Dominant Price Leadership
ICFAI UNIVERSITY, DEHRADUN NAME: KEDAR SINGH TOMAR IUD No: 0901201057 IBS No: 09BS0001057 Course Name: MANAGERIAL ECONOMICS Course Code: SLEC501 Faculty Name: DR. ANIRVINNA C. Date of Submission: 08TH SEPTEMBER 2009 Topic of the Assignment: DOMINANT PRICE LEADERSHIP Student Signature Faculty Signature DOMINANT PRICE LEADERSHIP Dominant price leadership exists when a. one firm drives the others out of the market. b. the dominant firm decides how much each of its competitors can sell. c. he dominant firm establishes the price at the quantity where its MR = MC, and permits all other firms to sell all they want to sell at that price. d. the dominant firm charges the lowest price in the industry. PRICE LEADER Marketing: Powerful firm whose prices are likely to be imitated by other firms in the same market. Price leaders usually are also the market leaders. DOMINANT LEADERSHIP Leadership characterized by a clear line of authority that gives the leader the power of delegation, and the power to control the subordinates’ level of participation in decision making process.
It is the most common form of leadership. PRICE LEADERSHIP Situation in which a market leader sets the price of a product or service, and competitors feel compelled to match that price. Oligopoly Models “Price Leadership” The firms in the Oligopolistic industry without any formal agreement accept the price set by the leading firm in the industry and move their prices in line with the prices of the leader firm. Price Leadership can be in any of the forms; Price Leadership by a Dominant firm Barometric Price Leadership Aggressive or Exploitative Price Leadership The structure of the DTH industry in India can be categorized as an “Oligopoly”.
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high. Firms within an oligopoly produce branded products and there are also barriers to entry. Key characteristics of “Oligopoly” are following : • Few larger supplier dominates the market • Interdependence between firms • Each firm produces branded products • Significant entry barriers into the market in the long run which allows firms to make supernormal profits • Each oligopolist is aware of he actions of the others. What is DTH? DTH stands for Direct-To-Home television. DTH is defined as the reception of satellite programmes with a personal dish in an individual home. DTH does away with the need for the local cable operator and puts the broadcaster directly in touch with the consumer. Only cable operators can receive satellite programmes and they then distribute them to individual homes. Dishtv, subsidary of the biggest media conglomerate – Zee group, reached a significant milestone of crossing 4. Million subscriber mark and thus consolidating its leadership position as the largest and most innovative DTH Company in India. Dishtv is the leader in DTH sector with a market share of more than 53 per cent of the total subscriber base of 8 million. Dishtv’s footprint covers 5400 towns across India bringing smiles to 23 million Indians. Reliance communications subsidiary, Big TV, crossed one million subscriber mark within 90 days of launch. Big DTH is growing exponentially and is now next to Dish TV and Tata Sky with its 15 per cent market share.
Launched in August this year, BIG TV is available at over one lakh retail outlets across 6,500 towns along with over 2,000 exclusive Reliance branded stores. Dishtv has consistently set the benchmarks for the Indian DTH industry and redefined the business through marketing innovations, introduction of new generation valueadded services and the highest standard of customer delivery. Today, Dishtv offers its subscribers choice and superior value for money with a range of innovative value-added services backed by excellent customer service.
The Four Million milestone is not just a significant one for Dishtv but also symbolizes the successful growth of the Indian DTH industry. Dishtv has always been a forerunner in bringing new marketing innovations and going forward the company will initiate certain steps to rationalize the package offerings which may include charging of service tax etc. directly from the subscriber. Adding to its array of interactive value added service, dishtv launched the innovative Interactive Banking Service “ICICI ACTIVE” in association with ICICI Bank.
This service enables Dish TV viewers to access information on ICICI Bank products and services, from the convenience of their homes. To celebrate the festive spirit of Diwali, Dishtv launched “BHAKTI ACTIVE”. Dishtv subscribers can now get Live Gurbani from Bangla Sahib and Nanded Sahib, Aarti of Sai Baba from Shirdi & Ganesh Aarti from Siddhi Vinayak, Mumbai, Aarti from Tirupati Balaji, Live Ganga Aarti from Haridwar and Bhasm Aarti of Mahakaal from Ujjain. Dishtv customers can now get blessed at the press of a button in the comfort of their home 24X7.
