INTRODUCTION

MONOPOLY

Monopoly can be defined as a market structure where a single seller sells a unique product
in the market. In a monopoly market, firm minimizes the cost and maximizes the profit.

Features of Monopoly

1. Single Seller: There will be only one seller who sells in the monopolist market but
there will be many buyers who exist in the market.
2. No direct substitutes: In a monopolist environment there will be no close substitutes
for the product sold
3. Price creator: In the monopolist market, the sole seller enjoys the market power
because he has the ability to influence the price of the product sold in the market.
4. Price discrimination: Monopoly firms charge higher prices to the customer which in
turn increases the profit of the firm. These firms charge higher prices to customers
with higher willingness to pay. They take advantage of being the sole seller and
charge exorbitant prices to the customers. These firms sell the same good at
different prices to different customers. This practice is referred to as price
discrimination.
5. Barriers to entry: In a monopoly market there is restriction on the entry and exit of
the firms. The sellers other than the monopolist firm are unable to enter the market.
6. Profit maximiser: Since there is only a single seller in the monopoly market, the sole
firm can maximize its profits by charging higher price than the price offered in the
competitive market because there is a lack of competition in the market.
7. Lack of competition within the market: There is lack of competition within the
monopoly market.
Advantages of Monopoly market:

 The monopoly firm have the benefit of economies of scale for their products in the
market.
 They can charge high prices for the consumers and make higher profit in the market
 Since the monopoly firm gets huge profit in the market, it can use the profit in the
Research and development for further innovation of its products
 The monopoly firm has the advantage of becoming successful and efficient.
 The price discrimination practice adopted in the monopoly market may help
economically weaker sections of the society.
 Govt. regulated monopoly can be beneficial for the customers as they will get fair
prices
 In the absence of price wars there

Disadvantages of Monopoly Market

 The monopoly firm can offer low quality products to the customer and charge high
price from the customers.
 They may offer low quality of services
 Since there is lack of competition in the monopoly market, they may offer low
quality goods and services
 They may also pay lower wages to their workers.
 The monopoly firm can gain political power and protect their interests
 Less number of choice is available for the consumers in the market
 Since there is lack of competition in the monopoly market, the firm may become
inefficient.
 The monopoly firm can restrict the supply of goods in the market to charge higher
price to its customers
 Monopoly may not invest in research and development to develop new products as
they can sell their existing products in the market.
 There is less incentive for the monopoly firm to invest in Research and development
as there is no competition.
  The firm may become too large that it will become less efficient and there is a
possibility of diseconomies of scale.
 When monopoly performs price discrimination practice it may harm customers who
are really in need of the product

Introduction of HMT watches limited

In 1961, HMT established a watchmaking unit in Bangalore in partnership with M / s Citizen

Watch Co., Japan. The first collection of wrist watches made here was issued by the then
Prime Minister of India, Jawaharlal Nehru. HMT Janata's most popular hand-held
mechanical watch. There are also other mechanical watches like HMT Pilot, HMT Jhalak
(Semi Skeletal), HMT Sona, HMT Braille, watch for the visually impaired , HMT janta , HMT
Jhalak semi-skeletal.

HMT watches have produced this bone clock based on 8N24 motion.
In 1972, HMT increased its clock production capacity by setting it up next to the Bangalore
Factory to make more clocks. In 1975, the Watch factory in Bangalore was expanded to
include parts for Main Spring, Spring Hair and Shock Absorbent Hair. [11]

HMT has set up additional production facilities to produce sets of visual aids in Tumkur and
Ranibagh in 1978 and 1985 respectively. The Tumkur watch factory was modified to
produce Quartz Analog Watches in partnership with M / S Citizen Watch Co, Japan. In order
to provide a market for Niche, a special crate making center for Bangalore was established
in 1983.

