Market structure Free Essays

Four basic types of market structures are: 1- Perfect competition 2- Monopolistic competition 3- Oligopoly 4- Monopoly There is also another market structure called Monopoly. 1- Perfect competition It is considered more theoretical than practical, because it is very rare. In perfect intention a large number of firms sell identical products, where none of them has pricing power. We will write a custom essay sample on Market structure or any similar topic only for you Order Now There no berries or very easy to enter to the market by any new farm. Prices. For example if we go to normal retail shops to buy vegetables, we will get at same prices from each and every shop. Fish market at Male’ is a very good and a simple example, where inside the market lot of sellers will be selling same fishes. Prices will be set by the demand and supply. Neither buyer nor seller sets the price. It is more like automates pricing. Characteristics of perfect competition include large umber of small firms, identical products, perfect resource mobility and perfect knowledge. 2- Monopolistic competition It is almost like perfect competition where large number of small firms sells similar but not identical products. Relative freedom of entry, to and exit from the industry. It means buyers will have substitutes to choose from. Alternatives to buy for fulfill their needs and wants. Examples of industries structures as monopolistic competition includes, clothing industry, restaurants, and shoes and so on. 3- Oligopoly It is a market situation where products are supplied by small number of firms where ACH of them has influence over pricing and supplies which directly effects the position of the competitors. I oligopoly there is a special case where there is only two producers are called Duopoly. 4- Monopoly This is a market structure where only one producer in a market who has to the total control. Buyers do not have substitutes and have no choice. They have total control over supply and prices. In this market structure, seller is always happy and consumers suffer. They take more profit with a huge marginal value from the products. Characteristics of monopoly includes single seller, unique product, berries o entry and specialized information. The fifth type of market structure which is not included in basic structures is Monopoly. It is upside down of a monopoly where there is only one buyer. If we relate to a Mammalian context, government is the only buyer for the explosives and guns. Where there may be many sellers. Exhibit 1 Perfect Competition Monopolistic Competition Oligopoly Monopoly Number of Sellers Many Few One Barriers to Entry Very Low Low Very High Type of Substitute Products Very good Good substitutes but differentiated Very good differentiated substitutes No good substitutes Nature of competition Price only Marketing, features and price Advertising Pricing Power None Little Little to significant Significant As mentioned above, from 1988 to 2005 telecommunication industry of Maldives was a monopoly market. The following will elaborate how it was a monopoly and what was the situation during the monopoly. 988-2005 Draught monopoly in Maldives It was history that people used to call Draught as â€Å"Blood Suckers†. When the company started in the Maldives in Maldives there was a telecommunication service by cable and wireless which uses USB set to communicate between the islands. After their establishment as one and only telecoms service provider in 1988 they brought a major upgr ade to their network in 1989 in Male and introduced paging service in the Maldives. They also introduced internet service for the very first time in Maldives in 1996 followed by mobile phone service in 1997 which was upgraded to GSM in 1999. Being the only company to provide the service and major share controlled by the government of the Maldives, they introduced services at a huge marginal value. Consumers have no substitution in the market, which lead Draught to grow up and cake huge profit and extended its service to nationwide, while charging extraordinary high charges to cover its expansion costs and making more profit. It is usual to charge more from the consumers in monopoly market structure. In monopoly, always seller is always happy and consumers are unhappy. Some pros and cons of monopoly are: Advantages Disadvantages Large capital scale benefit to the company More money to invest on development Earning national export revenues Price discrimination between consumers Very high market share Restricts production potential Do not actively pursue new clients Poor product quality Unfair wealth distribution Entry barrier for new comers When Waiting telecoms Maldives (presently called Ordered) started their service officially in Maldives on 1st August 2005 shortly after they were licensed on 1st of February 2005, the market structure changed to an oligopoly. Oligopoly In economics oligopoly means that there are few sellers of a certain product in a market. Usually these sellers are always in a high competition with each other. In this type of markets sellers knows very well about their competitors. They have a high power to in pushing their products to the consumers. When on seller makes a change, it will directly affect other sellers. There is a special case in oligopoly which is called duopoly. Which is when the there is only two sellers in the market. Here are some advantages and disadvantages of oligopoly. Advantages Lot of control Ability to fix prices Competitive pricing More profit making Perfect knowledge of the market Price controlling will be a disadvantage for consumers Creative ideas may fail to realist Difficult for small firms to establish in the market Not much of competition No fair wealth distribution Oligopoly in Maldives telecoms industry From 2005 Ordered became the major and the only competitor to Draught. As usual they have initiated their business with a huge investment to make existence of their network across the Maldives. It was a huge challenge for them to establish when there was a well-established and government controlled seller in the marker for almost a decade, market share was 100% controlled by monopolized Draught. Immediately after starting the service in the market by the new comer, the unhappy customers of the monopolized industry started to change their service provider. They started with introductory promotional prices which was far much better than the ajar market controller, which directly affected the business of Draught. Competition, strengths and weaknesses. When there are two or more sellers are there in a market, it is obvious that the competition will be born in the market. It is very interesting to study about the competition between Ordered and Draught. Luckily I have got very good connections at the top levels of both the companies, which made me to sit and talk about their respective companies. I found that they are tightly in competition with each other. Pricing: When Draught was alone in the industry, consumers pay around USED $100 average user used to pay around MOVE 2000 per month for the usage. Call rates are sky high. Rates differ from calls from mobile to mobile and mobile to landlines. When the competition started and if we see current situation, we have choices for individuals and businesses depends on what consumer needs. There are some consumers who want more talk time than data while others doesn’t care