MARKET STRUCTURES

In this report I will identify key market structures and their respective influences on the price

of goods and services within commerce. Firstly, I firmly believe that in order to achieve

success as a business (small or large) there has to be competition. Competition comes in

different forms, and the key factor to competition is that it allows consumers the opportunity

to choose the best range of goods at the best possible prices. True competition puts

businesses under pressure to constantly perform, thus the consumer benefits.

There are some major business organisations who try to limit competition in order to

dominate a particular market and they can be termed as a monopoly or a duopoly. In these

two particular market structures, the impact of competition is deliberately stifled to increase a

larger market share for the organisation in question. In monopoly, any business with around

25% share of the overall market is seen to be the dominant business in that particular

industry. Thus, competition is significantly decreased. It may seem like a perfect scenario.

However, I stand by my assertion that it actually stifles an organisations’ potential for growth

and can lead to inefficiency and complacency over the control of costs for products in the

market. In duopoly, the market is not dominated by one organisation but by two large

organisations. In this market, there are high barriers to entry. Thus, no small businesses

would be able to compete against the big two. There would be abnormal profits gleaned by

the two organisations. An example of a duopoly in today’s world would be Sky and Virgin in

the satellite television industry. Both organisations have a lion’s share of the market and,

thus, can be considered as a duopoly.

As you can see from the examples above that competition is of different types and that they

all have a bearing on prices of products. Another example of a market is Oligopoly. In this

market, the industry is dominated by a small cluster of large firms. In this case, there tends

to be a relatively small increase in prices for goods, as rivals are reluctant to go beyond a

certain known price-range for a particular product. Hence, it creates a price-stability within

the market. There is still potential for abnormal profits and also for potential collusion

between a cluster of large firms to ensure they all succeed. The methodology of business is

similar to a monopoly. However, it is in the number of firms within each respective market,

where the two systems differ.

Monopolistic Competition market differs from a monopoly market. It consists of many

competitors. This market structure first appeared way back in the 1930s. Edward Chamberlin

(American economist) and Joan Robinson (English economist) are credited with having

recognising this structure. One of the key differences between this market and a monopoly

market is that there are no high barriers to entry. The businesses involved all make

independent decisions about price and output. Examples of monopolistic competition in

society can be seen in restaurants, pubs, and hotels.

Although a perfect competition market is largely theoretical and used in essence as a

standard bearer of sorts to compare different market structures. The monopolistic

competition market can be closely associated with a perfect competition due to there being

relatively low barriers to entry in both. The key difference between them is that a

monopolistic competition offers a range of heterogeneous products as opposed to identical

products being offered under a theoretical perfect competition structure. Innovative new

technology is constantly shaping the methods of business, for both small and large firms.

Helping in mass production, efficient products and revolutionary new boom industries like the

internet, tablet and smartphone, which have all come into existence over the last 25 years.

Technology has the power to shift consumers from one product to another, affecting prices

in a wide variety of ways.

Employability in business now requires a whole new set of skills due to the advancement of

technology. People seeking jobs need to be computer literate and have a good grasp of

business market knowledge. There is potential for people to establish new enterprises and

become a player in a free market where they can become their own boss and possibly

compete with one of the larger firms with an innovative product of their own.

Research and development can help a novice business establish a firm foothold where

once it was dominated by a monopoly. A recent example of this would be Mark Zuckerberg

who created Facebook and is now able to compete with Google and Yahoo.

In conclusion, there are many different market structures in place today and they all

represent a mode in which businesses can thrive and compete in quality of products offered

and pricing. In the case of a monopoly or duopoly, which alienates many smaller businesses,

contrasted with a monopolistic competition structure which encourages small to medium

businesses to compete and prosper. There is no perfect market structure in place, but there

are structures/systems for businesses nonetheless to operate within.

i

i FARAZ AHMAD HND BUSINESS | SEPT GROUP 3 LO3 | AC 3.1