Final-mm-assignment-3

PART 1
1.1 Introduction of Unilever
Unilever was formed in 1929 by a full business merger of British soap maker Lever Brothers and Dutch margarine Producer Margarine Unie. Unilever is one of the world's leading fast moving consumer goods companies (FMCG). In addition, Unilever has more than 400 brands covering 14 categories of foods, soaps, shampoos and household care products. It produces world-leading brands including Axe/Lynx; Ben & Jerry's; Dove; Flora/Becel; Heartbrand; Hellmann's/Best Foods; Knorr; Lipton; Lux/Radox; Omo/Surf; Rexona/Sure; Sunsilk; Toni & Guy. Unilever's products are sold in over 190 countries, generating sales of €51 billion in 2012.
Beside that, Unilever invest around 1 billion euro in research and development every year. In 2010, unilever had spent around US$8 billion in investment to advertise and promote their product. Moreover, unilever would also have established laboratories around the world where their scientists explore new thinking and techniques, applying their expertise to products. Emerging markets now account for 55% of their business. Unilever is one of the largest media buyers in the world and the largest international competitors due to Nestlé and Procter & Gamble.
1.2 Introduction to Unilever -Lux
The brand LUX was founded by Lever Brothers in 1899. The name LUX was changed from "Sunlight Flakes", in Latin words, it means "light" and it connoting the idea of luxury. In 1924, Lever Brothers produce a rich smelling and fine textured beauty soap. In 1925, Lux launched the world's first mass market beauty soap. The range of products includes beauty soaps, shower gels, bath additives, hair shampoos and conditioners.
During the 1930's, LUX entered the international arena, landing in India, Argentina, and Thailand, beginning an expansion that representation in over 100 countries. In the '1990s, LUX introduced a range of body washes and rich shampoos. Various functions for different skin types began to play a role in product development and promotion. Developed by Unilever, Lux (soap) is now headquartered in Singapore.


