Wait a second!
More handpicked essays just for you.
More handpicked essays just for you.
Challenge of developing strategy
Don’t take our word for it - see why 10 million students trust us with their essay needs.
Question No. 1
INTRODUCTION
Market structure is the organizational characteristics of the market. Market structure studies the number of firms in the market, market share of the firms, nature of competition, pricing, types of consumers, product differentiation, et cetera. Product differentiation deals with making changes in the marketing mix of a product so as to differentiate it from whatever the competition is offering OR to offer a product which stands out in the market (Bhasin, 2016). In economics, there are basic 4 types of market structure. They are perfect competition, monopoly, oligopoly and monopolistic competition. Here, we are going to explain the product differentiation of the firms in each type of market structure.
ANALYSIS
Market is changing all the time and product differentiation is the only factor that maximizes the firm’s profit. But once-off expenditure on product differentiation is not enough to maximizes the profit. When the market is changing, the demand, taste and preference of the consumer also changes. So, the firm should make the product differentiation according to the demand, taste and preference of the consumer. Unique product alone doesn’t guarantee higher sales and maximizes profits. In any market, a product must satisfy the wants, taste and preference of the consumers.
…show more content…
There is no competition and barrier to entry in this market. I think in monopoly market, once-off expenditure on product differentiation is enough to guarantee the firm’s ability to maximize economic profit in the future. For example, De Beers was the longest lived monopolies in the diamond industry. There was no any product differentiation in the product of De Beers. Later some other companies also entered the market and due to the increased competition, De Beers has started to bring product differentiation on top quality of diamonds. The profit for monopoly market is shown in the figure
Nevertheless, it must “defend” its current market share if not increase it, by maintaining premium quality and develop innovative products. The marketing mix strategies will effectively achieve targeted revenue and profitability in the near future.
This organization belongs to the oligopoly market structure. The oligopoly market structure involves a few sellers of a standardized or differentiated product, a homogenous oligopoly or a differentiated oligopoly (McConnell, 2004, p. 467). In an oligopolistic market each firm is affected by the decisions of the other firms in the industry in determining their price and output (McConnell, 2005, P.413). Another factor of an oligopolistic market is the conditions of entry. In an oligopoly, there are significant barriers to entry into the market. These barriers exist because in these industries, three or four firms may have sufficient sales to achieve economies of scale, making the smaller firms would not be able to survive against the larger companies that control the industry (McConnell, 2005, p.
Thus new products/line extensions will be based on Allround brand, each one with a unique target market, delivering different value proposition to the respective customer.
Adopting a strategy of differentiation makes firms provide products and services what are distinct in some way valued by customers.
Market structure is classified according to the degree of competition firms encounter in their industry (Baker College, 2016). There are four main market structures: pure competition, monopolistic competition, oligopoly and a pure monopoly. Pure competition is where fir...
Porter (1997) suggests in order to gain competitive advantages in the changing business environment, it is essential to design a generic strategy for the business: product differentiation or cost leadership. The competitive strategy is determined at round 2, when recognised our rivals held whole product profile which was the product differentiation strategy. To differentiate our strategy from rivals for competitive advantages, Digby designed to imply the cost
The market structure of an industry is the deciding force for how a business runs its operations. Strategies that would excel in a monopoly structure would surely fail in a perfect competition. Market structures vary from industry to industry and define what practices are acceptable. They determine the price of goods, availability of products, barriers to entry and number of firms in competition. To illustrate the effects of market structure on an industry, an analysis of The Ridge Tool Company and the tool manufacturing industry will be done.
Differentiation through marketing strategies, this is a form of innovation driven by the need to create a superior brand (Sadler, 2003).
The one of main factors is that costumers are swayed by product itself. Where are we buying it? What is the trademark of the product? How much is it? What is the product’s appearance? How about product’s use? And, does the product have a good quality? All of these questions will appear in our mind when we are making decisions. Thus, every consumer will accord to analysis by synthesis product itself, and focus on the product that he or she most favorite. The ways of vendition and the environment of vendition impact the buying behaviors of the customers. The seller makes an attempt to choose the right way and sell the products in the right environment. Consumers will select a safe channel, and according to legal order trade with the marketer. So, having a good channel and place is very important. Usually, a well-known trademark can attract customers to buy the product, because of its influence, history, or another factors. In
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
Differentiation through distribution, including distribution via mail order or through internet shopping. For example u can buy Monster from Amazon.com.
In the modern world of conducting business, any company that wishes to succeed must differentiate its products or services from others in the industry. Differentiation makes it possible for consumers to point out notable differences between one company’s products as compared to those of competitors. Differentiation helps companies build brand loyalty as the uniqueness keeps customers fixed on a particular product. BMW is one of the most popular automakers in the world today. It definitely uses differentiation as a strategy to beat off competition by building products that are innovative, detailed and incomparable to those of competitors.
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
Perfect and monopolistic competition markets both share elasticity of demand in the long run. In both markets the consumer is aware of the price, if the price was to increase the demand for the product would decrease resulting in suppliers being unable to make a profit in the long run. Lastly, both markets are composed of firms seeking to maximise their profits. Profit maximization occurs when a firm produces goods to a high level so that the marginal cost of the production equates its marginal