about the talk time but data allowance the service provider offers. Those used to spend around 2000 per month now are spending less than 500 per month because of competitive pricing by the competitors. Advertising: Earlier days Draught keeps and average advertising. Unlike that now each and every TV channel is occupied by both Draught and Ordered advertisements. All the islands with more population see those companies’ bill boards near harbors and schools. It is very clear that Ordered is doing more aggressive advertising while Draught use more informative advertising. Corporate Social responsibility: We used to say that both the companies do corporate social responsibility to a certain extent. But in real, in my study I found that rather than corporate social responsibility they both do corporate philanthropy. They do not actively participate in social activities. But they do help by donation some money to do the social activities by others. That is a form of advertisement they both do. They are present in the activities as bill boards. Just to advertise the company name. For example: Thieved league football tournament is always sponsored by one of these two companies. Competitive advantages: Draught uses â€Å"first in Maldives† â€Å"Largest network† and so on while Ordered uses â€Å"best network for smart phones†. Draught is first to come and still holds 65% market share while Ordered is gaining market share at a rapid speed. Bad the backbone of the company is much better with latest technologies while Draught is upgrading its backbone. Subsidized handsets to consumers: Ordered started offering Samsung handset to its consumers with contract for the very first time in Maldives. And soon they will be starting offer apple handsets on contract, while Draught is working with apple to introduce subsidized apple handsets with contract. Apple currently certified Ordered network for their products while Draught is doing upgrades to obtain certification of using Apple products on contract. Is this industry good for the society? Unlike the history of the monopoly in the telecommunication industry in the Maldives, with existing oligopoly (duopoly) consumers are happy now. As is economic theory, human wants are unlimited with the scares resources available, people are still aiming for mush cheaper services with better quality. As mentioned earlier in this report, consumers’ expenses, for the use of telecommunication are decreased by 60 percentages. We never heard of handset for installments by service providers before. But it is started now. We have heard about subsidized handset with contract with carrier locked, from other parts of the world. We never imagined that a small country with a small population like us will get phones on contract with subsidized prices. But it is soon to happen. Unlike perfect competition and monopolistic competition there are no much of sellers. So competition and pricing of the products will not be according to the demand and supply. Sellers will have the power to set the prices. Consumers are very happy when there is a perfect competition and monopolistic competition. Consumers are sad at most when there is a monopoly. But than they used to have, the monopoly. It is an average good for the society. How to cite Market structure, Papers Market Structure Free Essays University of Phoenix Material Differentiating Between Market Structures The purpose of this assignment is to identify applications of economics by evaluating strategies acted upon by firms. Select and complete one of the following assignments: Option 1: Differentiating Between Market Structures in Kudler Option 2: Differentiating Between Market Structures in an Organization of Your Choice Option 1: Differentiating Between Market Structures in Kudler You will apply important microeconomics concepts toward the competitive strategies of the Kudler Fine Food Virtual Organization that affect its long-term profitability. You will evaluate the differences between market structures and review the organization’s strategic plan, marketing overview, market surveys, and other material to evaluate the organization’s competitiveness in the marketplace, including its customers’ views. We will write a custom essay sample on Market Structure or any similar topic only for you Order Now In the process, you will identify the market structure that you believe best applies to this organization, and assess how the market structure positively and negatively affects the firm’s long-term profitability. Complete the University of Phoenix Material: Differentiating Between Market Structures Table located on the student website. Compare the various characteristics of the market structures by completing the table. Kathy Kudler has hired you as a consultant to perform a market analysis, review her competitive strategies, and make recommendations on how she can maximize profits. Read the materials in the Kudler Fine Foods Virtual Organization, including the firm’s strategic plan and marketing overview. Write a 1,050 – 1,400-word market analysis in which you address the following: †¢ Based on the details available to you in the strategic plan, marketing overview, market surveys, and other material, how does the organization compete in the marketplace? What are the strengths and weaknesses of the firm as indicated by the marketing surveys completed by their customers? †¢ Based on your learning, identify the market structure that you believe best applies to this organization. Defend your answer. How does that market structure positively and negatively affect the firm? How does the effectiveness of the competitive strategies in the market structure affect the organization’s long-term profitability? †¢ What competitive strategies would you recommend for Kudler Fine Foods? Explain your answer. Identify real-world organizations that are comparable with Kudler Fine Foods. Format your paper consistent with APA guidelines. Option 2: Differentiating Between Market Structures in an Organization of Your Choice You will apply important microeconomics concepts toward the competitive strategies of an organization that operates in an industry of your choice. You will evaluate the differences between market structures and identify a group of competitive strategies consistent with the market structure that best aligns with the market in which the organization competes. You will assess how the market structure positively and negatively affects the firm and evaluate the efficacy of the structure’s competitive strategies. Complete the University of Phoenix Material: Differentiating Between Market Structures Table located on the student website. Compare the various characteristics of the market structures by completing the table. Write a 1,050 – 1,400-word paper Select an industry. Identify an organization in that industry. Identify the market structure in which this organization competes. Clearly indicate why the market structure was decided upon, and how this market structure differentiates from the other alternatives. Identify three or more competitive strategies of your choice that may be used by the organization to maximize its profits over the long run. Evaluate the efficacy of these strategies in the market structure you identified. Make recommendations related to the strategies the organization might consider to maximize its profits. Format your paper consistent with APA guidelines. How to cite Market Structure, Papers