1.3 Introduction to Lux
LUX Body Shampoo moisturized skin with LUX Soft Touch liquid soap, coveted skin care beauty secrets is one of Lux's view point. Lux is committed to creating indulgent skin treats women crave to provide an exceptional experience before and after shower. Lux is not just a soap that only good in smell, but a fine fragrance you can bathe in. Lux shampoo was enriched with the exclusive Silk Protein Extract and Cherry Cream, it forms a light creamy layer which covers the skin and helping to keep the moisture that dry skin needs. Lux not only rich in indulgent ingredients, state of the art textures, craft amazingly, but is designed to exceed consumer expectations.
1.4 Is Lux a normal product or luxury product. 
LUX Body Shampoo is a normal product. If it had an increase in income it will leads to an increase in demand for LUX Body Shampoo, on the other hand if it decrease in income it will leads to a decrease in demand for LUX Body Shampoo. Moreover, income elasticity of demand for LUX Body Shampoo is elastic. The co-efficient more than one. This means the percentage change in quantity demand is more than the percentage change in price.
1.5 Complement and substitude
Substitude - LUX Body Shampoo and Dove Body Shampoo are substitute goods. Substitute goods are the goods can satisfy similar needs. When increase the price of one good cause an increase the demand for other good.
1.6 Which market structure do Lux belong, why?
LUX Body Shampoo is a product of monopolistic competition market. LUXES has the characteristics of differentiation in products, many sellers, easy market entry and exit, price markets, and spend money in advertisement to communicate with customers. Under monopolistic competition, LUX's company sell differentiated products. LUX's firm practice product differentiation to gain an advantage on the competition and to acquire a bit of market control. For example, LUX body shampoo and Dove body shampoo are very similar, but each has a few differences in terms of product attributes, packaging, and brand names.
Besides, there is easy market entry and exit in monopolistic competition, so LUX's firm cannot earn an economic profit in the long run. LUX's firm lowering prices, thus making the newcomers' products less competitive.
In addition, LUX's company also speeds money in advertisements to communicate with customer. Every year, it will advertise its products in different channels such as magazines, newspaper, television, and internet. By promoting its products through advertisements, LUX product has attracted new customers bases who do not know its products well before and promote its benefits of their product.
Part 2
2.1 Advertisment
For Lux, they usually use Indian stars to promote their product through the media. For Lux there are few sources of media for them to promote their product, such as using television, outdoor (billboards), magazines, newspaper, brochures, and internet. Nowadays, Lux often used television or internet to promote their product, because most of the family would have at least a television in their house. Moreover, Lux is more to public relations is because that would build up the relationships with the customer. Lux company had form a consumer department in order to manage the complaints from the users. As for Dove, they have "Fan Test", "Dry Hair", "Fine Hair","Norlinda" for the advertising in order to attract others consumers.
2.2 Elasticity
Price elasticity of demand measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is horizontal line, demand is perfectly elastic. We compare the size of the change in quantity demanded of LUX's body shampo of the change in price in different location and stores. Due to the elastic demand curve, as any stores change the price of LUX's body shampoo, the quantity that the customers are willing to pay more to purchase will have a large change. This shows that the demand curve of LUX's body shampoo is elastic as the percentage change in quantity demanded for this product is more than the percentage change in price. The total revenue can be increased by lowering the price as the percentage increase in quantity demanded by the consumers is greater than the percentage reduction in price.
The price elasticity of demand of LUX's body shampoo is depending on the availability of close substitutes. Since LUX's body shampoo has many close substitutes from other product such as Dove, it is considered as elastic. Is show more substitutes are available for LUX's body shampoo in the market. Since the price is elastic, consumers are very sensitive the price of product change.
The demand of LUX's body shampoo is more elastic in long run when compared with short run. The quantity demand of consumers is less influenced by the increase in price of LUX's body shampoo in the short run. In the long run, consumers have more time to find suitable substitute product such as Dove and will change their consumption patterns in long run.
2.3 Income-normal good
Definition of normal good is good for which demand (consumption) increase as consumer income rises, but at a rate slower than the rate of increase in income. Defined also as a good for which the income elasticity of demand is positive but less than one. Also called necessary good, it is opposite of inferior good.
Therefore, Lux Body Shampoo is categorized as normal product because it will be consumed every day since bathing is one of human's needs. It is only the best way to protects from heat and repairs damage. Besides, the demand for Lux Body Shampoo will increase once the income of consumers increases.
Part 3
Deterred from the point of view of the firm, monopoly marketing structure provides a stable pricing for the company's market. As studies suggested, monopoly marketing structure are at times named as the most-stable-price marketing scheme. This can be simply explained by the cause of its structure that was characterized by only a single firm involvement, which sells a certain type of product in the market. Compared to other types of marketing structure, which have a less stable pricing system and tend to, be elastic – due to the competition that exist and co-exist, monopoly marketing has no competition at all.
In addition, monopoly marketing strategy also benefit the firm by producing massive revenue – maximizing profit earned. This is obviously due to the absence of obstruct competitors which lead to an insignificantly high percentage of monopoly-strategized-firm to receive immense profits from their operations. The profit may be usable allow the company to take advantage in the launching of new product, carrying out new researches and develop a lot more things that will benefit the firm in terms of it return of investments.
Whereas from the view of the customers, monopoly marketing strategy brings them benefits by providing a better goods production in terms of quality, quantity as well as price. Due to the monopsony, which states the one buyer and one product buying basis, monopoly allow monopsony control over the marketing sector which will held the customers by providing a better goods with reasonable price.
As price is now a very important way to conduit to customer retentions, a reasonable price will no doubt be able to bring the company's credibility and revenue to a higher achievement. The monopoly strategy is also efficient in helping out customers by classify them into different groups and perform successful price discrimination. The reason is simply because determining customer's willingness to by a good is difficult.
For instance, psychology proves that measurement of emotions and minds are non-sufficient for studies as the scale is differ in persons. Therefore, an insight can be gained by the company on the customer's daily postal lives in order to not just retain the customers, but perform a better task by utilising this information and convey to them better products and services. However, customers might find it offensive for companies are sued over the exploitation of consumer's personal information.
As a result, the monopoly market is named as – market of consumer exploitations. Some company may raid customer's information to achieve better information on customers in order to exploit them. Other than that, it will bring dissatisfaction to the customer as the consumers are to purchase product that is compromised in term of its quality bringing hat trick to the company, and sorrow to the customers.
Prices on the other hand had also became a major complains by buyers as the no-competition market have absence in the price war which result in monopolizing of price industry by firms. They tend to charge higher price on product which will bring inconveniences to buyers.


