Submitted to Submitted by42206(single diploma) – Amal Yusupov Each branch has its own market specificity – theproduction of various goods, a different industry of producers, the size ofenterprises, the features of technology, the composition and specificity of buyers,the specifics of competition.In microeconomics, the most typical market structures aregeneralized and the behavior of manufacturing firms is studied, leading to thereceipt of the greatest benefits for them-the receipt of the maximum profit. Atthe heart of these generalizations, specific recommendations are developed thathave important applied importance in the choice of the company’s behaviorstrategy in specific market conditions.
The object of the analysis of competition is the branch.For example, a group of competitors producing goods/services and directlycompeting with each other. The purpose of the analysis is to identify thecompetitive advantages of the firm and the choice of a competition strategy.There are four mainmarket structures: perfect competition, monopolistic competition, oligopoly andmonopoly.Perfect competition indicates a market structure, inwhich a plenty number of small companies compete against each other. Moreover, firmsdo not have a significant impact onpower of market.
Consequently, the manufacture generallyproduces the absolute l level of production, which in turn lead to market has many buyers and producers trading identicalproducts so that each buyer and seller is a price taker.Perfect competition relies on the following elements:· All small firms arefocused to maximize profits.· The goods whichoffered by the different sellers are largely the typical.· There are not specificpreferences between different sellers. It does not matter for the customer fromwhich firms buy the products.
· All firms have freeaccess and exit to the market.· There is perfectinformation and knowledge about homogenous products.At present, according to Nelson statistics (2017)3885567619 out of the global population 7519028970 people use the internet.Approximately 3.
9 billion internet users are both producers and consumers. Theabove mentioned example demonstrates that the internet is a market, where amyriads number of consumers/producers operate without any influence on marketpower which in turn lead to equal opportunities in this market, exemplifyingone of the features of perfect competition. Example of perfect competition. Internet related industries. Theinternet has a strong influence on perfect competition market due to the factthat the internet has made the way of comparison and check prices easily,quickly and efficiently (perfect information).
Consequently, selling any kindsof good on the internet through a service such as Alibaba, Aliexpress and E-bayis extremely similar to perfect competition. For instance, it is becoming moreand more popular to use the above mentioned online magazines to compare pricesof any types of product and buy cheaper ones.Like perfect competition online magazines namelyAlibaba, Aliexpress and E-bay relies on the following elements:· There also a largenumber of sellers.· Perfect informationand knowledge.
It is easy to compare the prices of goods.· There are nosignificant barriers to entry and to exit to the market. Monopolistic competition is a type of market structureconsisting of many small companies that produce differentiated products and freeentry to the market and exit from the market.
The products of these firms areclose, but not completely interchangeable, it means that there is a differencein price, features, branding and marketing.Bydifferentiating the product, the /monopolisticcompetitor reduces price elasticity. Raising the price, the monopolisticcompetitor is not deprived of all consumers, as it happens in the conditions ofperfect competition. The market is somewhat narrowed, but there remain thosewho steadily prefer the products of only this manufacturer. Monopolistic competition relies on the followingelements:· availability ofmany sellers and buyers (the market consists of a large number of independentfirms and buyers);· free access to andexit from the market (no barriers that keep new firms from entering the marketleaving the market);· Differentiated, variedproducts offered by competing firms.
Moreover, products may differ from oneanother in one or a number of properties (for example, in chemicalcomposition);· perfect awarenessof sellers and buyers about market conditions;· influence on theprice level, but in a rather narrow framework Example ofmonopolistic competition:One of the most convenientexample for the monopolistic competition is washing powder.There are quite a few different companies in Polandsuch as, Ariel, Tide, Ares, Perwoll, Lenor, Vizir, Perlux, Maxi trat, FF,Persil, Losk, Surf, Bio Power, Origami and so forth. As a result, for the production of newvarieties of detergent powders it is not required to create a large enterprise.Therefore, if firms producing powders will receive large economic profits, thiswill lead to the inflow of new firms into the industry. New firms will offerconsumers washing powder of new brands, sometimes not much different from thosealready produced in a new package, another color or designed for washingdifferent types of fabrics.
The market ofoligopoly is characterized by the presence on the market of a minimal number oflarge sellers, whose goods can be either homogeneous or differentiated. The entranceto the oligopolistic market is extremely difficult, the entrance barriers arevery high. Control of individual companies over prices is limited. Examples ofoligopoly can serve the automotive market, cellular communication markets,household appliances, metals. The peculiarity of the oligopoly is that thedecisions of the companies about the prices for the goods and the volumes ofits supply are interdependent. The situation on the market depends heavily onhow companies react when the price of a product changes with one of the marketparticipants.
Two types of reaction are possible: the first is reaction ,whenother oligopolists agree with the new price and set prices for their goods atthe same level (follow the initiator of the price change);the second ignoringreaction – other oligopolists ignore the price change by the initiating firmand maintain the previous level of prices for their products. Thus, for theoligopoly market, a broken demand curve is characteristic.Features and conditions of oligopoly: · the number ofsellers in the industry: small; · size of firms:large; · number ofcustomers: large; · goods: homogeneousor differentiated; · control over theprice: significant; · access to marketinformation: difficult; · barriers to entryinto the industry: high; · methods ofcompetition: non-price competition, very limited price.Cellular services today are the most profitable andrapidly growing segment of the telecommunications market in Russia. A smallnumber of sellers dominate the Russian cellular market, which is one of themost obvious example for oligopoly. The leading players here are MTS, Megafon,Beeline, Tele2.
A feature of the Russian cellular market is that it ischaracterized by a high level of competition. MTS successfully relies on theprice leadership strategy; Megaphone applies the strategy of minimum prices forservices; Beeline relies on a pricing strategy based on individual costs; Tele2provides the widest range of tariff plans at low prices. Monopoly occurs when an enterprise produces productsfor which there is no substitute.
The opposite of perfect competition is a puremonopoly – a market where only one firm operates, which by virtue of thiscircumstance can influence the market equilibrium and market price.Monopoly – a market structure that meets the followingconditions:· The release ofgoods throughout the industry is controlled by one seller of this product, whichmeans that the monopolist is the only producer of this good and personifies theentire industry.· The productproduced by the monopolist is special in its own way (unique) and has no closesubstitutes.· Monopoly iscompletely closed to enter the industry of new firms, therefore in theconditions of monopoly there is no any competitive struggle.
The most prominent example of a pure monopoly in theUnited States is the United States Postal Service (USPS). People have all heardthat the Postal Service is losing money. According to a report published in2014, the USPS lost a staggering $2 billion dollars in just 3 months, despitecutbacks in service. With such a glaring need for improved operations, youmight wonder why other businesses haven’t entered the market to compete withthe Post Office for first-class and standard mail delivery.
Moreover, it shouldbe noticed that the Post Office is a government-protected monopoly. The PrivateExpress Statutes established in 1792 gives the USPS exclusive rights to deliverletters for a fee, with very few exceptions. Letters that are designated to be ‘extremelyurgent’ may be delivered by other providers but even then, the Post Office isallowed to set the minimum price that the private competition must charge. Thisis an example of a legal barrier to entering the market.In conclusion, there arefour main kinds of market structure: perfect competition, monopolistic competition,oligopoly and monopoly. The perfect competition illustrates a market structure,where myriads of small firms contend with each other, while monopolisticcompetition also has a lot of small firms, which compete with each other withthe help of varied products.
Besides, Oligopoly demonstrates a marker structurewith small number of firms. Monopoly is the opposite of perfect competition, whereonly one firm controls all market.