History of HMT
It was founded as "Hindustan Machine Tools" in benguluru on February 7, 1953 and is now
known simply as "HMT." HMT Limited is a Central Public Sector Enterprise of the
Government of India, operating under the Department of Heavy Industry.
While HMT Watches adorned the wrists of the powerful and humble, HMT Machines are still
distributed throughout the manufacturing sector including the strategic sectors and are
known as long-lasting "Value for Money" products. The company was engaged in the
business of manufacturing and selling tractors and food processing machines. Their
segments include machine tools watches tractors bearings and exports. The company's
products include printing machine bearings food processing machine tools watches and
tractors. They had five subsidiaries namely HMT Machine Tools Ltd HMT Watches Ltd HMT
Chinar Watches Ltd HMT (International) Ltd and HMT Bearings Ltd. HMT Ltd was
incorporated in the year 1953 by the Government of India as a Machine Tool manufacturing
company with the name Hindustan Machine Tools Ltd.

With the establishment of technological leadership by providing reliable solutions to major

sectors of the country through the provision of appropriate goods and services, and thus the
‘Drive for Technological Growth’, HMT has been a step forward for India’s industrial
development since independence.

Currently, HMT Limited is a participating Company with less than two operational services
namely. HMT Machine Tools Limited and HMT (International) Limited, while the businesses
of Food Processing Machinery and Watches are directly owned by Holding Company.

HMT Machine Tools, in addition to the general purpose and multi-purpose CNC Machine,
has been providing a wide range of specialized and specific technology equipment to meet
the needs of strategic fields such as Defence, Trains, Nuclear, Space, Aerospace, Naval, Auto
etc. Most of them are imported machinery and equipment that is not technically approved
by developed countries. The company with its headquarters in Bengaluru has production
facilities in Bengaluru, Pinjore, Kalamassery, Hyderabad (2) and Ajmer.

HMT (International) was established in 1974 as a wholly owned subsidiary of HMT Limited,
overseeing export markets for HMT products, initiated numerous turnkey engineering
projects in various countries and created a niche in the establishment of Vocational Training
Centers, Business Training Centers, Skills Development Centers, etc.

The HMT Food Processing Machinery Division based in Aurangabad, Maharashtra, produces
various dairy machines including Pasteurizers, Homogenizers, Cream Separators, Continuous
Butter Making Machines, Centrifugal Pumps, Plate Heat Exchangers for dairy and non-dairy
applications dairy, Oil and Cleansing system, Milk / Oil Separator, Chillers / PHE etc.

HMT Auxiliary Business Division headquartered in Bengaluru oversees HMT Limited's

subsidiary businesses including the integration and sale of HMT watches, the sale of HMT
Tractor spares, etc. The Department has released a series of three new clocks to celebrate
HMT's 69th Foundation Day on 7 February 2021.

The IHMT Heritage Center and Museum located in HMT township in Jalahalli, Bengaluru, in a
green area of 4.17 hectares with a fully built 5000sq.ft., Showcases the Company's glorious
journey and showcases its Mult Unit, Multi Location, Multi Product & Multi the Technology
aspect also takes away the diversity of Products and Services that make HMT the largest
Indian Engineering Conglomerate

Hindustan Machine Tools Era- RISE OF HMT

The first two decades of its life, i.e., from 1961 to 1981, went well with HMT. It was a time
when mechanical clocks were accustomed to market trends, and HMT was well versed in
the art of making mechanical clocks that were sturdy and carefree. There was not much
competition in the domestic market with Timestar Watches as the only other player with a
well-known presence. Government policy also imposed stricter restrictions on the
importation of watches from India. All of this has helped HMT to move up to an area close
to independence in the Indian watch market. The company's market share began to rise
sharply, reaching 90 percent from time to time. In addition to gaining market dominance,
HMT has been able to make a good profit by reaping the economic benefits of scale through
their mass production strategy. In 1976, HMT achieved a milestone when it doubled its
potential. The company's dependence on imported components has been greatly reduced
by the performance within the component parts and components.

How Monopoly led HMT to failure?

