the 2022 financial year and well below market expectations of 7% [7].

D) Interest Rate:

The Indian Reserve Bank announces its decision regarding interest rate that serves as the benchmark because temporary lending rates are a significant predictor of how much currency is worth and market participants closely track the movements in interest rates. Moreover, interest rates are very closely related to controlling inflation rates, a tool of economic stimuli. As shown in Figure 4, from 2013 to 2022, interest rates in India were gradually reduced, with the RBI lowering the repo rate in response to various economic conditions.

Illustrations are not included in the reading sample

Figure 4: Interest rates from 2013-2023 [8]

High-interest rate period (2013-15): Until 2015, the interest rates were very high due to high inflation rates. The repo rate was around 8%. The repo rate had reduced to roughly 7.25% by 2015. This pattern persisted in 2016 and 2017, with the repo rate peaking at over 6% by mid-2017. These rate decreases were meant to stimulate economic growth and investment.

Decreasing interest rate period (2015 to March 2020): The repo rate had reduced to roughly 7.25% by 2015. This pattern persisted in 2016 and 2017, with the repo rate peaking at over 6% by mid-2017. These rate decreases were meant to stimulate economic growth and investment. However, while inflation remained under control, the RBI continued rate reduction in late 2018 and early 2019. The repo rate had fallen to about 5.75% by mid-2019. The repo rate had declined to 4.00% by May 2020.

Constant rate period (May 2020 to April 2022): From 2020 to April 2022 the interest rates were constant at 4%. The RBI maintained an accommodating equilibrium in 2021, keeping interest rates low to assist economic recovery.

Uptick once again (May 2022 to August 2023): Starting in May 2022, the RBI hiked rates and it was reaffirmed at a 6.5% growth prediction for the fiscal year 2024. This rate was held constant from the three consecutive meetings in a row as there is a clear indication of rising inflation after higher-than-usual seasonal rises in food prices.

E) Trade Balance:

Illustrations are not included in the reading sample

Figure 5: - Trade balance in India [9]

The balance of trade equals the goods and services exported less the imports of goods and services. Although we observe a mixed trend of trade balance from Figure 5 there was a historic negative trend. For instance, we can see that “India’s trade balance for 2022 was $151 Billion, nearly an 82% increase from 2021”, “same in 2021 was $83 Billion, a 690% increase from 2020”, “for 2020 was $10 Billion, an 85% decline from 2019”, and same for 2019 was $7 Billion, a 28% decline from 2018”. This trend of trade deficit is due to global uncertainties or crisis factors. Originally, India has had a persistent trade deficit which means that it buys more products and services than it exports. Over time, this deficit has been a steady inclination. Although India’s exports have increased in sectors such as IT services, pharmaceuticals, textiles, and chemicals by leveraging India’s competitive advantage, there has been a sharp increase in the import of electronics, high demand for oil and gas or energy consumption, sophisticated services, and machinery, technologies, and so on. So, India’s trade balance is always in the negative trend and obviously, we are in the trade deficit. Whereas China for many years remains a trade surplus country. Due to high energy demand (cost of imports), Our honorable Prime Minister of India (Shri. Narendra Modi) asked for a global biofuel alliance during the G20 summit along with the leaders of, Bangladesh, Italy, Singapore Brazil, USA, UAE Argentina, and Mauritius.

F) Exchange Rate:

Illustrations are not included in the reading sample

Figure 6: - Exchange rate of rupee and US dollar during 2013-2023 [10]

A stronger currency of another country (compared to India) makes exports more competitive and can raise import costs. Figure 6 depicts a trend of Indian rupee comparison against the dollar. This trend can be explained using various timelines as follows:

From 2014 to 2016: During this time, the Indian Rupee was reasonably stable. Contributing factors for this stability may be slow economic growth, stable inflation, and the RBI’s efforts to maintain foreign exchange reserves. The Indian government’s plan for the withdrawal from circulation (demonetization) of high-denomination currency notes (Rs. 500 and Rs. 1000) in late 2016 caused some economic anxiety. This, however, had only a little impact on the exchange rate.