PART 4:
4.1 Summary
Lux is a product that is in monopoly market. Which means that other than Lux we have Dove, Ivy, Summer and much more. In order to sell their product , they need to compare their price to avoid their salaries drop from their expetations.

4.2 Usefulness of assignment -Conclusion
As a conclusion, this assignment is very useful and significant to us. At first, we had obtained a valuable experience in this assignment from studied how the prices of Lux Body Shampoo affect the market. After knowing the theories of Microeconomics and Macroeconomics, we are able to apply some of them in our real life. This assignment creates the service awareness in all of us in term of current economic states.

4.3.1 Empirical finding-Long Earn for Monopolistic Competition

According to the economic facts, a Monopolistic Competitive market surviving in a long-run business should be earning zero-economic profit because of the easy market entry and exit. In the long run, the company can have more time to make profit and attract new entrants; this eventually increases the supply of the product and lowers down the price. This will reduce the revenue earned and causes some firms to exit the market. However, the Unilever's company is now in its long-run stage but still earning economic profit. In year 2009, they earned the profit of RM5020 million; in year 2010, their profit increased to RM6339 million. In a nutshell, the economic facts of the monopolistic competition market cannot be applied to the situation for LUX's company as matches the characteristics of a Monopolistic Competitive market but not the details.

4.3.2 Empirical finding-Elasticity

In additional, a product under Monopolistic Competitive market has demand, which means the product has relatively high consumer price sensitivity. When the price of a good increases, the demand of the good decrease. However, we have found contradict from our research. The price of LUX Body Shampoo has increased from year to year at the average price RM15.33. LUX Body Shampoo is known to be a popular brand of laundry detergent around the world and it causes the price to increase more and also includes the high cost of advertisement expenditure.
Other than that, although there is much availability of close substitutes for LUX Body Shampoo which is one of the determinants for the demand, there are other determinants to determine the elasticity of a product. For instance, whether the product is a luxury or a necessity and the proportion of income spent on the good.

4.3.3 Empirical finding-Law of Deamnd

Furthermore, we found that the price will change due to the factor of demand and supply. According to the law of demand, when the quantity demanded increases, then its price falls and vice-versa. Therefore, when the prices of Lux Body Shampoo (700ml) rise, the quantity demanded will decrease. In real life, consumers will more concern on the mentality of the prices and not only the economics. The consumer will usually be aware of higher-price product as having higher quality. Therefore, consumers will still continue to purchase Lux Body Shampoo although its price is higher than other brands of body shampoo. Besides, the expectation of the consumer on Lux Body Shampoo (700ml) is one of the determinants that affected the demand of the product.

References
Part 1
http://en.wikipedia.org/wiki/Unilever
http://www.unilever.com/aboutus/introductiontounilever/
http://www.houseoflux.com/timeline
http://www.unilever.com/brands-in-action/detail/Lux/292092/
Part 2
http://designingculture.wordpress.com/tag/dove/
http://www.slideshare.net/HarshPatel14/lux-report
http://www.scribd.com/doc/38079063/Product-Life-Cycle-of-Lux-Soap
Part 3
http://www.mouthshut.com/product-reviews/Lux-Body-Wash-reviews-925048099
http://www.nextag.com/shampoo/products-html#!
http://www.malaysia.com/directory/retail-general/hypermarket/perak/Econsave_Cash_Carry_Ip_Sdn._Bhd._164699.html

Part 4
https://www.boundless.com/marketing/integrated-marketing-communication/selecting-the-promotion-mix-for-a-particular-product/characteristics-of-the-product/
http://www.unilever.com.lk/our-brands/detail/Lux/324471/

Part 5
http://www.unilever.com/images/Financial_record_AR10_tcm13-260329.pdf



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