A23 termpaper

7/31/2019 A23 termpaper

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INDEX

SRN TOPIC

1 Oligopoly

2 Curve in oligopoly

3 Features in oligopoly

4 Banking structure in India

5 Privatization of bank

6 List of bank in India

7 Top 10 private bank in India

8 Importance of private bank in India

9 Major & minor player in private bank in India

10 Strategic group in indianprivate bank industry

11 Oligopoly in private bank in india

12 Reference and bibliography


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INTTRODUCTION

Oligopoly is a market where a few sellers sell differentiated or homogenous products under

continuous consciousness of rivals actions. Examples of oligopolies include crude oil

businesses and auto manufacturers.

Market structure:.

Oligopolists are torn between:

1. cooperating to increase profits by obtaining the monopoly outcome, or;

2. competing to try to gain an advantage over competitors.

Duopolies and Cartels

A duopoly is when there are only two businesses in a market. Their best outcome is tocooperate and agree to restrict output to the monopoly quantity, where price is greater than

margical cost, and profit is maximized. A great example of a duopoly is Coca-Cola and

Pepsi Co. Usually, a duopoly trying to maximize profits will produce more than amonopolist but less than a competitive industry. Duopolies come from collusion where

firms agree to share output and set prices such as in a cartel.

A cartel is a group of companies acting in unison, such as OPEC. If the competing

companies cannot agree, then they may end up with the competitive position with profitsequal to zero. Cartels are known to restrict output quantities in order to raise prices, and

consequently profits.

Size of an Oligopoly and the Market Outcome

Generally, the more companies in the industry, the harder it is to form a cartel and toenforce it. As the number of companies increases, the more the industry resembles a

competitive outcome, since each company has a smaller effect on the outcome. The

mentality where each company tends to think only of its own profits and strategicbehaviour is reduced. Each company will increase production as long as price is greater

than marginal cost. As the number of companies increases, we tend to move towards a

perfectly competitive outcome.


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Game Theory and Prisoners' Dilemma

Game theory is the study of how people behave in strategic situations (i.e. when they must

consider the effect of other peoples responses to their own actions). In an oligopoly, eachcompany knows that its profits depend on actions of other firms. This gives rise to the

"prisoners dilemma".The prisoners' dilemma is a particular game that illustrated why it isdifficult to cooperate, even when it is in the best interest of both parties. Both players selecttheir own dominant strategies for shortsighted personal gain.

Curve in oligopoly

Demand(Kink) curve in oligopoly


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Features of Oligopoly:

1.Few sellersThere are few dominated sellers in oligopoly market structure. For examples, automobilesector in India, Maruti, Hyundai, Toyota and Ford are few major players.

2.ProductThere may be differentiated products(like cars ,motorbikes, television, washing machines)

and homogenous products (like petrol, cement, steel and aluminium) in oligopoly.

3Entry barriersThere is no legal barriers as such to enter the market under oligopoly. However, at the same

time various economic barriers which the number of firms in the market. These are:

Big investment Requirements

Strong consumer loyality for Existing Brands

Economic of scale

4.Interdependent decision makingOne firm cannot take any decision independent of other firms.if a firm reduce cost and

improve quality of its product, other rivals would also follow this strategies to exist in

market.

5.No price war:

Non-price competition is a consistent feature of the competitive strategies ofoligopolistic firms. Examples of non-price competition includes:

a. Free deliveries and installation

b. Extended warranties for consumers and credit facilities

c. Longer opening hours (e.g. supermarkets and petrol stations)d. Branding of products and heavy spending on advertising and marketing

e. Extensive after-sales service

f. Expanding into new markets + diversification of the product range


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BANKING STRUCTURE IN INDIA


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PRIVATISATION OF BANK

Privatisation, process of transferring ownership of a business, enterprise, agency or public

service from the public sector (government) to the private sector (business). Privatisationcan be done by two type firstly when government company sale there mostly share to theprivate organisation and secondly demutualization of mutual organisation to a joint stock

company.