From 2017 to 2018: During this time, the Indian rupee appreciated. This increase was driven by variables such as high foreign direct investment (FDI) inflows, a stronger Indian economy, and improved investor morale or sentiments.

From 2018 to 2019: During this time, there were some ups and downs. Rising crude oil costs, global trade tensions, and fears about the Indian economy’s development prospects all played a role in these movements.

In 2020: The Indian rupee first dropped against the US dollar. Fortunately, to stabilize the currency, the RBI intervened in the foreign exchange market. This fluctuation can be largely attributed to the COVID-19 pandemic causing major volatility (economic uncertainties) in global financial markets.

In 2021-2023: The Indian Rupee has remained relatively stable in 2021. Factors such as considerable foreign exchange reserves and a modest economic recovery helped to keep the stability. Fears of inflation and rising oil prices, however, have caused some depreciation in the next years (2022 and 2023) since exchange rates are influenced by a complex combination of economic, political, and geopolitical factors. As a result, a variety of events and policies, including geopolitical developments, fiscal policy, interest rate changes, monetary policies, central bank interventions, and trade balances can all have an impact on the direction of the trend.

G) Government Bond:

Illustrations are not included in the reading sample

Figure 7: - Government bonds during 2013-2023 [11]

From Figure 7, the yield movements can be depicted as follows:

From 2014 to Early 2018: This is a declining yield period since during this period, there was a general pattern of declining yields. This can be due to interest rate reductions announced by RBI to boost economic growth.

2020: This is a volatile period since bonds have undergone severe volatility. This is because the growing fiscal imbalance and greater government borrowing (due to COVID-19) pushed rates higher. The RBI implemented multiple bond market stabilization measures, including operation twist and open market operations.

In 2021 and 2021-23: This is known as yield reversal. Beginning in 2021, the trend began to reverse as yields began to grow. This was due in part to inflationary stresses and increasing government borrowing to cover pandemic-related expenses. During the period 2021-2023, bonds experienced a mixed trend and continued to grow. Finally, India’s ten-year sovereign bond rate has risen sharply to 7.15% since bond yields in India were influenced by a combination of factors such as fiscal policy (reduce poverty, promote sustainable growth), monetary policy (manage price fluctuations and ensure economic stability), and global economic conditions (good during normal conditions, and worse in the crisis periods such as a pandemic, war, tensions, failure of the economy, etc.).

Summary of challenges faced by Indian economy and government measures:

As India is diverse, complex, and one of the largest economies, it has faced many challenges and continues to face many. Therefore, government intervention and sustainable measures are inevitable as discussed:

A) Unemployment:

(a) Challenge: India has a high unemployment rate (particularly youth of the country) resulting in difficulty in accommodating the livelihood of its people. Moreover, there is no data on employment at our disposal (data restriction) since calculating unemployment is difficult due to underemployment and a large part of the workforce is in unorganized sectors (structural challenge).

(b) Government Policy: Skill India, make in India, and Startup India (clusters for startups in special economic zones, academic institutes, etc.) are initiatives that have been launched to stimulate job creation, inculcate the habit of entrepreneurship (rather than being job seekers, people can be job creators), and skill development (dropping the rat race for grades in the academics and paying emphasis on skill). During the pandemic, the elevated crisis of unemployment was responded to by passing a slew of measures, including the Mahatma Gandhi National Rural Employment Guarantee Act, MGNREGA (100 days guaranteed work) and other economic stimulus packages (groceries, direct benefit transfers, etc.).

B) Economic disparity:

(a) Challenge: Since India is diverse with the majority of the nation’s people dwelling beneath the poverty line it experiences the challenge of economic inequality.

(b) Government Policy: The MGNREGA and the Pradhan Mantri Jan Dhan Yojana (PMJDY) are two of the government’s poverty-relief initiatives that started to address the challenge. Introduced Swachh Bharat Abhiyan scheme to inculcate the habit of cleanliness so that public health and hygiene will be improved. The introduction of The Pradhan Mantri Awas Yojana (PMAY) pushes for the provision of affordable housing available to everybody. Furthermore, progressive taxes and various social welfare programs are intended to eliminate inequality (income distribution through direct benefit transfer).

