Sheamoisture: Monopolistic Competition

SheaMoisture operates within the market of monopolistic competition. According to the textbook, The Micro Economy Today, monopolistic competition is defined as “a market in which many firms produce similar goods or services, but each maintains some independent control of its own price” (Schiller, p. 265). The characteristics of monopolistic competition are low concentration ratios, some market power, independent production decisions, low entry barriers, and product differentiation. Monopolistically competitive firms produce in the short-run at the profit-maximizing point where marginal revenue equals marginal cost (Schiller, p. 270). Due to the entry of new firms in the market, the textbook stated, “In the long run, there are no economic profits

265-268). This is quite apparent for SheaMoisture.

Many women with natural hair use SheaMoisture because of their excellent brand image that caters to specific tastes and preferences within the natural hair community. They continue to gain revenue because these women continue to consume SheaMoisture products due to brand loyalty. However, statistic shows that the four leading hair conditioner brand in the United States was OGX in sales, approximately 137.7 million, followed by It’s a 10 Miracle 56.6 million, Garnier Fructis Sleek &Shine 53.8 million, then SheaMoisture 42 million dollars (Sales, 2016). According to the textbook, “Brand loyalty exists even when products are virtually identical” (Schiller, p. 268). This means that if a rival brand, such as Carol’s Daughter, were to make the exact same product as SheaMoisture, consumers of SheaMoisture are still likely to purchase the SheaMoisture product, even if the price is slightly higher. The textbook also states that, “In other words, brand loyalty makes the demand curve facing the firm less price-elastic” (Schiller, p. 268). Consumers of SheaMoisture products are still likely to purchase their products, even if they are expensive because of their brand