Competition intensified as 1991's historic freedoms opened the doors to international

watchmaking products. As quartz clocks were becoming more common in India, HMT has
also introduced quartz watches at all price points to keep them running. In 1991, HMT
reached its peak where it sold its highest sales for Rs.300 crores. However, its journey down
the mountain began as can be seen in the exhibit below. In 1994, HMT registered a loss of
Rs.60 crore while Titan recorded Rs.19 crores gain.

 HMT's ability to grow was hampered by its monopoly position, as they failed to
recognise the need of innovation.
  It was based on the designs of a foreign product. HMT has not released any new
products in the two years since Titan's introduction.
 HMT had given little attention on the trade channel, which comprises retail stores
and service centres.
 They did not build a watch that is suited for youngsters, and the corporation did not
actively push its products.
 HMT made a product price mismatch by positioning its quartz watches as space age
generation watches, which were targeted to modern young men but could only be
afforded by wealthy middle-aged buyers due to the high price

They failed because they did not have a proper defensive and offensive strategy to stay
consistent in the market. Those who have worked for HMT Watches Ltd. for a long time
blame the company's demise on incompetent management and corruption in the early
1990s, which allowed new private companies to enter the Indian watch industry and the
fatal blow came when HMT shut down its Research and Development branch in the late
1990s, robbing the corporation of any possibility of competing with private players.

The sad downfall of HMT might also be attributed to a lack of discipline and devotion. HMT
suffered a shortage of trained people despite having considerable managerial skills and
providing ample training opportunities for its staff. Aside from that, there was a major lack
of team spirit and innovation drive. HMT's people and machine resources were also
underutilised to a significant degree. Internal red tape, another common occurrence in
PSUs, caused HMT to react slower to its competitors' advances, causing it to lose out in a
fiercely competitive field now dominated by classy worldwide and local private brands,
resulting in large losses.

HMT was unable to diversify its business. It may have expanded into several watch
categories, such as analog-digital, multi-function, digital, stop-watch, alarm clocks, and so
on. It may have also taken advantage of the export market. It may have also made a line of
timepieces for ladies. HMT also missed out on the festive extravaganza, which Titan has
brilliantly captured.
Key learnings from the case-

Accepting and adapting to change is the only way for any business to not only develop its
market share but also to stay in the market for a long time. HMT was the market leader
initially. It captivated the hearts of millions of Indians who remained faithful to it for a long
time because of its affordable costs, fashionable appearance, good quality, and the fact that
it was manufactured in India. However, this brand is no longer in use. Several reasons,
according to the lawsuit, contributed to the fall. Most of these elements can be applied to
teach management abilities.

The prevailing microeconomic conditions in India were a major factor in HMT's success and
expansion. Because it was the only rival in the market, HMT was immune to competition. In
a monopolistic market, customers have only one choice and will all gravitate toward it.
Customers in HMT's circumstances had few options when it came to purchasing timepieces,
therefore they relied on HMT. HMT, on the other hand, began to lose market share when
new competitors joined the Indian watch industry. Titan, for example, attracted customers
by offering a variety of products at various price points.

Titan gave very tough times for HMT by hiring their top managers which includes even the
general manager. Titan exploited the weaknesses of HMT in its inability to control the retail
trade and lack of design very strategically when it entered the market. Titan also adopted
aggressive marketing strategies targeting different segments of customers. 

HMT was hesitant to respond to this competition, which posed a serious threat to them.
They continued to make the same old watches with little or no changes in style, and they
used the same marketing strategies that barely met the demands of modern Indian
customers. In a world of severe competition and shorter product cycles, innovation is the
only way to achieve long-term success. Even though HMT carried out many product
innovations and delivered customized watches to various government organizations, the
majority of these creative launch initiatives were inconsistent and did not occur at regular
intervals. An example of this was the launch of quartz watches, but the company failed to
generate profits because of its narrow choice of design in these types of watches. Hence,
the monopoly of HMT watches declined in the market by losing their market share from
90% to 4%.