C) Education and Skill Development:

(a) Challenge: To maintain its economic growth, India needs a qualified workforce, yet there is a huge gap in education and skill development.

(b) Government Policy: The government has launched programs such as Skill India to boost workforce employability and educational quality. Started many Indian Institute of Technology (IIT) (at least one for each state), National Institute of Technology (NIT), Central University for each state, National Skill Qualifications Framework (NSQF), National Institutional Rankings Framework (NIRF), approving Deemed Universities (discouraging large cluster of inefficiently managed affiliated college system), Institute of National Importance scheme, Institute of Eminence scheme, National Education Policy (NEP-2020), Academic Bank of Credits (ABC) etc.

D) Infrastructure Deficit:

(a) Challenge: India suffers from a lack of robust transportation, energy, and healthcare infrastructures.

(b) Government Policy: To overcome infrastructure deficiencies, the government has launched programs such as Atmanirbhar Bharat Abhiyan (to increase indigenous industry participation and infrastructural development), Bharat Mala Scheme (aims to road infrastructure development), Sagar Mala (aim to port infrastructure development), and the Smart Cities Mission (aims to promote clean and green cities with all necessary amenities) along with smart city rankings based on Swatch Bharat Abhiyan criteria’s.

E) Digital and Technological Divide:

(a) Challenge: To foster economic inclusion a high gap digital divide has to be removed by achieving universal internet access

(b) Government Policy: Digital India and the National Broadband Mission, for example, are aimed at increasing digital infrastructure and encouraging digital literacy. National Programme on Technology Enhanced Learning (NPTEL), upGrad, Udemy, Unacademy, etc. are the benefits of such programs.

F) Fiscal Deficit and Public Debt:

(a) Challenge: Fiscal deficit and public debt levels have been the foremost challenges faced by India for very long.

(b) Government Policy: GST (Goods and Service Tax) and DBT (Direct Benefit Transfer) are the form of fiscal consolidation strategies introduced to control expenditure and revenue collection.

G) Foreign Investment and Trade Balance:

(a) Challenge: It is critical for economic growth to attract foreign direct investment (FDI) and maintain a fiscal surplus (positive trade balance).

(b) Government Policy: The “Ease of Doing Business” and the “Make in India” initiative are intended to attract FDI. The expedited trade policies examination process regularly was initiated to enhance the trade balance.

H) Agricultural Distress:

(a) Challenge: Small landholding, lack of modernity, and low income, are all difficulties confronting the agricultural sector.

(b) Government Policy: Projects such as the Pradhan Mantri Kisan Samman Nidhi-PMKSN (farmer income support scheme) and agricultural marketing reforms (e.g., Agriculture Produce Market Committee, APMC reforms) aim to increase farmer income and boost agricultural growth.

I) Inflation and Price Volatility:

(a) Challenge: Successful control and management of macroeconomic stability factors like inflation and volatility in food and fuel prices is a crucial challenge.

(b) Government Policy: RBI’s monetary policy to control inflation and food security scheme of government to control price volatility are examples of responses to inflation and volatility control.

J) Environmental Sustainability:

(a) Challenge: Though India is agrarian in nature and agricultural activities are the country’s backbone, to feed (high resource consumption) its huge population a balance between economic growth and environmental sustainability (high pollution levels) is of prime concern.

(b) Government Policy: Policies such as the National Clean Air Programme (NCAP) and renewable energy plans are meant to tackle sustainability issues while also fostering the expansion of the economy. Due to high energy demand (cost of imports) and rising environmental concerns, our honorable prime minister (Shri. Narendra Modi) advocated for a worldwide biofuel alliance at the G20 conference, alongside the leaders of Bangladesh, Italy, and Singapore. Brazil, USA, UAE Argentina, and Mauritius.

Acknowledgements:

The data has been collected from various websites as given in the references. I pay my heartfelt gratitude to the authors or their organizations for providing the data handy which is very helpful to complete my assignment. We thank our beloved Principal of Loyola Academy, Rev. Fr. Dr. L. Joji Reddy, SJ for his continuous support.

