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BVL2

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12 views12 pages

BVL2

Uploaded by

Juber Ahamad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Market Structure

Perfect Competition
In a perfect competition market structure, there are a large number of
buyers and sellers. All the sellers of the market are small sellers in
competition with each other. There is no one big seller with any
significant influence on the market. So all the firms in such a market are
price takers.
Agricultural markets:
Monopolistic Competition
➢ In monopolistic competition, there are still a large number of buyers
as well as sellers. But they all do not sell homogeneous products.
The products are similar but all sellers sell slightly differentiated
products.

• Example: The Fast Food companies like the McDonald and Burger King who sells
the burger in the market are the most common type of example of monopolistic
competition..
• The service provided by the hairdressers in the market provides one of the
most famous types of the example of the monopolistic competition.
• There are certainly a lot of bakeries in any town and each one of them sells a
slightly differentiated product to the consumer in the market.
• There are a number of brands if one is searching for running shoes like
Adidas, ASICS Nike, etc.
Oligopoly
• Oligopoly: There are only a few firms in the market.
While there is no clarity about the number of firms,
3-5 dominant firms are considered the norm. So in
the case of an oligopoly, the buyers are far greater
than the sellers.
• Examples:
1. Airlines
2. Entertainment (Music and Film)
3. Automobiles
Monopoly
• Monopoly: In a monopoly type of market structure,
there is only one seller, so a single firm will control the entire
market. It can set any price it wishes since it has all the market
power. There is no substitute in the market. Consumers do not
have any alternative and must pay the price set by the seller.
• Example:
1. Microsoft and Windows
2. Indian Railway
Porter's Five Forces
➢ The tool was created by Harvard Business School professor Michael
Porter, in 1979, to analyze an industry's attractiveness and likely
profitability.
➢ Porter's Five Forces is a simple but powerful tool for understanding
the competitiveness of your business environment, and for
identifying your strategy's potential profitability.
➢ This is useful, because, when you understand the forces in your
environment or industry that can affect your profitability, you'll be
able to adjust your strategy accordingly. For example, you could
take fair advantage of a strong position or improve a weak one, and
avoid taking wrong steps in future.
➢ Porter recognized that organizations likely keep a close watch on
their rivals, but he encouraged them to look beyond the actions of
their competitors and examine what other factors could impact the
business environment.
Porter's Five Forces
➢ Competitive Rivalry. This looks at the number and strength
of your competitors. How many rivals do you have? Who are
they, and how does the quality of their products and services
compare with yours?

▪ Where rivalry is intense, companies can attract customers


with aggressive price cuts and high-impact marketing
campaigns. Also, in markets with lots of rivals, your suppliers
and buyers can go elsewhere if they feel that they're not
getting a good deal from you.

▪ On the other hand, where competitive rivalry is minimal, and


no one else is doing what you do, then you'll likely have
tremendous strength and healthy profits.
➢ Supplier Power. This is determined by how easy it is for your
suppliers to increase their prices. How many potential
suppliers do you have? How unique is the product or service
that they provide, and how expensive would it be to switch
from one supplier to another?
▪The more you have to choose from, the easier it will be to
switch to a cheaper alternative. But the fewer suppliers there
are, and the more you need their help, the stronger their
position and their ability to charge you more. That can impact
your profit.
➢ Buyer Power. Here, you ask yourself how easy it is
for buyers to drive your prices down. How many
buyers are there, and how big are their orders? How
much would it cost them to switch from your
products and services to those of a rival? Are your
buyers strong enough to dictate terms to you?
▪ When you deal with only a few savvy customers,
they have more power, but your power increases if
you have many customers.
• Threat of Substitution. This refers to the likelihood
of your customers finding a different way of doing
what you do. For example, if you supply a unique
software product that automates an important process,
people may substitute it by doing the process
manually or by outsourcing it. A substitution that is
easy and cheap to make can weaken your position and
threaten your profitability.
➢ Threat of New Entry. Your position can be affected by
people's ability to enter your market. So, think about how
easily this could be done. How easy is it to get a foothold
in your industry or market? How much would it cost, and
how tightly is your sector regulated?
▪If it takes little money and effort to enter your market
and compete effectively, or if you have little protection
for your key technologies, then rivals can quickly enter
your market and weaken your position. If you have strong
and durable barriers to entry, then you can preserve a
favorable position and take fair advantage of it.

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