Monopolistic Competition Examples

Most existing markets in the world today are monopolistic competition with several businesses offering similar products and services to consumers.

Although these products and services are not perfect substitutes for each other due to differences in quality, price, or branding, consumers may patronize a competing company when the one they use changes its price or quality.

Since several competing firms operate under monopolistic competition, it implies that monopolistic competition examples are numerous. These examples exist in several industries including the retail, hospitality, beverage, and clothing industries.

Knowing the monopolistic competition examples is necessary for business owners so that they can better understand the extent of competition that exists in their industry.

It will additionally aid them to effectively position their businesses to gain more market share through distinctive branding and marketing. Consumers will equally better understand the industries where they can find alternative goods and services.

Before we discuss the monopolistic competition examples in detail, let us define monopolistic competition.

See also: Examples of Efficient Market Hypothesis

What is monopolistic competition?

Monopolistic competition is a market structure where several companies that produce similar goods or provide similar services compete with each other for customers. This type of market falls between a monopolistic market and perfect competition.

Due to the similarities in the goods or services offered under monopolistic competition, most consumers are unaware of the specific differences between these products.

However, although companies that operate under monopolistic competition offer similar goods or services, the products are differentiated in several ways and are therefore not perfect substitutes for each other.

Some key differentiating factors for goods or services sold under monopolistic competition include price, quality, marketing, customer service, reputation, and branding.

Companies differentiate their products in the above ways as a means of gaining more market share so that they can increase their revenue and gain a dominant position in the market in the long run.

Marketing is one of the top strategies used by companies under monopolistic competition to inform consumers about their products or services and how they differ from other products or services available in the market.

Features of monopolistic competition include the presence of several competing firms, product differentiation, and low entry and exit barriers. Additional characteristics include low market power and freedom in decision making especially regarding pricing and branding.

See also: Traditional Economy Examples

Monopolistic competition examples
Examples of monopolistic competition

What is the difference between a monopoly and a monopolistic competition?

The main differences between a monopoly and monopolistic competition lie in the extent of market power, the number of firms in the market, and the degree of entry barriers.

In a monopoly, only one company serves as the producer of a particular good or service. This gives the producer a dominant position in the market as there are no competing firms. Thus, consumers do not have access to alternative products or services.

In addition, the firm has market power due to its dominant position hence it can determine market price and production quantity. Furthermore, high entry barriers exist making it impossible for competing firms to enter the market.

On the other hand, under monopolistic competition, several companies produce goods or provide services thereby giving consumers a wide range of products and services to choose from. The presence of several competing firms in monopolistic competition indicates that there are low entry barriers.

Additionally, each firm has a low market share thus no one company can single-handedly determine market price. Instead, each company can only decide on its selling price.

See also: Backward Vertical Integration Examples

Monopolistic competition examples

  1. Bakeries
  2. Barbershops/hair salons
  3. Cereals
  4. Cleaning supplies
  5. Clothing
  6. Coffee shops
  7. Cosmetics
  8. Drinks
  9. Event planners
  10. Farmers
  11. Grocery stores
  12. Hotels
  13. Restaurant
  14. Shoes
  15. Smartphones
  16. Toothpaste

Bakeries

Bakeries exist in almost every neighborhood making them a good example of monopolistic competition. They typically offer a wide variety of baked goods such as bread, cake, biscuits, croissants, muffins, pastelitos, pancakes, apple pies, donuts, and cookies.

Even though most bakeries have similar menus, products often differ in taste and ingredients. Hence appealing to different consumer demographics.

For instance, one bakery may sell plain cookies while another may sell chocolate chip cookies. Thus, although both bakeries sell cookies, their products are not perfect substitutes due to the difference in ingredients.

Some brands may streamline their customer base by focusing on particular products. This serves as a differentiation strategy to aid them stand out from their teeming competitors.

For instance, Bread Lounge in Los Angeles is well known for its burnished loaves of whole wheat bread. Another bakery, Levain Bakery, is known for its cookies and has earned itself the title of being New York’s most famous cookie place.