References:

[1] The World Bank. https://databank.worldbank.org/reports.aspx?source=2&country=IND

[2] Trading Economics. https://tradingeconomics.com/india/full-year-gdp-growth .

[3] Macrotrends. https://www.macrotrends.net/countries/IND/india/gdp-gross-domestic-product

[4] Mankiw NG. Macroeconomics, 7th Edition. Worth Publishers, New York; 2010. ISBN10: 1-4292-1887-8.

[5] Forbes India. Published: August 10, 2023, and Updated: August 28, 2023. https://www.forbesindia.com/article/explainers/unemployment-rate-in-india/87441/1#:~:text=According%20to%20the%20recent%20Bloomberg,significant%20changes%20in%20economic%20conditions .

[6] Macrotrends. https://www.macrotrends.net/countries/IND/india/inflation-rate-cpi

[7] Ministry of Statistics and Programme Implementation, Government of India. https://www.mospi.gov.in/dataviz-cpi-map#

[8] Forbes India. Published: August 21, 2023, and Updated: August 29, 2023. https://www.forbesindia.com/article/explainers/repo-rate-current-history-india/85101/1

[9] Macrotrends. https://www.macrotrends.net/countries/IND/india/trade-balance-deficit

[10] Thomas Cook. https://www.thomascook.in/blog/1-usd-to-inr-from-1947-to-2023

[11] Investing.com https://in.investing.com/rates-bonds/india-10-year-bond-yield-historical-data

Chapter 2: A comprehensive review of Smartphone Industry in India

Zakir Hussain¹, Nazleen Sulthana², Lingareddy Joji Reddy³, Kandala Vijaya Lakshmi⁴, Nityananda Ghosh[1]

¹Department of Chemical Technology, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

²Department of Environmental Sciences and Mathematics, St. Pious X (ICSE), Alwal Hills, Old Alwal, 500010 Secunderabad, Telangana, India

³Department of Biotechnology, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

⁴Department of Mathematics, Statistics and Computer Science, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

Abstract

In the present study as a business analyst, we perform a thorough analysis of smartphone industries in India from 2022. The major smartphone industries and their market shares has been analyzed and their market characteristics were studied using STEP framework.

Introduction and Case study:

India is one of the largest and fastest-growing smartphone markets in the world. Major players like Samsung, Xiaomi, OnePlus, and Apple are competing for market share, along with several local brands. The market is characterized by rapid technological innovation, varying price points, and a diverse consumer base.

As an economic analyst we assess the market structure of the Indian smartphone industry, using data from 2022 onwards. We have considered the number of firms in the market, types of products, pricing strategies, and other market characteristics.

A. Based on recent data (from 2022 and after), we found the kind of market structure best describes the Indian smartphone industry (monopoly, monopolistic competition, perfect competition, or an oligopoly). The market characteristics led to describe the smart phone industry belongs to the particular type of competition.

B. We present recent statistics (the data is recent, from 2022 or 2023), such as market share distribution among top firms or pricing trends, that support your analysis.

Results and Discussions:

A. In India, only a few well-known brands with high concentration ratio (there are many brands but limited by market share) dominate the smartphone market share (3.4 trillion Indian rupees in 2022, 3.4 trillion Indian rupees reached by September 2023) and each brand is up against intense competition [1,2]. Both of these traits indicate that the smartphone market in India is oligopolistic.

Key players across the Indian smartphone industry include:

i. Xiaomi
ii. Samsung
iii. Vivo
iv. Realme
v. OPPO
vi. OnePlus
vii. Apple
viii. Lenovo
ix. Motorola
x. Transsion
xi. Huawei
xii. Nokia
xiii. Tecno
xiv. Infinix
xv. LG
xvi. Micromax
xvii. JIO
xviii. SWIPE MOBILES
xix. CELKON
xx. SMARTRON
xxi. YU TELEVENTURES
ii. Among these players, the majority of share is being held by first (i) to (v) and to some extent from (i) to (ix) [3-14]. A “tight oligopoly” is defined as an industry with fewer than ten firms [15]. Further, a thorough analysis of the data at hand shows that these oligopolistic enterprises compete on pricing and as a result, smartphone prices in India have tended to fall over time. Unlike a collusive oligopoly, the smartphone industry in India is more akin to a non-collusive oligopoly market structure (large cost advantage of the players in the industry). Non-collusive oligopoly pertains to a state whereby businesses conflict against one another on price and quantity. Their output plans are distinct from those embraced by their counterparts, and they compete to grow their market share.

