...Monopolistic Competition in the Retail Industry The retail industry is a prime example of the modern version of Chamberlin and Robinson’s model of Monopolistic Competition (Grewal, 441). The retail industry consists of vast markets with different brands and goods of one common goal, to sell their products. To cater to this rapidly changing market many large scale retailers are findings ways to make their product more appealing to the public in hopes of gaining market share over their competition. As prices rise, customers are forced to buy substitutes of well-known brand names or alter their preferences. This results in the phenomenon known as monopolistic competition. Monopolistic competition is defined as the result of many firms competing for the same customers in a particular market differentiating their products. If a firm in a purely competitive market can differentiate its product or service, it becomes a part of the monopolistic competition market. Monopolistically, markets are dominated by the following trends: the demand curve is down-ward sloping, no major barriers to entry or exit, profit maximizers, make up the large majority of advertisers, specialize in product differentiation, and each company is free to set their own price and level of output. Due to the retail industry having a large number of firms and competition, there are three major implications of the retail industry that dictate whether a product or brand will succeed. The first implication is how...
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...Consider Singapore retail firms (retailers) and discuss if oligopoly or monopolistic competition best explains these retailers’ market behaviour. Does oligopoly or monopolistic competition better explain the market behaviour of Singapore retail firms? First, a few definitions are in order. First, retailers are firms that do not produce their goods that are sold, but only sell goods which are in turn manufactured by manufacturers or producers. Second, oligopoly is characterised by many buyers but few sellers, each of the sellers interacting strategically against their rivals, which are the other firms competing in the oligopolistic industry, and there are high barriers to entry, usually caused by high economies of scale. Third, monopolistic competition is a market structure where there are many buyers and sellers, few barriers to entry, and differentiated products that are quite different from other competitors, but psychologically or physically different. For example, NTUC and Giant hypermarket are examples of oligopoly while clothing retail shops such as Charles and Keith are examples of monopolistic competition. First, monopolistic competitive firms can make independent decisions on pricing and output, whereas oligopolies are mutually interdependent because they are rivals rather than competitors. There is price stickiness in oligopoly, shown by the oligopoly kinked demand curve model, which shows there is no incentive for firms to raise or lower prices as long...
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...Every industry has its own specific market structure and also to the type of consumer that is being catered to. The retail industry is a very risky industry and requires your company to be able to sell what latest fashion trends are currently. Today’s fashion trends are constantly changing not only due to products going in and out of style but also based on location and weather as well. The fashion industry can be very rewarding but with anything else you must put the work into it first before you will start reaping the reward. The retail industry is a very lucrative and highly paid industry; however, keep up with latest fashion trends can be very difficult considering fashion changes constantly from one location to another. At no time in U.S. history has there ever been one specific product that consumers all over the world have been interested in purchasing at one specific time. There has always been a generational gap as to what is currently in style as to what is out of date. For example if you grew up during the 1960’s and 1970’s bell bottom jeans may have been in style then, where as currently today’s youth thinks it is fashionable to wear your jeans with your behind hanging out of them or to wear your pants so big so they are constantly falling off your waist. The retail industry is a market industry that exhibits “monopolistic competition” characteristics for numerous of reasons. The main reason why the retail industry would be considered a monopolistic competition...
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...marginal costs and marginal revenue to maximize profit. A mix of pricing and non-pricing strategies will be suggested. This proposal will also explore options of creating or increasing barriers to entry. Further, increased product differentiation will be discussed. Finally, other way to minimize costs will be explored. Market Structure and Elasticity of Demand CVS retail pharmacies operate in a monopolistic competition market structure. According to Investopedia (2012), the monopolistic competition is, “A type of competition within an industry where: 1. Firms produce similar yet not perfectly substitutable products. 2. Firms can enter the industry if the profits are attractive. 3. Firms are profit maximizers. 4. Firms have some market power, which means none are price takers. Firms in a monopolistic competition sell goods that have either actual or perceived non-price differences. These differences are not so significant, however, that they climate the potential for substitutes. The cross-price elasticity of demand in a monopolistic competition, therefore, is positive or high. Prescription drugs and retail pharmacies are close but imperfect substitutes, which perform the same basic functions but have differences that distinguish them from each other such as location,...