. Private banking in India was practiced since the begining of banking system in India.

The first private bank in India to be set up in Private Sector Banks in India was IndusIndBank. It is one of the fastest growing Bank Private Sector Banks in India. IDBI ranks the

tenth largest development bank in the world as Private Banks in India and has promoted a

world class institution in India.

The first Private Bank in India to receive an in principle approval from the Reserve Bank of

India was Housing Development Finance Corporation Limited, to set up a bank in theprivate sector banks in India as part of the RBI's liberalisation of the Indian Banking

Industry. It was incorporated in August 1994 as HDFC Bank Limited with registered officein Mumbai and commenced operations as Scheduled Commercial Bank

ING Vysya, yet another Private Bank of India was incorporated in the year 1930.

Bangalore has a pride of place for having the first branch inception in the year 1934. Withsuccessive years of patronage and constantly setting new standards in banking,

OBJECTIVES OF PRIVATISATION OF BANK IN INDIA:

Following are the objectives of privatization of bank in india:

1) Improve the operational efficiency of enterprises that arecurrently in the Parastatal sector, and their contribution to thenational economy;

2 )Reduce the burden of enterprises on the Government budget;

3) Expand the role of the private sector in the economy,

permitting the Government to concentrate public resources on itsrole as provider of basic public services, including health,education and social infrastructure; and

4) Encourage wider participation by the people in the ownershipand management of business

5) To create a more market-oriented economy;
http://finance.indiamart.com/investment_in_india/private_sector_banks.htmlhttp://finance.indiamart.com/investment_in_india/private_sector_banks.html


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6) To secure enhanced access to foreign markets, to capital and totechnology;

7 )To promote the development of the capital market; and

8)To preserve the goal of self-reliance

List of Private Banks in India

Bank of Punjab

Bank of Rajasthan

Catholic Syrian Bank Centurion Bank

City Union Bank

Dhanalakshmi Bank

Development Credit Bank

Federal Bank HDFC Bank

ICICI Bank

IndusInd Bank

ING Vysya Bank

Jammu & Kashmir Bank

Karnataka Bank

karur Vysya Bank

Laxmi Vilas Bank

South Indian Bank

United Western Bank

UTI Bank

TOP ten Bank in India(2009)

Rank Bank

1 State Bank of India

2 HDFC Bank 3 Axis Bank

4 Bank of India

5 Punjab National Bank

6 Bank of Baroda

7 ICICI Bank

8 Union Bank of India

9 Citibank


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10 Canara Bank

Importance of Private Sector in Indian Economy

The importance of private sector in Indian economy over the last 15 years has been tremendous.

The opening up of Indian economy has led to free inflow of foreign direct investment (FDI) along with

modern cutting edge technology, which increased the importance of private sector in Indian economyconsiderably. Previously, the Indian market were ruled by the government enterprises but the scene in

Indian market changed as soon as the markets were opened for investments. This saw the rise of the

Indian private sector companies, which prioritized customer's need and speedy service. This further

fueled competition amongst same industry players and even in government organizations.

The post 1990 era witnessed total investment in favor of Indian private sector. The investmentquantum grew from 56% in the first half of 1990 to 71 % in the second half of 1990. This trend of

investment continued for over a considerable period of time. These investments were especially made

in sector like financial services, transport and social services. The late 1990s and the period thereafterwitnessed investments in sector like manufacturing, infrastructure, agriculture products and most

importantly in Information technology and telecommunication. The present trend shows a marked

increase in investment in areas covering pharmaceutical, biotechnology, semiconductor, contract

research and product research and development.