These market characteristics are based on the STEP framework:

i. S- only a few players dominate the market share.
ii. T- A few producers with differentiated Products (Android, IOS, more apps, face unlock, fingerprint sensor, voice recognition, simple sharing, regular updates, bigger screen, portable charger, wireless charger, dual sim, foldability, design, etc.)
iii. E- high entry barriers include a lot of sunk costs, high startup costs (technology development patents, manufacturing spares, and assembling), advertisement costs, and brand loyalty.
iv. P- Smartphone companies are interdependent and they must consider the reaction of competitors in case of changing their prices. As an outcome of this interdependence, market pricing tends to be very rigid. Another way of analyzing interdependence is despite their competitiveness and legal patent disputes, Apple and Samsung remain mutually dependent [16,17]. Samsung supplied DRAM memory chips to Apple for its iPhones and iPads. Consequently, Apple was responsible for some percentage of all income generated by Samsung [18].

The kinked demand curve (non-conventional demand curve) of the Sweezy model can be used to describe this market structure:

Illustrations are not included in the reading sample

Figure 1: Kinked demand curve

MR= Marginal revenue

E= Kink point

dE= Upper segment of the demand curve

P= Prevailing price level

Q= Output at prevailing price

EO= Lower segment of the demand curve

The kink in the demand curve is caused by sellers’ asymmetric behavior. If a vendor raises the price of his product, rival sellers will not follow, causing the original seller to lose a significant quantity of sales. In other words, every price rise will be overlooked by competitors. Every price, on the other hand, is going to be countered by an identical cost cut by a competent company. As a consequence, the advantage of the first firm’s price drop will be negligible. The demand curve will be kinked at the governing market price as an outcome of these behavioral tendencies. A relatively elastic demand can be observed at dE and inelastic at EO of Figure 1.

B. The Indian smartphone business was analyzed using the data collected from various sources and presented in Table 1 (market share) and Figure 2 (revenue from the smartphone industry)

Illustrations are not included in the reading sample

Illustrations are not included in the reading sample

Figure 2: Revenue from the smartphone industry (*indicates projected value) [1]

Acknowledgements:

The data has been collected from various websites as given in the references. I pay my heartfelt gratitude to the authors or their organizations for providing the data handy which is very helpful to complete my assignment.

References:

[1] Shangliao Sun. Revenue of smartphone industry in India from 2020 to 2022 with forecasts until 2025. Statistica report. Published: 13 April 2023. https://www.statista.com/statistics/1358735/india-smartphone-industry-revenue/#:~:text=In%202022%2C%20the%20industry%20revenue,a%20significant%20increase%20from%202020.

[2] Statistica report. Published: September 2023 https://www.statista.com/outlook/cmo/consumer-electronics/telephony/smartphones/india

[3] Maximize Market Research Pvt. Ltd. (MMR) analysis report. Published: August 2019, Modified: October 2021. https://www.maximizemarketresearch.com/market-report/india-smartphone-market/20060/

[4] India Smartphone Market Share: By Quarter. Counterpoint (Technology Market Research). August 17, 2023. https://www.counterpointresearch.com/insights/india-smartphone-share/

[5] India Smartphone Market Report 2022: Size, Analysis, Growth, Demand, Trends, Opportunity, Forecasts 2021-2028 - The Emergence of Budget-Centric Smartphones & Increasing Number of Product Launches. GLOBE NEWSWIRE Published: 21, March 2022. https://www.globenewswire.com/en/news-release/2022/03/21/2406467/28124/en/India-Smartphone-Market-Report-2022-Size-Analysis-Growth-Demand-Trends-Opportunity-Forecasts-2021-2028-The-Emergence-of-Budget-Centric-Smartphones-Increasing-Number-of-Product-Laun.html