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...housing. Pinnacle is a full-service real estate management and brokerage firm that is headquartered in Seattle. Pinnacle oversees a portfolio of apartment, office, industrial and retail assets valued at more than $18 billion. The portfolio includes properties in more than 300 cities across the United State, Canada, and Asia. Pinnacle is also a recognized leader in affordable housing management and active in the privatization of military housing. American Management Services LLC was founded by John Goodman in 2003. Goodman Management Group, as it was originally named was formed to restructure Pinnacle’s business to better serve clients. In 1985, Stan Harrelson, became partner of Goodman Management Group and renamed it American Management Services, dba Pinnacle. In response to client demands, the company expanded nationwide in the late 80s. Market structure is defined by the manner in which a market is organized, based largely on the number of firms in the industry. There are several competitive firms in the industry. Of these firms, Pinnacle is the second largest and most powerful company in the industry in sales and service. Four basic structure models are: perfect competition, monopoly, monopolistic competition, and oligopoly. Perfect competition is theoretical. A perfect competition is often used as a benchmark and compared to real structures. This is a model that is traded freely by buyers and sellers usually in large numbers and there are no individual transactions...
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...companies operate within different market structures, which include pure competition, monopoly, monopolistic competition, and oligopoly. These market structures are characteristic descriptors that reflect the strength of buyers and sellers within the market. This writing will examine each of these market structures and identify a company which operates within the market structure. This writing also examines Quasar Computers, a fictitious company in which the authors participated in a software simulation. Throughout the simulation the Quasar evolved through the four market structures. This writing will identify the findings of that evolution through the life cycle of their products and the changes of buyers and sellers over time. Pure Competition In pure competition, a large number of independent sellers of standardized products characterize the market. Information is free flowing and free entry and exit exist. The seller is the price taker and not the price maker (McConnell & Brue). The firm in perfect competition is a structure that demonstrates the market under degrees of completion, given certain conditions. Pure competition is an unlikely scenario and is rare in the real-world; moreover, this market model is significantly important. One can learn from this model, from various markets, such as form agricultural, fish products, from foreign trade, and metals. The text illustrates pure competition as, “a meaningful starting point for any discussion of price and output...
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...structure, on the other hand, refers to characteristics of a given market such as the size of the market, number of buyers and sellers, nature of product being sold, mode of pricing and nature of market information. The structure of any market has a great influence on the behaviour of buyers and sellers in the market and thus affects the performance of firms operating in the market and, as could be expected, the decision making activities of managers of the respective firms in their bid towards achievement of the traditional profit maximization objective of the firm. There are four kinds of market structures that can be identified: Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly. We would examine the market structures and their effects on managerial decision making in turn. Perfect Competition Perfect competition is the idealized version of the market structure with existence of many buyers and sellers with free entry and free exit, homogeneity of the product sold, perfect mobility of resources or factors of production and perfect information among all market players. In this type of market, demand is perfectly elastic and each individual buyer or seller is so small relative to the market size that he or she has no power to influence the price. Each individual can only decide how much to buy or sell at the price determined by the market. The profit maximising output for a firm is where marginal revenue equals marginal cost, and since in...
