Submitted by42206(single diploma) – Amal Yusupov Theimportance of knowledge market structure has always been a vital asset sincethe rise of globalization. In today’s world, the debate about branch which hasits own market specificity – the production of different goods, a various industryof sellers, the size of enterprises, the features of innovation, the compositionand specificity of consumers is becoming more and more popular. Inmicroeconomics, the most elementary market structures are generalized and the conductof manufacturing firms is studied, leading to the receipt of the greatestbenefits for them-the receipt of the maximum profit. All of thesegeneralizations are considered to be a key development, specificrecommendations are developed that have important applied importance in thechoice of the firm’s behavior strategy in specific market features.
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The object ofthe evaluation of competition is the branch. For instance, a group ofcompetitors producing goods/services and directly competing with each other. The purpose of the analysis is to identify the “ competitive advantages” of thefirm and the choice of a competition strategy. There are four main market structures: Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly. Perfectcompetition indicates a market structure, in which a plenty amount of small firmscompete against each other.
Moreover, firms do not have a significant impact onpower of market. Consequently, the manufacture generally produces the absolute level of production, which in turn lead to market hasmany buyers and producers trading homogenous products so that each buyer andseller is a price taker. Perfectcompetition relies on the following elements:· All small firms arefocused to maximize profits.· The goods whichoffered by the different sellers are largely the typical.· There are not specificpreferences between different sellers. It does not matter for the customer fromwhich firms buy the products.
· All firms havefree access and exit to the market.· There is perfectinformation and knowledge about homogenous products. At present, according to Nelson statistics (2017) 3885567619 out of the global population7519028970 people use the internet.
Approximately 3. 9 billion internet usersare both producers and consumers. The above mentioned example demonstrates thatthe internet is a market, where a myriads number of consumers/producers operatewithout any influence on market power which in turn lead to equal opportunitiesin this market, exemplifying one of the features of perfect competition. Example ofperfect competition. Internetrelated industries. The internet has a strong influence on perfect competitionmarket due to the fact that the internet has made the way of comparison andcheck prices easily, quickly and efficiently (perfect information). Consequently, selling any kinds of good on the internet through a service suchas Alibaba, Aliexpress and E-bay is extremely similar to perfect competition. For instance, it is becoming more and more popular to use the above mentionedonline magazines to compare prices of any types of product and buy cheaperones.
Like perfectcompetition online magazines namely Alibaba, Aliexpress and E-bay relies on thefollowing elements:· There also a largenumber of sellers.· Perfectinformation and knowledge. It is easy to compare the prices of goods.· There are nosignificant barriers to entry and to exit to the market. Monopolisticcompetition is a type of market structure consisting of many small companiesthat produce differentiated products and free entry to the market and exit fromthe market.
The products of these firms are close, however not completelyinterchangeable, it means that there is a difference in price, features, branding and marketing. By differentiating the product, the /monopolistic competitorreduces price elasticity. Raising the price, the monopolistic competitor is notlost of all consumers, as it happens in the conditions of perfect competition. The market is somewhat narrowed, however, there remain those who steadilyprefer the products of only this manufacturer. Monopolisticcompetition relies on the following elements:· availability ofmany sellers and buyers (the market consists of a large number of independentfirms and buyers);· free access to andexit from the market (no barriers that keep new firms from entering the marketleaving the market);· Differentiated, variedproducts offered by competing firms.
Moreover, products may differ from oneanother in one or a number of properties (for example, in chemicalcomposition);· perfect awarenessof sellers and buyers about market conditions;· influence on theprice level, but in a rather narrow framework Example of monopolistic competition: One of the most convenient example for themonopolistic competition is washing powder. There arequite a few different companies in Poland such as, Ariel, Tide, Ares, Perwoll, Lenor, Vizir, Perlux, Maxi trat, FF, Persil, Losk, Surf, Bio Power, Origami andso forth. As a result, for the production of new varieties of detergentpowders it is not required to create a large enterprise. Therefore, if firmsproducing powders will receive large economic profits, this will lead to theinflow of new firms into the industry.