[6] GSMA Intelligence report. https://www.gsma.com/mobileeconomy/wp-content/uploads/2023/03/270223-The-Mobile-Economy-2023.pdf

[7] India’s smartphone shipments decline 21% in Q1 2023: Report. The Hindi Bureau. Published: May 05, 2023 https://www.thehindu.com/sci-tech/technology/india-smartphone-shipments-decline-21-q1-2023-report/article66815187.ece

[8] Shilpi Jain. India Premium Smartphone Segment Grows 112% YoY in Q2 2023; India Now Among Apple’s Top 5 Markets. Counterpoint (Technology Market Research). Published: Jul 31, 2023. https://www.counterpointresearch.com/insights/india-smartphone-market-q2-2023/

[9] Ash Turner. bankmycell.com https://www.bankmycell.com/blog/smartphone-market-share-in-india/

[10] India's smartphone market sees green shoots; Samsung retains top stop; Vivo replaces Xiaomi for number 2. Times of India. Updated: Jul 20, 2023 https://timesofindia.indiatimes.com/gadgets-news/indias-smartphone-market-sees-green-shoots-samsung-retains-top-stop-vivo-replaces-xiaomi-for-number-2/articleshow/101983344.cms

[11] Vijay Anand. India's smartphone market declines 6% YoY in second quarter of 2023: Research. CNBC TV18 Published: Aug 10, 2023 https://www.cnbctv18.com/technology/cybermedia-research-cmr-india-smartphone-market-shrinks-6-percent-yoy-q2-2023-17491201.htm

[12] Mobile Vendor Market Share in India - August 2023. Statcounter (GlobalStats). https://gs.statcounter.com/vendor-market-share/mobile/india

[13] Pain continues for smartphone brands in India, 4 reasons why 2023 may be better. Times of India. Published: Dec 23, 2022. https://timesofindia.indiatimes.com/gadgets-news/pain-continues-for-smartphone-brands-in-india-4-reasons-why-2023-may-be-better/articleshow/96463543.cms

[14] India: What the smartphone market tells us about its economy. BBC News. Published: 8 May, 2023. https://www.bbc.com/news/business-65491090

[15] Rajat Kathuria, Mansi Kedia, Kausambi Bagchi. Competition Issues in India’s Mobile Handset Industry. Indian Council for Research on International Economic Relations. Published: October 2019. https://icrier.org/pdf/Competition-Issues-in-India-Mobile-Handset-Industry.pdf

[16] CNET cover report. iPhone 6 vs Samsung Galaxy S6: Here's the difference. Published: March 28, 2015. https://www.cnet.com/tech/mobile/iphone-6-vs-samsung-galaxy-s6-heres-the-difference/

[17] Macworld report. Apple patents: Clues to future iPhones, iPads, Macs, Apple Watch https://www.macworld.com/article/670717/apple-patents-clues-to-future-iphones-ipads-macs-apple-watch.html

[18] Vlad Savov. The Verge reports. Samsung is once again the world's biggest smartphone vendor, but its profits haven't recovered. Published: 29 April 2015. https://www.theverge.com/2015/4/29/8512887/samsung-earnings-q1-2015-smartphone-market-share

Chapter 3: Case Study on Monopolistic Coffee Firm and its Customers

Zakir Hussain¹, Nazleen Sulthana², Lingareddy Joji Reddy³, Kandala Vijaya Lakshmi⁴, Nityananda Ghosh[1]

¹Department of Chemical Technology, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

²Department of Environmental Sciences and Mathematics, St. Pious X (ICSE), Alwal Hills, Old Alwal, 500010 Secunderabad, Telangana, India

³Department of Biotechnology, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

⁴Department of Mathematics, Statistics and Computer Science, Loyola Academy, Old Alwal, 500010 Secunderabad, Telangana, India

Abstract

The coffee shop business is a fast-growing entity and is considered one of the monopolistic industries with a high rate of returns if the operation strategy is profound. Many entities like café coffee day (CCD), and Starbucks have laid their distinct strategy to rise from the small entities to the global chains. This shows how the role of strategic thinking and adopting distinct offerings finally leads to a successful business and a vast customer base. In this article we have conducted a critical analysis of the case highlighted in the introduction and thorough strategic suggestions were proposed.