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...Structure of the telecommunication industry Telecommunications involves an exchange of information, over a long distance, by means of electronic methods. (Rouse, 2007) In South Africa, there are three distinct forms of telecommunications, namely fixed landlines, mobile networks and broadband communication. This network industry, known as telecommunications, is an industry in which high initial fixed costs and exhibiting increasing returns to scale are presented. (Theron & Boshoff, 2006; p.2). In this industry, as network effects are realized, the average cost may decline over a long period. The high initial capital costs will be recovered over a period of time. (Theron & Boshoff, 2006; p.2) In this essay, these three forms of telecommunications will be discussed in depth, in accordance to their market structures, their nature of competition, their pricing and lastly their strategic decision making. The first part of the telecommunication industry is fixed landlines. The fixed landline in South Africa is Telkom. Telkom is seen as a pure monopolist business, because their market structure only exists of a single seller, which means the market for their goods and services is dominated by themselves. The demand for their goods and services in the entire markets is the demand for the firms individual output. In this case, Telkom is the firm supplying fixed landline services to all the consumers of South Africa. Telkom has no competitors or close substitutes, and is seen as the...
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...and Shanhai Banking Corporation Sri Lanka referred to as HSBC herein. The contents will highlight the key assumptions made on the market structures by the economists and channel it across the commercial banking industry via the key competing elements of HSBC. 1. Introduction Having celebrated 115 Years of service with pride, HSBC which was formally known as Hongkongbank opened its doors in Sri Lanka during mid-1882. Having been with the nation during the tough and good times, HSBC boasts of stability with a strong capital structure and innovativeness by customizing its products and services to its customers. 2. Brief Introduction to Industry Market Structures The form of market in which a firm operates, is referred to as the market structure. The identification of same is vital as the decision making atmosphere will depend on the type of structure the firm functions in. However it is noted that a firm may not necessarily fall into a particular type of market, but may possess basic characteristics, which can be extracted to determine its market structure. In this context we will be exploring the four main categories of market structures in the economy namely; a) Monopoly b) Perfect Competition c) Oligopoly d) Monopolistic competition a) Monopoly In the event only one firm produces goods and services in a particular market, then it is said to have a monopoly in the market. Similarly if a company enjoys tremendous turnover compared to its smaller...
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...economic units such as individual consumers, families, and individual businesses. Both macroeconomics and microeconomics have played an integral role in the global economic crisis. 4. While the free market drives performance in the American economy, the federal government and the Federal Reserve can help shape performance. During the recent crisis, both the government and the Fed have taken proactive roles to mitigate this economic contraction. The overarching goal is controlled, sustained growth, and both fiscal and monetary policy can help achieve this objective. 5. The fundamental elements are rights to own a business and keep after-tax profits, the right to private property, the right to free choice, and the right to fair competition. They can profit from these by getting extra money after taxes by owning their own property, and have some...
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...while outpacing any competition in product affordability and product quality. Our newest product is a coffee substitution drink, a natural energy enhancement made from all natural ingredients that provides the same caffeine boost without the added calories from sugar and additives. Along with a wide variety of flavors, we have added an innovative lid that is used as a measuring cup and allows the consumer to measure out the exact amount of energy needed. Mobileboost Energy Company has added its new product named “Mobile-Energy” and promises its users that they will taste the difference and feel the amount of natural energy our product contains without missing a beat in today’s fast paced society. Elasticity of Demand Mobileboost Energy Company is among the industry leaders for energy drinks and has proved, each year, to be highest grossing company on the market. Despite holding the number one seat in market share, the demand for energy drinks is extremely elastic. There are two key factors of price elasticity of demand for monopolistic competitor organizations, “the number of rivals and the degree of product differentiation” ” (McConnell, et.al., 2009). The elasticity of demand results from the abundance of companies that bring new drinks to the industry each year. The market is often flooded with new flavors, new portions, and lower costs from various companies, each promising to provide the customers what their competitor cannot. Along with competition, other costs are constantly...