The importance of private sector in Indian economy has been very commendable in generating

employment and thus eliminating poverty. Further, it also effected the following -

Increased quality of life

Increased access to essential items

Increased production opportunities

Lowered prices of essential items

Increased value of human capital

Improved social life of the middle class Indian

Decreased the percentage of people living below the poverty line in India

Changed the age old perception of poor agriculture based country to a rising manufacturing

based country

Effected increased research and development activity and spending

Effected better higher education facilities especially in technical fields Ensured fair competition amongst market players

Dissolved the concept of monopoly and thus neutralized market manipulation practices


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MAJOR PLAYER IN PRIVATE SECTOR BANK

ICICI bank

HDFC bankIDBI bank

HSBC bank

STANDARD CHARTERED bank

AXIS BANK

RELIANCE bank

UTI bank

MINOR PLAYER IN PRIVATE SECTOR BANK

LUXMI BANK

DENA BANK

BANK OF RAJASTHAN

BANK OF PUNJAB


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STRATEGIC GROUP IN INDIAN PRIVATE BANK INDUSTRY:A related aspect of market dynamics may be captured by comparing the ranks ofbanks, based ontheir market share between 1994-95 and 2001-02. Such an exercise is reported in table IV and V. Itis observed from the table IV that over time, there has occurred a deterioration in ranks ofall banks, except for only two banks, Jammu and Kashmir Bank and Lord Krishna.

Deterioration in the case of a quite a number of oldbanks is significantly marked. Theyinclude Sangli Bank, Bank of Rajasthan, Vyasa Bank, Catholic Syrian Bank, UnitedWestern Bank, and Dhanalaxmi Bank. Bharat Overseas Bank etc. On the other hand, allthe new banks have improved their rank over 126the said period, as shown by table V.Most prominent among them are UTI Bank, HDFC Bank and ICICI Bank. Bank of Punjab,Centurion Bank, Global Trust Bank1 and IndusInd Bank followed them. Hence, anotherelement of market dynamics is derived from the fact that, most old banks have faced adeterioration in their ranks, while new banks, without exception have improved their rankover the period of the study. To recapitulate, some aspects of the dynamics of privatebanking market are listed below.

The old banks are faced with a fall in both asset and market share. Absolute and proportionate

increase in relative market share over the period of time was greater for the new banks.

The ranks of most old banks have fallen, while that of new banks improved.

OLIGOPOLY IN PRIVATE SECTOR BANK

Few sellers: There arefew dominated private bank in market .Like HDFCbank, ICICI bank, AXIS bank, Kotak Mahindra & IDBI bank. However, bank

like Dena bank, luxmi bank, kutumbkam bank are the small player.

Product: There are homogenous because some provide insurance(healthinsurance, life insurance, retire plan),credit card & loan by ICICI bank and

HDFC bank, venture capital by IDBI bank .

ENTRY BARRIERS :As we know that there is no legal barriers. and all the

private banks are there come in oligopoly. However small player like Luxmibank and Dena bank are not bale to spend lot of their money on advertisements

to be a competitors of other major players, economic of scale and consumer

loyalty is not so good because their market share shsre is no t and they couldnot convenience large number of people.


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Interdependent decision making between private banks

players:

As ICICI bank started credit card (premium card, titanium card),HDFCalso stared credit services to beat them

As ICICI become no. 1private in India due to expanding mostpart of its

capital on advertising, their competitors like HDFC,HSBC also

expanding money on advertising on TV, radio ,newspaper etc.

HDFC launched number of branches of atm in metro,city & town,ICICI also follow it to exist in oligopoly and to preserve their market

share.

ICICI are launching their branches in small cities to attract smalltownand rural publics,as HDFC did.

ICICI changed their promotional strategies to exist in market .they

today expand their money on AD. Like YOU ARE FIRST.

ICICI increased their workforce to beat to give better service to their

customer to exist in market.

REFERENCE AND BIBLIOGRAPHY:

Paper work by Ashu Taru Deb and K.V.Bhanu

Murthy

Geetika Pyali Ghosh, and Purba Roy

Chaudhary(Managerial Economics) www.economicstimes.com
http://www.economicstimes.com/http://www.economicstimes.com/


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