Introduction and Case details:

Imagine you are an economist advising a new entrant in the coffee shop industry, ZenEspresso (hypothetical company), in a large metro city. The market is monopolistically competitive, with each coffee shop offering slightly differentiated products — be it through the quality of coffee, atmosphere, or additional services like free Wi-Fi. ZenEspresso has been operating for a year and is earning a profit [1-3]. Now it is contemplating strategies to move from short-run to long-run equilibrium [4-10].

A. The short-run Equilibrium for ZenEspresso indicating its demand, marginal revenue, short-run marginal cost, and short-run average total cost curves is shown in Figure 1, representing the level of output, price, and economic profit at this initial stage.

The following can be the likely equilibrium plots and strategies to be adopted by the current company

The short-run Equilibrium plot for ZenEspresso is shown in Figure 1:

Illustrations are not included in the reading sample

Figure 1: Short-run equilibrium diagram

MC= Marginal Cost

ATC= Average Total Cost

AR= Average Revenue

AVC= Average Variable Cost

MR= Marginal Revenue

D= Demand

AFC= Average Fixed Cost

E= Equilibrium (MC = MR)

M= Equilibrium Quantity

P= Equilibrium price

Profit= Q(P-ATC)

B. After the initial success of ZenEspresso, several new coffee shops entered the market, and some existing competitors up their game. Assuming that ZenEspresso and its competitors can adjust their scale of operations, Figure 2 shows the long-run equilibrium for ZenEspresso and illustrates the changes in its demand, marginal revenue, long-run marginal cost, and long-run average total cost curves.

The long-run Equilibrium plot for ZenEspresso is shown in Figure 2:

Illustrations are not included in the reading sample

Figure 2: Long-run equilibrium diagram

MC= Marginal Cost

AVC= Average Variable Cost

MR= Marginal Revenue

D= Demand

AFC= Average Fixed Cost

ATC= Average Total Cost

E= Equilibrium

E = Equilibrium (long-term) shift

M= Equilibrium Quantity

P= Equilibrium price (short-run)

AR= Average Revenue

C. The coffee shop industry is monopolistically competitive, we can frame a strategy for ZenEspresso to differentiate its products and improve its price elasticity of demand.

Since the coffee shop industry is given a monopolistic industry (selling similar products but not identical) and we know that in monopolistic competition, this shop can enjoy some degree of control over the price of its products. Therefore, it is very important to have a strategy so that ZenEspresso can improve its price elasticity of demand by differentiating (vertical and horizontal product differentiation works here) its offerings to the customer in the following way:

1. Quality: It can concentrate on enhancing the quality of coffee offerings by utilizing high-quality ingredients, coffee beans, and brewing techniques to produce a superior product for which buyers are ready to pay a premium price.

2. Unique menu and customization options with other similar products: ZenEspresso can introduce new yet inventive coffee or food items that are not commonly accessible elsewhere. Similar to coffee products can be offered in combination with available products to realize economies of scale. For instance, it can create signature coffee blends, unique dessert options, or themed drink specials to distinguish its business from the competition. It can allow buyers to personalize their orders by providing customization possibilities. It will be imperative to allow them to select a variety of beans used for coffee, dairy products (milk, cream), sugar substitutes, and flavors to suit their preferences.

3. Loyalty, seasonal offerings, and Limited edition: ZenEspresso can implement a loyalty program with a reward on each purchase with a unique redemption option (free offering, discount, etc.) to its loyal customers so that they are connected to the brand. They can create a niche by offering limited-time deals and special edition products so they form a sense of urgency to buy a product immediately.

4. Feedback: They can gather customer input regularly and use it to improve the services and products offered. They can update or redesign the menu with customer-requested services (wherever possible) to reflect what the clients want and value the most. The customer will feel that ZenEspresso is valuing its customer’s feedback which in turn increases the attachment to the brand.

