Welcome TO ENTREP 2021

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WELCOME

TO
ENTREP 2021
Objectives:

1. Define Market and its


structure
2. Analyze structure of a
market and its need.
WHAT IS MARKET?

Market, a means by
which the exchange of
goods and services takes
place as a result of buyers
and sellers being in contact
with one another, either
directly or through
mediating agents or
institutions.
Markets in the most literal and
immediate sense are places in
which things are bought and
sold. In the modern industrial
system, however, the market is
not a place; it has expanded to
include the whole geographical
area in which sellers compete
with each other for customers
( Alfred Marshall, 1890)
Market structures provide a
starting point for assessing
economic environments in
business. An understanding of
how companies and markets
work allows business
professionals and leaders to
accurately judge industry and
market news, policy changes
and legislation and how the
economy .
What Are Market Structures?

“Market structures” refer to the organization


and the characteristics that determine
relations between sellers to each another, of
sellers to buyers and more. It is focus on the
characteristics of a market which affect the
degree of competition between firms and
pricing decisions.
There are several basic
defining characteristics
of a market structure;
The commodity or items that are
sold and the extent of production
differentiation.
● The ease or
difficulty of entering
and exiting the
market.
● The distribution
of market share for
the largest firms.
The number of
companies in
the market.
The number of buyers and how they work with or
against the sellers to price and quantity.
Pure Competition

 Pure or perfect competition is a


market structure defined by a large
number of small firms competing against
each other. A single firm doesn’t have
significant marketing power, and as a
result, the industry produces an optimal
level of output because firms don’t have
the ability to influence market prices.
Supply and demand determine the
amount of goods and services produced,
along with the market prices set by the
companies in the market. Products are
identical to competitors’ products, and
there are no significant barriers to entering and
exiting the market.
Pure Competition
 The pure competition
market structure is rare in
the real world. This is a
theoretical model that is
helpful when looking at
industries with similar
characteristics. In other
words, it’s a good reference
point for other market
structures. The best
examples of pure
competition market
structures are stock,
agricultural and craft
markets.
Monopolistic Competition

 Like pure competition, monopolistic


competition is a market structure referring
to a large number of small firms competing
against each other. However, firms in
monopolistic competition sell similar but
highly differentiated products.
 Lowest possible cost production, which
leads to optimal output in a pure
competition market structure, is not
assumed.

 These factors give firms in a


monopolistic competition market power to
charge higher prices within a certain range.
The products are remarkably similar, but
small differences become the basis for
firms’ marketing and advertising.
Differentiation can include style, brand
name, location, packaging, advertisement,
pricing strategies and more.
 Examples include fast food restaurants, clothing stores, breakfast cereal
companies, service and repair markets, tutoring companies and beauty salons
and spas. Products and services at a beauty salon are quite similar, but these
companies will use certain value propositions, such as quality of services and
appealing pricing, to draw more customers. They may even advertise brand-
name beauty products that are themselves in monopolistic competition — there
is little that separates makeup and hair products, as far as what constitutes
these products and their use.

 Producers freely enter the market when profits are attractive. There is easy
entry and exit in monopolistic competition.
Oligopoly

An oligopoly is dominated by a few firms, resulting in limited competition. They can collaborate
with or compete against each other to use their collective market power to drive up prices and earn
more profit.

Entering into an oligopoly is difficult. The most powerful companies have control over raw
materials, patents and financial and physical resources that create barriers for potential entries. This is
what helps set high prices. However, if prices are too high, buyers will head to product substitutes in
the market.

Products may be homogenous or differentiated. Typically, there are three to five dominant firms,
but this number can vary depending on the market. For instance, video gaming consoles are an oligopoly
with three companies — Microsoft, Sony and Nintendo — dominating the market. Other examples of
oligopolies are the automobile and gasoline industries.

Pricing, profits and production levels change as the dynamic relationship between sellers and buyers
changes.
Pure Monopoly

A monopoly exists when there’s a single firm that


controls the entire market. The firm and industry are
synonymous. This firm is the sole producer of a
product, and there are no close substitutes. Because
there are no alternatives, the firm has the highest
level of market power. Hence, monopolists often
reduce output, increase prices and earn more profit.
Entry or exit is blocked in a pure monopoly. This can occur for more than
one reason, as seen in two of the best examples for pure monopolies:
public utilities and professional sports leagues.

Public utilities are considered natural monopolies because they have


economies of scale — a firm receives certain cost advantages due to its
size — in an extreme way. New firms cannot start up because it would be
incredibly expensive to reach scale in a short amount of time. Building a
maze of pipes and wires to be able to compete with the firm would
require a lot of capital, and there would be legal barriers to entry. That’s
why there are typically government monopolies (or government
regulations) for natural monopolies.
Professional sports leagues control player contracts and have
leases on major city stadiums and arenas. It would take a
substantial amount of capital to lure away top talent and secure
a large enough place to showcase that talent, if someone wanted
to start a professional sports league. Plus, there are broadcasting
rights and more at play. For example, for the 2017-2018 season,
37 players in the NBA will earn $20 million or more in salary
alone. New arenas in the league cost in the neighborhood of $500
million. Television rights for the NBA were extended in February
2016 with ESPN and TNT for a value of about $2.66 billion per
year
What are the
important
things I learned
today?
Self task: MARKET STRUCTURE IN YOUR OWN AREA

Companies/businesses Types of Market Structure Short descriptions

1 Puregold Pure Competition Puregold offers all kinds of products.

2. Unliwings Monopolistic competition It is a small fast food restaurant that


offers unlimited chicken and others.
3

10
THANK YOU
AND GOD
BLESS.

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