Hence by focusing on particular products, these brands have been able to distinguish themselves among other existing bakeries in the market.

Barbershops/hair salons

Barbershops and hair salons are another monopolistic competition example due to the ease of entry and exit that is present in the industry. Thus barbershops and hair salons are easily found in almost every street corner.

The need to get a haircut, locs, braid, or color one’s hair has led to the availability of several individuals or brands who offer these services. In the United Kingdom, for example, some of the top barbershops include Manifesto, Loch and Key, Mint, Ruffians, and Jake Barbers.

The diversity in the hairdressing industry provides individuals with access to providers of several hair-related services. Every hairdresser provides a slightly different service and prices often differ based on the uniqueness of the service provided.

For example, if a hairdresser is well known for providing the best service when it comes to braiding, the hairdresser may charge slightly higher than other hairdressers. The price difference may serve as an indication of the elite service provided and may even be a selling point that attracts more customers.

Some of the top hair salons in the United States include Sally Hershberger, Ouidad Salon, Peter Alexander, The Knotty Spot, and Andy LeCompte Salon.

Cereals

Cereals are the go-to breakfast option in most homes, with a population of over 341.4 million people, the US is one of the top consumers of breakfast cereals in the world. Thus, there is a huge market comprising several producers of cereals.

Some common examples of breakfast cereal producers include Kellogg’s, General Mills, Nestlé, Three Wishes, Quaker Oats, Post Foods, Cap’n Crunch, Kashi GO, Kellanova, and Barbara’s Bakery.

This availability of several brands producing a variety of breakfast cereals makes it a good monopolistic competition example.

In this highly competitive cereal market, producers keep churning out different flavors and varieties to expand their market base. Sweetened cereals are often targeted at children while other varieties such as gluten-free ones are targeted at consumers with gluten-related disorders.

Cleaning supplies

For every home, office, school, company, or establishment, the use of cleaning supplies is a daily occurrence to maintain hygiene and keep the environment clean. To achieve this, households and organizations use a wide range of cleaning supplies such as all-purpose cleaners, disinfectant sprays, bathroom cleaners, deodorizers, air fresheners, detergents, etc.

These cleaning supplies are made by several companies thus cleaning supplies are an additional example of monopolistic competition.

Clothing

Monopolistic competition is also found in the clothing industry, where multiple clothing brands offer similar products in the form of dresses, pants, shirts, and skirts.

Despite the similarity in form, most brands differentiate themselves by focusing their products on a peculiar target market.

For instance, clothing brands such as Lululemon are known for making yoga-inspired clothing, Lious Vitton is known for luxury clothing, and Forever 21 is known for leisure and trendy wear at the best possible prices.

Several other brands produce clothes for specific events such as weddings, work, mountain climbing, sports, etc. Aside from global clothing brands, numerous other brands exist in various countries and localities that serve the needs of customers within their immediate environments and localities.

Due to the different target markets served by clothing brands, the clothes may differ in texture, quality, thickness, elasticity, colors, and absorbance. For example, sporting brands often use airy and absorbent materials to keep people comfortable while actively sweating. Brands that make children’s clothing often use bright colors to reflect the vibrant energy of children.

Individuals generally patronize clothing brands based on personal preference and sometimes, price. For instance, while younger people may patronize a brand that makes trendy clothes which are the rave of the moment, older people may patronize a brand based on other factors such as its quality or brand reputation.

Coffee shops

Many individuals begin their day with a cup of coffee which they buy from the coffee shop around their apartment building, across the street from their school, or near their workplace. As a result, coffee shops have continued springing up almost daily.

Even though all these shops have coffee as their main product, differences exist in the type of coffee variety used, as well as the way it is brewed or served. Hence, the taste of the coffee sold often differs from one coffee shop to another.

