Question

The text summarized monopolistic competition as follows:

Monopolistic competition refers to a market where many firms sell differentiated products. Differentiated products can arise from characteristics of the good or service, location from which the product is sold, intangible aspects of the product, and perceptions of the product.

Think about a small business you might enjoy opening. Typical examples might be a restaurant, specialty clothing store, or professional service. Assume that it will be in a monopolistically competitive market structure. How will you specifically differentiate your product from others in the market?

Please answer in 150 words or more.

Answer 1

Monopolistic competition is where there exists large number of sellers selling differentiated products. As the products are differentiated on various aspects such as durability, quality, tangibility, services rendered etc., many factors come into existence to differentiate the business from the market.

For example, Let us assume that Mr.X has started a small restaurant in a city where there exists large population, and is very much famous for restaurants. He has to set strategies in such a manner such that he ensures that his restaurant creates demand and achieves to satisfy his target customers.

When we consider this case, the parameters that Mr X should focus on can be as follows:

-The appearance and furniture of the restaurant

-Comfort-ability experienced by the customers

-Quality of food

-Taste of food

-Varieties of food available

-Extra lines of food that are provided in the restaurant such as: Fruit juices, Ice cream stalls within, etc.,

-Services that are rendered by the staff of the restaurant

-Chefs employed in preparing food

-Delivery of promises

-Quickness of recording orders

-Prompt orders

-Location of the restaurant

-Environment in the restaurant

-Design and decoration of the restaurant

-Parking and valet facilities, etc.,

All these attributes makes the restaurant different from other restaurant and Mr X restaurant will start generating and attracting customers, even though the business is on small scale.