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...pure monopoly, monopolistic competitive markets, oligopoly, and pure competition. In economics, market structure refers to the number of firms producing identical products or services. In a pure monopoly there is only one! The team pinpointed some key terms that helped us differentiate this type of market from the other three structures. A“single seller” monopoly is one where a single firm is the sole producer of a good or service. A "no close substitutes" is a company that sales a product and there is nothing in the market the can be used as a substitute, therefore everyone have only one place to go to buy the produce. The "price maker" is when a firm has control over the quantity supplied; consequently they will have control over the price of the product they are producing. The "blocked entry" limits competitors from entering a market due to certain barriers such as economic or legal, things such as patents or licenses (McConnell, Brue & Flynn, 2009).A monopoly exists when there is only one supplier of a good, with no close substitutes; the smaller the number of firm in this industry, and the larger those firms are, the more power that exists in that industry around control and prices. As a result, the greater the market share the more power the firm will have over the industry.Today, a few examples of monopolies are Microsoft, Wal-Mart, and the United States Postal Service (Simpson, 2010). A monopolistic competitive market represents imperfect competition because the producers...
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...managers or entrepreneurs, the classification and types of marketstructure, upsurge the team’s interest. Thus, this week’s team deliverable focuses on pure monopoly, monopolistic competitive markets, oligopoly, and pure competition. In economics, market structure refers to the number of firms producing identical products or services. In a pure monopoly there is only one! The team pinpointed some key terms that helped us differentiate this type of market from the other three structures. A“single seller” monopoly is one where a single firm is the sole producer of a good or service. A “no close substitutes” is a company that sales a product and there is nothing in the market the can be used as a substitute, therefore everyone have only one place to go to buy the produce. The “price maker” is when a firm has control over the quantity supplied; consequently they will have control over the price of the product they are producing. The “blocked entry” limits competitors from entering a market due to certain barriers such as economic or legal, things such as patents or licenses (McConnell, Brue & Flynn, 2009).A monopoly exists when there is only one supplier of a good, with no close substitutes; the smaller the number of firm in this industry, and the larger those firms are, the more power that exists in that industry around control and prices. As a result, the greater the market share the more power the firm will have over the industry.Today, a few examples of monopolies are Microsoft...
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...Models of retail competition This chapter examines the effects of competition on a retailer’s performance. As noted in Chapter 1, retailing in the United States was once a growth industry that was able to increase profits solely on the basis of an increasing population base. Today’s slower population growth rates have turned retailing into a business where successful regional and national retailers can grow only by taking sales away from competitors. However, retail competition at the local level is more complex. Depending upon the economic base of the regional economy, it is possible for an area’s population and disposable income to grow even while the country’s is slowing. For example, Phoenix and Las Vegas are like many Sunbelt communities where a vibrant local economy, combined with attractiveness to retirees and second-home owners, results in a growing sales potential for many retailers. A retailer could grow in such a venue without having to take sales away from competitor. Just the opposite would occur in areas such as Mansfield and Youngstown, Ohio, which are experiencing a counting economic slump. A retailer must always be on the offensive by studying the changing competitive environment, especially its local competition, and differentiating itself from that competition. Only by creating a differential advantage that is extremely difficult to copy in terms of time and money can retailer hope for continued success. Prime examples of such differentiation are category...
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...well in price. In the market, the performances of single organizations are critically swayed by market structure. Market structure consists of a Monopoly, Oligopoly, Monopolistic Competition, and Perfect Competition structure. These structures affect how market equilibrium is recognized. Monopoly: A monopoly is a firm that has no opponents in its business. It decreases output to increase revenue and increase profits. An example of monopoly is the U.S. Postal Services. Oligopoly: An oligopoly is an business with only a small number of organizations that can decrease the amount produced and increase revenues in the same manner a monopoly does. An example of Oligopoly is AT&T and T-Mobile. Monopolistic competition is an industry that covers numerous competing firms, which has a similar but somewhat different product. An example of monopolistic competition is wholesale retailers. Perfect Competition: Perfect competition: Perfect competition occurs the minute several small firms compete against each other. An example of a perfect competition is agricultural farms. History of Costco The entire history of Costco began with Sol Price and his son, Robert, opening the first Price Club warehouse on July 12, 1976 on Morena Boulevard in San Diego, California, thus giving birth to a very new concept: a retail warehouse club. The Price family placed Price Club Warehouse #1 inside a series of old airplane hangars previously owned by Howard Hughes; that warehouse, now known as...
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