Examples of globally recognized coffee outlets include Starbucks, Costa Coffee, McCafe, Tim Hortons, Barristart Coffee, Dunkin Donuts, and Pilot Coffee Roaster.

Cosmetics

Monopolistic competition examples exist in the cosmetics industry. As more people get concerned about their physical appearance and look for products that will enhance their appearance, more cosmetic brands have emerged catering to individuals through different products.

Cosmetic products are available for hair and skin care, fragrance, and makeup. The products vary for different skin tones, hair textures, skin or hair blemishes that need to be treated.

For example, some creams and oils enhance hair growth, treat acne and blackheads, provide protection from the sun’s ultraviolet rays, prevent hair loss, anti-aging, etc.

These products are made by thousands of cosmetic companies including P&G, L’Oreal, Unilever, Estee Lauder Companies, Johnson & Johnson, Coty, Mary Kay, NIVEA, and Revlon.

Consumers patronize brands based on what they expect the cosmetic product to do for them. For instance, an individual battling with dry skin will prefer skincare products that keep the skin moisturized thereby preventing dryness.

Some consumers may also patronize a brand based on its reputation for providing quality products. An example is the patronage Mary Kay products enjoy when it comes to beauty and makeup products due to the brand’s reputation of providing high-quality products.

Drinks

The drinks industry is another example of monopolistic competition, drinks such as water, carbonated beverages, and alcoholic drinks are packaged or produced by many competing companies.

For example competing companies such as Coca-Cola, Keuring Dr Pepper, and Pepsi function in the carbonated drink sector. Dasani, Evian, Mountain Valley, and Voss function in the bottled water sector. Molson Coors Beverage Co, Heineken, and Constellation Brands Inc. function in the alcoholic beverage sector.

Brands that operate in the drinks industry compete and try to differentiate their products by employing several product branding and marketing strategies. For example, the Coca-Cola brand has enjoyed a considerable market share in the global nonalcoholic beverage market due to its distinct taste and secret ingredient which has been an exclusive trademark of the company for decades.

This buttresses the point that although products found under monopolistic competition may be similar, they are not perfect substitutes for each other.

Event planners

Planning an event is a cumbersome and time-consuming process, thus most individuals or organizations hire event planners to ease themselves of the stress involved in planning an event.

These events range from fundraisers, funerals, product launches, balls, weddings, birthday parties, galas, concerts, seminars, and several other social, corporate, or charitable events.

The rates charged by event planners vary based on the size of the event, location, and reputation of the brand.

For example, top event planners such as RGI Events, Purple, and Bassett Events may charge higher to plan an event when compared to other event planners that are less recognized.

The ease with which individuals or organizations can begin and enter the event planning and management industry makes it a good example of monopolistic competition.

Farmers

Another monopolistic competition example is farmers. All over the world, individuals get into farming to provide food for themselves and others. Farmers produce food not only for human consumption but for livestock and other uses as well.

According to research carried out by Hannah Ritchie and Max RoserIn, half of the world’s habitable land is used for agricultural purposes including crop and livestock farming.

Statista reports that agricultural imports in the United States amounted to approximately $195.4 billion while exports were $178.7 billion for the 2023 fiscal year.

These are indicators of the thriving monopolistic competition that is in play when it comes to farming.

Grocery stores

Grocery stores operate within a monopolistic market due to the large number of stores that sell many of the same goods. Despite the similarity in the kind of goods sold at these stores, distinctions still exist in their client base, store arrangement, branding, and marketing.

For instance, based on the location and the number of customers served, Tesco operates different store formats such as Tesco Express, one-stop, supermarkets, and hypermarkets.

Another grocery store brand, Costco operates in an entirely different way, having warehouses instead of stores where consumers can bulk purchase items at discounted rates provided they have the brand’s club card.

Aside from these brands mentioned above, several other grocery stores operate in different localities providing residents with access to groceries and unique shopping experiences.

Hotels

Hotels offer another monopolistic competition example with thousands of brands operating in that sector. Hotels generally offer accommodation services to people, but as a means of differentiation, some hotels offer additional services such as gym, spa, laundry, car wash, etc.

