There are various types of market structures that are operational in the economy like monopolistic, oligopolistic, Monopoly and perfect markets. Few of these are merely theoretical in nature. But others are functional and practicable. Let's talk about Monopoly.
Theoretically, Monopoly is a type of market structure wherein a single business operates in an industry selling a unique product or service that cannot be easily replicated. This type of market usually has no competitors. There could be various reasons for this. It could be technological hindrances, difficulty in procuring inputs, political and legal restrictions, etc.
But in the real world, is it possible to have just one company in an entire industry? For a few sectors like railways, there are drawbacks that restrain other players to enter the industry. But in most industries, players attempt to enter the market and try their luck.
So the meaning of "monopoly" is slightly tweaked. A business is said to have a monopoly position in the industry if it has captured the majority of the market share and can influence the business decisions of other players in that industry. The "monopolist" also becomes the trendsetter and price leader, which are followed by the other players.
Companies enjoying monopoly status in India
Today we will look into the top 10 companies in India that have managed to acquire the monopoly position in their respective industries.
Headquartered in Bangalore, India, Hindustan Aeronautics Limited (HAL) is a government-owned aerospace and defence company. Incorporated as Hindustan Aircraft Limited, Hindustan Aeronautics Limited has been operating in the industry for more than 79 years. It is one of the largest aerospace companies in Asia, and the government owns around 75% of the total stake.
Indian Railway Catering and Tourism Corporation (IRCTC) provides ticketing, catering, and tourism services to the Indian Railways. Though it was initially established as an organization wholly owned by the government, it currently has its stock traded on the NSE. IRCTC enjoys the power of Monopoly as it is the only organization that operates Indian Railways.
The government recently announced that it has plans of privatization of this sector in a phased manner.
3. Nestle Cerelac
Cerelac is an instant cereal for infants in the age group of 6 months and older. Recognized as 'The Most Valuable Food Brand' in India, Nestle is the global leader in infant nutrition and milk substitute products. In the Indian market, Nestle Cerelac has a market share of around 96.5%.
4. Coal India Limited
Having a market share of 82%, Coal India Limited is a public sector undertaking involved in the business of coal mining and refining. It is the world's largest coal-producing company. It produces coal through 7 of its subsidiaries. Currently, the government's shareholding stands at 66.13%.
5. Hindustan Zinc Limited
HZL is an Indian integrated mining and resources producer of zinc, silver, cadmium and lead. Hindustan Zinc Limited holds a market share of 78% in the primary zinc industry. It is the world's second-largest zinc-lead miner in the fourth largest zinc-lead smelter. Some competitors of HZL are India Coal, Hindalco and NALCO. Currently, the Government of India holds 29.5%, and its parent Vedanta Limited holds 64.9% of its shareholding.
6. ITC Limited
The now Indian Tobacco Company Limited was established in 1910 as Imperial Tobacco Company of India Limited. Having sustained in the industry for decades, the company diversified its operations from tobacco to various other industries. Nonetheless, its main business still remains to be tobacco. With major competitors like Godfrey Phillips India Ltd., VST Industries Ltd., Golden Tobacco Company Ltd., ITC continues to hold 77% of the market share.
7. Marico (Oil products)
Marico is one of India's largest FMCG companies. It was established in the year 1990. Its products include some very famous brands like Setwet, Saffola, parachute, nihar, mediker, livon, revive etc. Saffola and parachute are the two brands that contribute to a majority of Marico's revenue. Saffola, which competes in the premium refined edible oil segment, leads the market with a share of 73%.
8. Pidilite Industries
Pidilite Industries is an adhesives manufacturing company of Indian origin. Its products are quite diverse, ranging from adhesives, sealants, waterproofing solutions and construction chemicals to arts & crafts, industrial resins, polymers and more. The success of this company lies in the fact that it constantly modifies its products and produces new products to satisfy the needs of its consumers. This company has captured around 70% of the market share.
Container Corporation of India Ltd. is a PSU incorporated in 1988. It is currently managed by the Indian Ministry of Railways. Its core businesses include cargo carrier, warehouse operator, MMLP operation and terminal operator. As per 2019-20 data, the market share of CONCOR was 68.52%. Other players in the market include Aegis Logistics Ltd., ABC India Ltd., Asis Logistics Ltd., etc.
Bharat Heavy Electricals Limited is a government-owned engineering and manufacturing company. It is India's largest power generation equipment manufacturer. BHEL is engaged in the design, manufacturing, engineering, construction, testing, commissioning and servicing of a wide range of products and services for the crucial sectors of the economy like transmission, power, oil and gas, renewable energy, transportation and defence. Currently, 63.17% of the ownership lies with the Government of India, and the rest of the stock is publicly traded on NSE and BSE.
A company that has secured a monopoly does enjoy a lot of benefits. There is a constant demand for their products. The monopolist can adopt the strategy of price differentiation wherein different prices are charged for the same product from different target markets. However, there are drawbacks to this type of market structure. Lack of competition in the market can often lead to the inefficient operations of the monopolist. Also, price differentiation could be disadvantageous for the consumers.
In short, it is surely difficult for a business to attain Monopoly in an industry, but it is even more difficult for it to maintain that position. With most industries having no barriers to entry, it becomes relatively easier for businesses to enter a market and tap into potential opportunities.
Anyway, do you have any business ideas that could be the next Monopoly?