MARKET STRUCTURE. COMPETITION.

Generally speaking, a market is a gathering of people for buying and selling, the place where they meet.

There are two typesof markets according to the character of concluded contracts, spot markets, where the buying and selling of goods, currency or securities are available for immediate delivery.

Futures markets where the buying and selling of goods, currency or securities are traded for delivery at a future date for a price fixed in advanced. Also, there are 3 types of markets according to their functions: commodity markets - are places where raw materials and manufacture date are sold for future delivery. Stock markets are markets where securities are bought and sold. Foreign exchange markets are markets where foreign currencies are traded. Market leaders. In most markets there is a definite market leader: the firm with the largest market share. This is often the first company to have entered the field, or at least the first to have succeeded in it. The market leader is frequently able to lead other firms in the introduction of new products, in price changes, in the level or intensity of promotions, and so on.

Market leaders usually want to increase their market share. There are three ways to do it: One way is to increase the size of the entire market. Another way is to try to find new users. At last they can also be expanded by stimulating more usage of products.Market challengers-the company with the second-largest market share. Market challengers can attempt to attack the leader, or to increase their market share by attacking various market followers. If they choose to attack the leader, they can use most of the strategies available to market leaders: product innovation, price reduction, improved services, distribution channel innovations and so on. Market followers concentrate on profitable niche products that are in some way differentiated from the products of larger companies. A market follower which does not establish their own niche is in a vulnerable position: if its product doesn’t have a unique selling proposition there is no reason for anyone to buy it. Small companies are generally flexible and can quickly respond to market conditions, their narrow range of customers causes problematic fluctuations in turnover and profit. At last, customers prefer to buy from big well - known suppliers. Porter’s theory. Porter argued that growth and diversification alone do not guarantee a company long – term success. Porter outlines five competitive forces at work in an industry: 1/rivalry among existing firms, 2/the threat of new entrants,3/ the threat of substitutes, and 4,5/the bargaining power of both buyers and suppliers.

Within these competitive constraints, Porter isolates three generic strategies that can give a company a competitive advantage : cost leadership; differentiation, or focus on a narrow market segment.

Classification of ms in terms of types and sizes the companies.Perfect competition

Perfect competition is an idealized version of market structure that provides a foundation for understanding how markets work in capitalist economy.

The arguments against market concentration, or at least against monopoly, are obvious:

Monopolists are always able to make excessive profits, and businesses facing no competition have no incentive to find ways to reduce costs.

Even the profits made by a natural monopoly will be temporary, because they are an incentive for entrepreneurs to discover and implement new low – cost technologies. An example here would be telecommunications.

According to this position, the government only needs to ensure that there is no monopoly over important inputs, because there will never be a monopoly of scientific or artistic genius or business ideas.

Monopsony- 1 buyer , many sellers. Duopsony- 2 buers Many sellers . Oligopsony few buers

Date: 2015-12-17; view: 1941