Additional points of differentiation occur in the quality of service, location, and pricing. Hotels located in prime locations often charge higher than those located elsewhere.

For example, The Mark Hotel in New York City charges over $1,000 per night for its most basic rooms due to its prime location and reputation as the most lavish hotel in New York.

Restaurant

In every city, many restaurants operate and compete with each other based majorly on the quality of their food. Each restaurant may further differentiate by providing a specific menu or in their mode of operation.

This means that they could operate as quick service restaurants (QSR) such as McDonald’s, Burger King, and Chick-fil-A or as regular restaurants such as Chipotle, Moe’s Southwest Grill, and Panera or as fine dining restaurants such as Eleven Madison Street, The Inn at Little Washington, and The Grey.

For example, while McDonald’s focuses on making meals available to people at the cheapest possible rate, Chick-fil-A focuses on chicken-based menu items alongside excellent customer service.

The price of meals in restaurants is often dependent on the restaurant’s reputation, location, the quality of the ingredients used, and customer service.

Product differentiation and ease of entry and exit are some of the main features of monopolistic competition, which are abundantly found in the restaurant industry.

Shoes

Similar to clothes shoes also exist in different forms and for various purposes including running, mountain climbing, walking, etc. Various shoe brands produce shoes that meet the specific needs of their target market.

For example, brands such as Nike, Puma, Adidas, and Reebook are well-known brands that produce running shoes, however, despite serving the same target market, these brands have differentiated their products through their designs, features, and branding.

Due to these differences, each shoe brand provides unique products to its customers, thus making the shoe industry a monopolistic competition example.

Smartphones

Smartphone producers are another monopolistic competition example with several brands such as Apple, Oppo, Infinix, iTel, Samsung, LG, Tecno, etc. Each of these brands offers unique designs and features that may attract consumers.

For example, Tecno keeps improving its battery capacity, charging time, and camera quality in a bid to attract young consumers who are on the go and want a phone with a long-lasting battery with which they can take selfies.

Producers of smartphones compete by ensuring that they improve on their phone features with every subsequent production. One smartphone company that has effectively positioned itself in this regard is Apple. Consumers often look out for subsequent iPhone launches in a bid to upgrade theirs to the latest version.

Other brands such as Vivo are recognized for their pocket-friendly prices. As a result of these variations, despite all the brands being producers of smartphones, the uniqueness of each product ensures that they are not perfect substitutes for each other. Therefore, it fosters the continued existence of monopolistic competition.

Toothpaste

A walk down the lane of a grocery store will bring you face to face with a wide range of toothpaste brands such as Arm & Hammer, Pepsodent, Close Up, McCleans, Sensodyne, and Colgate.

Each brand markets its product in a different way from the other, emphasizing the peculiar benefits of using their product for the individual’s oral health.

For instance, while one brand may focus on the treatment of cavities and gum-related issues, another may focus on bad breath while yet another may focus on making a product for children.

The product variation and the availability of options to consumers are possible due to monopolistic competition.

See also: Forward Vertical Integration Examples

Conclusion

Examples of monopolistic competition can be found in the bakery, hairdressing, restaurant, farming, clothing, and smartphone industries. Additional examples exist in the shoe, cleaning supplies, toothpaste, grocery stores, drinks, and event planning industries.

From these monopolistic competition examples, we can conclude that monopolistic competition supports the existence and thriving of several brands in several industries. This can be attributed to the ease of entering or exiting the market by producers, the availability of options for consumers, and the differentiation of available products.

All these enable brands that have developed a strong brand presence to charge higher for their products and differentiate themselves through branding and marketing.

If an industry that functions in a monopolistic competition market has high profit margins, it can attract and lead to the emergence of new companies. As more firms enter the market, competition becomes tougher and profits begin to decline.

Last Updated on April 14, 2024 by Blessing Peter Titus