Dishtv added 3 new channels on its platform. This addition will further enhance Dishtv’s strong bouquet of general entertainment, news, sports and regional channel offering to its discerning subscribers. The company had added a record 5. 29 Lakh subscribers during the Second Quarter of fiscal 2009 (July – September), breaking all its previous achievements. Dishtv’s footprint covers 6500 towns across India and it reaches into far flung markets which enable building of a diverse subscriber base across consumer segments. STRENGHTS Pioneer and leader of DTH services in India ? First mover advantage One year lead over nearest competitor ? ~ 3-year lead over others ? Largest subscriber base ~ 5. 0 mn (Mar-09) ? Backed by Zee Group ?????? India’s strongest Media group Full-service business model ? Basic subscription packs ? Value added services ? Bandwidth ? Teleport services Leveraging on first mover advantage backed by strong industry understanding ? Diversified content offering ? 240 channels + Services ? Content tie-ups at fixed rates ? State-of-the-art infrastructure ? Large distribution network ? Aggressive subscriber acquisition strategy to ensure continued market leadership DTH INDUSTRY MARKET SHARE 2008 | | | |Brand |Promoter |Market Share | | | | | |Dish TV |Zee group |53% | | | | | |TataSky |Tata Sons & Star TV |30% | | | | | |Big TV |Anil Dhirubhai Abani Group |15% | | | | | |Others (Sun Direct, AirTel Digital |Sun by SUN TV |2% | |TV ) |AirTel by Bharati telemedia | | | | | | Another way of confirming it is by using the index Herfindahl.
The Herfindahl index, also known as HERFINDAHL-HIRSCHMAN INDEX or HHI, is a measure of the size of firms in relationship to the industry and an indicator of the amount of competition among them. HHI s defined as the sum of the squares of the market shares of 50 largest firms (or summed over all the firms if there are fewer than 50) within the industry, when the market shares are expressed as percentages; the result is proportional to the average market share, weighted by market share. The higher the HHI Index the more oligopolistic is the industry In mathematical term it is defined as following : n H = ? si2 i=1 Where si is the market share of firm i in the market, and n is the number of firms.
In the case of Indian DTH Industry the HHI index can be computed by squaring the market share of each player and adding them i. e. H = 532 + 302 + 152 + 22 H = 85399 Since this value of H is petty high it indicates that the market is oligopolistic. SUN TV NETWORK It is No 1 media company in South Asia and Asia Pacific Region based in Chennai, Tamil Nadu, India. Established in 1993, it offers a plethora of television channels in 4 languages covering the whole of southern India. It was the first fully privately owned Tamil channel in India when it emerged in 1993. Its serials and soaps have generated the maximum TRP for viewership all over India, making it the most popular network of channels in India.
All its channels occupy the top spots in their respective languages. Sun TV, in Tamil is the Network’s flagship and most popular channel. Being the premier channel, Sun TV is often used to refer cable tv in general or to the Sun TV Network in general. Sun TV and its sister channels have a dominating share of viewership in Tamil Nadu. Its cable arm, SCV is cable distribution and Sun Direct is the dominating DTH (direct-to-home) player in the state. Its radio network Suryan has a lion’s share of listenership; its magazine Kungumum and newspaper Dinakaran are leaders Although its main presence is in Tamil, it has channels in other languages also. Channel |Type | |Sun TV |Tamil Entertainment Channel | |Sun Music |Tamil Music Channel | |Sun News |Tamil News Channel | |KANNADA | |CHANNEL |TYPE | |Udaya TV |Kannada Entertainment Channel | |Udaya Movies |Kannada Movie Channel | |U 2 |Kannada Music Channel | |TELUGU | |CHANNEL |TYPE | |Gemini TV |Telugu Entertainment Channel | |Gemini Music |Telugu Music Channel | |Gemini News |Telugu News Channel | MALAYALAM | |CHANNEL |TYPE | |Surya TV |Malayalam Entertainment Channel | |Kiran TV |Malayalam Music Channel | |Kochu TV |Malayalam Kids Channel | |Chiri Thirai |Malayalam Comedy Channel(DTH) | FM RADIO STATIONS Sun TV Network has many FM radio stations based in India |Tamil FM Stations | |Radio Station |Area |Frequency | | |Suryan FM |Chennai |93. MHz | | |Malayalam FM Stations | |Radio Station |Area |Frequency | | |S FM |Thiruvananthapuram |93. 5 MHz | | |Telugu FM Station | |Radio Station |Area |Frequency | | |S FM |Vishakapatnam |93. 5 MHz | | |Kannada FM Station | |Radio Station |Area |Frequency | | |S FM |Bangalore |93. MHz | | |Hindi / Other Language FM Station | |Radio Station |Area |Frequency | | |Red FM |New Delhi |93. 5 MHz | | |Red FM |Mumbai |93. 5 MHz | | |Red FM |Kolkatta |93. 5 MHz | | PRINT MEDIA TAMIL NEWSPAPERS Dinakaran – (Daily Morning Newspaper) Tamil Murasu – (Daily Evening Newspaper) WEEKLY TAMIL MAGAZINE Kungumum Mutharam Because of the strong presence of SUN TV in every field whether its print media, TV, Radio and other close competitior in South India it is a clear market leader over there.