5. Ambiance and Experience with ethical practice and unique packages: They can stand out by creating an unusual and appealing atmosphere by incorporating unique interior design, artwork, music, and comfy seating. Customers who value all aspects of the experience will be drawn to and retained by a pleasant and distinct atmosphere. Highlight ethical and ecological practices, by practicing fair-trade coffee beans procurement, utilizing packaging that is environmentally friendly, or aiding local farmers. These days many customers who cherish these values may be willing to pay a higher price for the products.

6. Marketing and Branding, Collaborations and Partnerships, and Online Presence: They can invest in effective advertising and promotional tactics to differentiate their coffee shop from competitors. They may employ storytelling and branding connections to give a distinct personality that appeals to those they want to reach. Create special items or promotions in collaboration with nearby enterprises or freelancers. Collaboration can help them to reach fresh market segments and broaden their horizon.

D. The strategy described in ‘C’ would appear on the long-run equilibrium diagram as shown in Figure 3.

The firm will be faced with competition in the long run as new competitor business entities with substitute items begin to enter the market. As a result, demand will diminish and economic profit will fall or the firm will only earn normal profits. Demand will continue to fall until total revenue equals the entire cost, at which point, as with perfect competition, all profits will be lost in the long term and eventually break even. Therefore, a robust strategy outlined (quality improvement, unique menu and customization, loyalty, seasonal offerings, limited edition, feedback, ambiance and experience with ethical practice and unique packages and marketing and branding, collaborations and partnerships, and online presence) incorporating all the factors will bring a new niche demand towards the monopolistic competition realized during the short run (price-setting power, create entry barrier by technological enhancement, etc.). By adopting these strategies, the demand will shift from D1 towards D, revenue will increase from MR1 to MR and equilibrium will shift from E1 towards E as shown in Figure 3.

Illustrations are not included in the reading sample

Figure 3: Long-run equilibrium diagram for the firm adopting a robust strategy

MC= Marginal Cost

AVC= Average Variable Cost

MR= Marginal Revenue (short term) shift is due to the adoption of a new market strategy

D= Demand (short term) shift due to adoption of new market strategy

ATC= Average Total Cost

AFC= Average Fixed Cost

E= Equilibrium (short-term)

E = Equilibrium (long-term)

AR= Average Revenue

M= Equilibrium Quantity

P= Equilibrium price (short-run)

References

1. Statista. (2023). Coffee Market in India and Global Trends. https://www.statista.com

2. International Coffee Organization (ICO). (2022). Annual Coffee Market Report. https://www.ico.org

3. Starbucks Corporation. (2023). Annual Report and Financials. https://www.starbucks.com

4. Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach (9th ed.). W.W. Norton & Company.

5. Pindyck, R. S., & Rubinfeld, D. L. (2017). Microeconomics (9th ed.). Pearson Education.

6. Krugman, P., Wells, R., & Graddy, K. (2018). Microeconomics (5th ed.). Worth Publishers.

7. Chamberlin, E. (1933). The Theory of Monopolistic Competition: A Re-orientation of the Theory of Value. Harvard University Press.

5. Bresnahan, T. F. (1989). Empirical Studies of Industries with Market Power. Handbook of Industrial Organization, 2, 1011-1057.

6. Haskel, J., & Martin, C. (1994). Market power and the U.K. coffee industry: A study of differentiation and competition. Journal of Industrial Economics, 42(2), 177-189.

7. Dube, J. P., Hitsch, G. J., & Chintagunta, P. K. (2010). Tipping and Concentration in Markets with Indirect Network Effects. Marketing Science, 29(2), 216-249.

[...]

Details

• Course: Master of Business Administration
• Grade: A
• Authors: Zakir Hussain (Author), Nazleen Sulthana (Author), Lingareddy Joji Reddy (Author), Kandala Vijaya Lakshmi (Author), Nityananda Ghosh (Author)
• Publication Year: 2023
• Pages: 32
• Catalog Number: V1573484
• ISBN (eBook): 9783389121764
• ISBN (Book): 9783389121771
• Language: English
• Tags: strategy leadership Business Administration