1. IS MONOPOLY FATAL FOR THE FIRM’S
GROWTH:
EXPERIENCE OF HMT WATCHES LTD.
SUBMITTED TO :
Dr. B.Venkatraja
BY GROUP NO. 4 :
KUNAL PANWAR (16140)
MANASH GOGOI (16141)
MANGALA DEVI (16142)
MAYANK AGRAWAL (16143)
MELKEY ANAND (16144)
MOHAMMED MASOOD (16145)
2. HMT INTRODUCTION
incorporated in 1953 ,in Bangalore as a machine
tool manufacturing company by government of
India.
Diversify into businesses such as tractor, printing
machinery, metal forming presses, die casting,
plastic processing machinery, CNC systems, bearing
and watches.
It was first to launch hand-winded mechanical
watch, quartz watch, automatic watch, women’s
watch and Braille watch.
HMT brand became known for its watches rather
than its other products.
4. JOURNEY OF HMT WATCHES
First company in India which introduce Quartz watches in
the 1970s under the sub brands Sona and Vijay.
Set up manufacturing unit with the help of Japanese
technology in 1972 , to produce automatic day and date
watches.
In 1972 , two new units in Bangalore and one in Srinagar
were set up these plants were capable of manufacturing two
lakhs watches per annum.
Total turnover of these three units exceeded by Rs.13 Crore
in 1975-76.
5. Set up another two manufacturing unit at Tumkur and Ranibagh in 1978 and 1985.
It enjoyed 55.22% market share of the total watch production till 1990.
After 1990 ,HMT faced competitions from Titan, Timex etc.
it had market share of 90% but gradually declined to 26% during 1997-98 and it dropped to 14% during 2001-02
and presently it is only 4%.
6. CONCLUSION
Many of the HMT ‘s top managers including the general manager of watches
who was known to be the driving force behind HMT ‘s strategy were hired by
Titan.
HMT’s inability to control the retail trade and lack of design in its range created
vacuums which Titan exploited very strategically when it entered the market.
As HMT had narrow choice of design in their range of watches. It also failed in
the profit maximization technique in the case of launching of Quartz watches.
When HMT was not innovating anything, Tata took the opportunity and entered
into watch segment in 1984 and launched attractive products to capture the
watch market and it succeeded, became the market leader in the watch industry
by having 60% market share.
HMT market share reduced to 4% from 90%. Hence, these are the reasons that
lead monopoly failure for the HMT watches.
7. MONOPOLY
Monopoly defines that the market structure is characterized with only a single seller , and he is
selling a unique product in the market.
Examples for Monopoly:
1. If a firm has an exclusive ownership of their resources like Microsoft owing Windows operating
system. It has a Monopoly power over their resources.
2. Government can also create a monopoly in an industry if it wants to control. For Ex. Electricity,
Television cables, Post office etc.
8. FEATURES OF MONOPOLY
1. Sole seller of a product - There is only one seller selling goods in the particular
market. But there is large number of buyers in that market.
2. No close substitute – If monopolist exists then there shall not be any close
substitute for that product sold. Then cross elasticity of demand in this case
must be negligible or zero.
3. Price maker - Monopolist in that particular market enjoys the market power
because they have the ability to fix the price and decide the quantity to be sold
in the market.
9. 4. STRONG BARRIERS FOR NEW FIRMS - There is a strong barriers for a new firms to enter
into that market because monopolist has total control over the production and sale of the
product.
5. PRICE DISCRIMINATION - Monopolist can change the price and quality of the product.
He can sell higher quantities at lower price and also lower quantities at very high price.
10. PROFIT MAXIMISATION
Like a competitive firm, a monopolist also maximizes the profit by producing the quantity when
MC=MR.
Where MC=MR it gives output Q and price P.
Here Average Revenue (AR) is above the Average Total Cost (ATC) at the point Q which shows
profit maximization.
Since there is no close substitutes, the monopolist can obtain maximum profit which is shown in
the graph PABC.
11. ADVANTAGES OF MONOPOLY
1. Economies of Scale:
The economies of scale is enjoyed by the monopolistic industry, as it is the only supplier of
product or service in the market. The benefits can be passed on to the consumers
2. Research and development:
Since Monopoly can make maximum profit that can be used to spend on high cost capital
investment. So that successful R&D can be used for improving the products with low cost in the
long run to maintain its monopoly status.
3. Price Discrimination
Monopolies may use price discrimination by selling higher quantities at lower price which benefits
the economically weaker sections of the society.
4. Profit Maximization:
As there is no competition in monopoly, it tends to earn maximum profits from their operations.
The maximum profit thus earned can be used in launching other products, for carrying out
research and development and for many other things that is beneficial to the monopolistic firm.
12. DISADVANTAGES OF MONOPOLY:
1. Exploitation of Consumers
The firm may produce inferior or substandard goods because at the end they know
very well that the consumers have no other choice and there are no competing
products, which results exploitation in terms of quantity, quality and pricing.
2. Price Discrimination
Consumers may be charged high prices for low quality of goods and services. That
is in monopoly market the seller discriminates the prices for different consumers
3. Dissatisfied consumers:
Consumers are dissatisfied in a monopoly market because quality may be low.
Therefore, dissatisfied customers often complain about the monopoly firm’s product
13. HOW MONOPOLY LEADS HMT TO FAILURE
The power of monopoly made HMT blind. In other words they suffered from myopia
HMT did not realise the importance of innovation.
It copied designs of foreign product.
Even two years after the launch of Titan, HMT still did not launch any new product.
HMT did not diversify its product.
It did not focus on women’s watches.
HMT had paid a little attention to the trade channel which includes the retail outlets and service
centres.
14. Continued….
They didn’t design a watch which is suitable for youth.
The company didn’t promote its products aggressively.
HMT didn’t put efforts to in the market and allowed the competitors to take advantage
of it.
HMT made a product price mismatch by positioning its quartz watches as ‘space age
generation’ watch which was targeted to modern young man but due to high price, only
affluent middle aged buyer could afford it.
HMT ignored the competitors as power of monopoly made them blind.
They did not took proper attack and defence strategy to remain consistent in the market
which resulted in failure.
15. IS MONOPOLY A FATAL FOR FIRMS’ GROWTH?
Monopoly proves to be fatal only if :
• The monopolist does not charge each customer a price to his/her willingness to
pay
• It does not include the welfare of both the consumer and the producer
• A firm is not sensitive towards internal and external environment.
• A firm is not innovating and not focusing on R&D
