marketing, structures of market

1. MARKET STRUCTURES
The structural condition of a market has an enormous
influence on supply, demand, pricing, efficiency, fairness and
resource allocation. Structures are defined by the degree of
competition they allow.
1) Monopoly is a market structure in which there is only one
producer/seller for a product. Therefore, monopolies are
price makers.
2) Oligopoly is a market structure where only a few firms
make up an industry. These firms have control over the
product's price.
3) Monopolistic Competition is a market structure
with many sellers; it occurs often in the real world.

2. Characteristics of a Monopoly
- Entry into such a market is restricted due to high
costs or other impediments, which may be economic, social
or political.
- Government can create a monopoly over an industry that
it wants to ​control, such as electricity.
- One entity has the exclusive rights to a natural
resource. For example, ​in Saudi Arabia the government has
sole control over the oil industry.
- A company has a copyright or patent that prevents
others from entering the market. Pfizer, for instance, had a
patent on Viagra.

3. - The product in a monopoly must be unique.
- If substitute products were available, the
monopolist would not ​be able to exert control
over the product's price (the essential point
of ​creating a monopoly).
- Because these circumstances are rare,
monopoly is not a common market
structure. Because it is the least competitive
market, it is not a desirable structure for
consumers or governments.

4. TYPES OF MONOPOLIES
All monopolies fall into 4 broad categories:
A) Natural - It is financially impractical, if not impossible, for multiple
companies to engage in the business. For example, if you had multiple
companies attempting to offer electricity, that would require multiple
power lines running to homes which is impractical and probably spatially
impossible.
B) Geographic - Only one company offers a particular good or service in
an area. For example, in a small town there may only one general store,
which has a monopoly on the goods it sells.
C) Technological - A good or service a company provides has legal
protection in the form of a patent or copyright.
D) Government - Government sometimes reserve a specific trade,
product or service for public agencies. For example, many times a
government agency will be in charge of water. Legal barriers are put up to
prevent other companies from competing in those areas.

5. Characteristics of Oligopoly
- There are high barriers to entry.
• Often, oligopolies are found in markets where the initial
capital outlay is very high, discouraging new firms from
competing - example: automobile manufacturing. This is a
common market structure in heavy industry.
- Pricing is interdependent so price competition is
rare.
• If two firms control roughly fifty percent of the market share
each, when one firm lowers its price it will gain a short
term market share advantage which will be immediately
offset as its competitor follows suit (as it must). Thus both
firms will end up with the same sales at a lower price,
making price competition impractical. Collusion and price
fixing, or price leadership by the leading firm in the
industry is common.

6. Characteristics of Oligopoly
cont'd
• The products in the market are
differentiated.
•Advertising is used for both product
competition (highlighting physical
differences in the products) and image
competition (highlighting the status value or
other ephemeral qualities of the product),
but not for price competition.

7. Characteristics of Monopolistic Competition
- Differentiated Products characterize this
market.
• For example, two different brands of soda
have different tastes and flavors but are still
sodas. These differences allow producers to
emphasize the strongest qualities of their
product and develop brand loyalty among the
consumers. Consumers are often willing to pay
a little more for their brand, but since there are
a large number of firms supplying the
products, and because the differences are not
extreme, the level of price control exercised is
minimal.

8. - Advertising is a key component in
creating brand loyalty.
• Product and Image Competition are very
important, but Price Competition is the
major factor influencing sales.
- There are few entry barriers and firms
enter and leave the market frequently.

9. Mad Men – The Carousel

17. TV Commercials and Advertising
• Answer these three questions
for each commercial while
viewing them in class. To be
collected.
• 1. Who is the target
audience?
• 2. What techniques are
being used?
• 3. Why is this commercial
effective?
• Links
• Miller Light 1
• Miller Time
70s Commercial
Spuds
Frogs
Wasssup
Univision

18. 3) Perfect or Pure Competition is a rare market structure in the real
world, but it represents the ideal model for market behavior and the
benefits of a market economy in general.
- There are many buyers and sellers, creating an ultra competitive
atmosphere based on price competition that maximizes the efficient
use of resources and responsiveness to consumer demands.
- The products are identical and so there are many substitutes.
There is no way to compete via product or image differences so price
competition is the sole means of increasing sales.
- There no barriers to entry for new companies, so producers in a
perfectly competitive market do not have any leverage over price. For
example, in a perfectly competitive market, should a single firm decide
to increase its selling price of a good, the consumers can just turn to
the nearest competitor for a better price, causing any firm that
increases its prices to lose market share and profits.