Market Structures and Competitive Strategies

• Market structures and competitive strategies exist in firms.
• The main types of market structures are perfect competition, monopolistic competition, oligopoly, and monopoly.

Perfect Competition

• There are many buyers and sellers.
• All parties initiate the buying and selling mechanism.
• The market price is determined by supply and demand.
• Individual farmers do not set the market price
• A firm will lose all sales if it raises its price.
• Firms face a horizontal demand curve at the market price.
• Key characteristics include a large market, homogeneous products, low transportation costs, perfect information availability, low government regulations, and the freedom to enter or exit the market.

Monopolistic Competition

• Many firms compete in the market.
• Each firm offers similar but slightly differentiated products, in quality, features or branding.
• Firms have some control over prices due to product differentiation.
• It combines aspects of perfect competition and monopoly.

Oligopoly

• A small number of firms operate and control the majority of the market share.
• There are few large firms.
• Products can be homogeneous or differentiated.
• There are high barriers to entry due to economies of scale, high startup costs or control over essential resources.
• Firms have a large degree of control over pricing.
• Firms are interdependent, and the actions of one can affect others.

Doupoly

• A type of oligopoly.
• Two firms have dominant or exclusive control over a market.
• Most of the competition occurs directly between these two firms.

Monopoly

• A single firm dominates the market and is the sole producer of a product or service.
• This single firm controls the entire market.
• Unique products do not have close substitutes.
• There are high barriers to entry due to factors like high capital costs or legal restrictions.
• Firms can set prices to maximize profit.
• There is potential for inefficiency and higher prices due to lack of competition.

Monopsony

• A single purchaser or buyer exists, giving them great power.
• There is one dominant buyer and many sellers.
• The buyer has significant power to dictate prices.
• Sellers have few alternatives to sell goods or services and have less bargaining power.
• Buyers can purchase goods or labor at a lower price than possible in a competitive market.

Competitive Strategies

• Long-term plans are developed to gain a competitive advantage over rivals in the market
• Cost leadership is to offer the lowest price.
• Differentiation is to offer unique products or services.
• Focus or niche marketing is when firms target a specific market segment.
• Product leadership is when innovative products are prioritized.
• Customer intimacy is to build strong relationships with customers.
• Operational excellence is to deliver products efficiently.

Competitive Strategies Depending on Market

• In perfect competition, firms strive to be the lowest-cost producer.
• These firms need to optimize production processes to lower costs and increase profitability.
• In monopolistic competition, firms develop unique features, quality, or brand.
• With similar products, these firms invest in advertising and branding.
• In oligopolistic markets, firms may form informal agreements to control prices and market share.
• Otherwise, a firm may act as the price leader.
• Product differentiation differentiates products or services in ways that do not involve lowering prices.
• The monopolist can set prices at whatever level maximizes profits, but must continue to innovate and manage public perception to maintain power.
• Monopsonies should build strong, long-term relationships with suppliers to ensure quality, reliability, and stability. This can be achieved through collaboration, consistent feedback, and co-developing solutions