New firms will offer consumers washingpowder of new brands, sometimes not much different from those already producedin a new package, another color or designed for washing different types offabrics. Themarket of oligopoly is characterized by the presence on the market of a minimalnumber of large sellers, whose goods can be either homogeneous ordifferentiated. The entrance to the oligopolistic market is extremelydifficult, the entrance barriers are very high. Control of individual companiesover prices is limited. Examples of oligopoly can serve the automotive engineering, cellular communication markets, household appliances, metals. The difference ofthe oligopoly is that the decisions of the companies about the prices for thegoods and the volumes of its supply are interdependent. The situation on themarket depends heavily on how companies react when the price of a productchanges with one of the market participants.
Two types of reaction arepossible: the first is reaction , when other oligopolists agree with the newprice and set prices for their goods at the same level (follow the initiator ofthe price change); the second ignoring reaction – other oligopolists ignore theprice change by the initiating firm and maintain the previous level of pricesfor their products. Thus, for the oligopoly market, a broken demand curve ischaracteristic. Features andconditions of oligopoly: · the percentage ofsellers in the industry: small; · size of firms: large; · the percentage ofcustomers: high; · goods: homogeneousor differentiated; · control over theprice: significant; · access to marketinformation: difficult; · barriers to entryinto the industry: high; · methods of competition: non-price competition, very limited price. Cellularservices today are the most profitable and rapidly growing segment of thetelecommunications market in Russia. A small number of sellers dominate theRussian cellular market, which is one of the most obvious example foroligopoly. The leading players here are MTS, Megafon, Beeline, Tele2.
A featureof the Russian cellular market is that it is characterized by a high level ofcompetition. MTS successfully relies on the price leadership strategy; Megaphone applies the strategy of minimum prices for services; Beeline relieson a pricing strategy based on individual costs; Tele2 provides the widestrange of tariff plans at low prices. Monopolyoccurs when an enterprise produces products for which there is no substitute.
Theopposite of this market is perfect competition- a market where only one firmoperates, which by virtue of this circumstance can influence the marketequilibrium and market price. Monopoly – amarket structure that meets the following conditions:· The release ofgoods throughout the industry is controlled by one seller of this product, whichmeans that the monopolist is the only producer of this good and personifies theentire industry.· The good producedby the monopolist is special in its own way and has no close substitutes.· Monopoly iscompletely closed to enter the industry of new firms, therefore in theconditions of monopoly there is no any competitive struggle. Example ofMonopoly: The mostprominent example of a pure monopoly in the United States is the United StatesPostal Service (USPS).
People have all heard that the Postal Service lost a lotof money. According to a report released in 2014, the United States PostalService lost a staggering $2 billion dollars in just 3 months, despite cutbacksin service. With such a glaring need for developed operations, you might wonderwhy other businesses haven’t entered the market to compete with the Post Officefor first-class and standard mail delivery. Moreover, it should be noticed thatthe Post Office is a government-protected monopoly. The Private ExpressStatutes established in 1792 gives the USPS exclusive rights to deliver lettersfor a fee, with very few exceptions. Letters that are designated to be ‘ extremely urgent’may be delivered by other providers but even then, the Post Office is allowedto set the minimum price that the private competition must charge. This is anexample of a legal barrier to entering the market.
In conclusion, there are four main types of market structure: perfect competition, monopolistic competition, oligopoly and monopoly, which are differ from eachother by their goods/services, using specific tactics of behavior and marketingmethods to maximize the profit in the market sphere. Therefore, The perfectcompetition illustrates a market structure, where myriads of small firmscontend with each other, while monopolistic competition also has a lot of smallfirms, which compete with each other with the help of varied products. Besides, Oligopoly demonstrates a marker structure with small number of firms.
Monopolyis the opposite of perfect competition, where only one firm controls allmarket.