The two focal marketing structures include Monopolistic Competition and Oligopoly. Throughout research, discussion, and evaluation it has become imperative how crucial these structures are to everyday consumerism and not only the survival of a firm but its profitability.
Monopolistic Competition resides within imperfect competition where multiple companies sell products that are differentiated from one another therefore, unable to be truly interchangeable. Whether it is by branding, quality or various attributes there are no perfect substitutes. Within monopolistic competitive firms can behave resembling monopolies in the short-run, including using market power to generate profit. Long term, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like perfect competition where firms cannot gain economic profit. The long-run characteristics of a monopolistically competitive market are almost the same as in perfect competition, with the exception of monopolistic competition having various products, and that monopolistic competition involves a great deal of non-price competition based on subtle product differentiation. A firm making profits in the short run will break even in the long run because demand will decrease and average total cost will increase. This means in the long run, a monopolistically competitive firm will make zero economic profit. This gives the amount of influence over the market; because of brand loyalty, it can raise its prices without losing all of its customers. This means that an individual firm’s demand curve is downward sloping, in contrast to perfect competition, which has a perfectly elastic demand schedule. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. Monopolistic Competition also has the advantage where consumers perceive that there are non-price differences among the competitors’ products, therefore also providing producers a degree of control over their products.
Therefore to recognize and determine monopolistically competitive markets, they must have the following characteristics:
•There are many producers and many consumers in a given market, and no business has complete control over the market price.
•Consumers perceive that there are non-price differences among the competitors’ products.
•There are few barriers to entry and exit.
•Producers have a degree of control over price.
Similar to monopolistic competition, oligopoly also falls between perfect competition and monopoly. Oligopoly is a market that is run by a small number of firms that together control the majority of the market share. The oligopoly structure is different in nature as it is conscious of the actions of competing firms. This structure creates a market situation in which producers are limited that the actions of each have an impact on price as well as competitors. With this in mind, competition in oligopolistic industries tends to identify itself in non-price forms such as advertising and product differentiation. Being that oligopolistic markets share in market saturation as well as the profit shares a cut in price within one firm may be a cause for concern within the rest. The cut in price by one may lead to an equal reduction by the others, which results that each firm will retain about the same share of the market as before but with a lower profit margin. The group behavior both evident as well as imperative to oligopoly to reach recognized success must in fact recognize their interdependencies. No firm can fail to take into account the reaction of other firms to its price and output policies. Under oligopoly there is the existence price rigidity. Prices lend to be rigid and inelastic. If any firm makes a price-cut it is instantaneously retaliated by the competing firms by the same practice of price-cut. There occurs a price-war in the oligopolistic condition. Hence under oligopoly no firm resorts to price-cut without making price-output decision with other contending firms. The net result will be price-finite or price-rigidity in the oligopolistic condition. Prices in an oligopoly are usually lower than in a monopoly, but higher than it would be in a competitive market. This kept in mind; Output would be less than in a competitive market and more than within a monopoly. Most competition between companies within oligopoly is by means of research and innovation, location, packaging, marketing, and the production of a product that is ever so slightly different than the competition. Oligopolies develop in industries that require a large sum of money to initiate. Costs add to the major barriers that keep companies from joining oligopolies. The major barriers include economies of scale, access to technology, patents, and actions of the businesses in the oligopoly themselves. Barriers can also be imposed by the government, such as limiting the number of licenses that are issued.
Therefore to recognize and determine oligopolistic competitive markets, they must have the following characteristics:
•Indeterminateness of demand curve
•Importance of advertising and selling costs
•Elements of monopoly
2. Please outline the market structures discussed in class or your textbook. For each market structure, outline the facts that need to be present for such market structures to exist. Be as exhaustive as possible in your answer. This question should be general in nature and not related to your selected company.
3. Having outlined what the different market structures are in 2 above, where does the company you selected fit in the scheme of things? Does your company operate in a perfectly competitive environment or does it fit somewhere else (oligopoly, monopoly, other)? Why or why not. You should ensure that the characteristics that make up a particular market structure are discussed when determining where your company falls.
Instructions: this is a group assignment, where everyone has to answer a question. I have provided question #2 which is related to my part which is #3. You need to read the first part which is #2 in order to be able to answer #3. The company is about blackberry industry.