Perfect competition can be described as competitive depends in part on how many suppliers are seeking the demand of consumers and with a new businesses can enter and exit a particular market In the long run. In a market economy, competition occurs between large numbers of buyers and sellers who vie for the opportunity to buy or sell goods and services. Perfect competition exists when there are so many people in the market, and other conditions are such, that no-one can influence the price, all other things being equal. Monopolistic competition is when a large number f firms sell closely related but not homogeneous products.
There are three ways: * There are many buyers and sellers * Entry and exit are easy * Firms take other firms price as given Oligopoly is when there are a few large suppliers, and business decisions affect each other. Monopoly is a business environment In which a single company, by controlling a specific supply of products or service, set prices, prevents other business from entering the market and controls the available supply of the product or service. Duopoly Is a market with tow sellers competing with each other with a homogeneous DOD.
The importance of market structure in an economy cannot be over emphasized as the effect of market structure on an economy, need to understand the value of this concept while dealing with others (buyers/sellers) in any market place. How market structure determine the pricing and output decision of business Taking pricing decision is one of the critical factors of business. To take the pricing decision a proper research needs to be carried out such as on the product availability, competitor’s pricing strategy, customer’s perceived pricing, customers willingness to ay the price of the product, demand factor etc.
The pricing decision influences the demand of the product In the market, the pricing strategy of the competitors, the profitably of the company and the most Important Is the customer decision on purchasing the product such as which brand product to but and which not, which will give the major satisfaction to the customer by rendering the higher value at the lesser price then the competitors The type of market structure a firm faces has some to make the maximum possible profit. In perfect competition, firms have no choice UT to charge the market price.
They are price takers in this market structure and must charge the same as everyone else. In all other market structures, firms have some control over their pricing. In oligopolies, they must pay attention to the pricing decisions of competitors, but they do not really need to do this in monopoly or monopolistic competition. However, in all of these cases, firms must (to maximize profit or minimize loss) produce the quantity were their marginal revenues equal their marginal costs. They must then charge a market clearing price–the price that ill clear exactly that quantity of their product.
Market structure does affect firms’ pricing decisions, but firms are never simply free to set their own prices if they want to maximize profits Task 2: Illustrate the way in which market force shape organization response using a range of example Market forces shape organizational responses through a very basic economic principle: Supply and demand. A company or organization will always try and predict demand for its product or service, and ensure that demand is met by implementing a cost effective strategy.
Market forces, by definition, can have an effect n that demand – and as such, will have an effect on the supply chain and strategy used by an organization. We could make a never ending list of market factors and examine how they impact supply and demand, but actually it’s safer to Just stick to the well-established concept of Porter’s Five Forces: 1 . The threat of entry: This threat of entry depends on the extent to which there are barriers to entry, these barriers are : a. Economics of scale: This requires knowing the optimum scale of operation and also knowing how damage is going to be to operate below that level.
It’s difficult to assess economics of scale but it depends for some extend on how large is the market and how many competitors are there. B. The capital requirement of entry: This is linked to economies of scale, requires involvement of the enormous capital for build societies to compete fully. C. Product differentiation: This will vary by industry and it changes over time, differentiation might result from having strong image, product or service quality, efficiency of distribution. . Access to distribution channel: Dominance of the market constructs the main barrier to access distribution Hansel and that is because the distributors will not accept alternative suppliers whenever there is a big company or organization has dominant their privileges. E. Cost disadvantages independent of size: It’s the phenomena of what is known as the “experience curve” which it’s about the early entries into the market and the experience gained. F.
Legislation or Government action: The government may intervene to prevent accompany acquiring another or a license issued by a government agency may be required to operate in certain industry such as mining and oil exploration. 2. The power of buyers and suppliers :- t is that margins will be low. Some indicators could be used by analyst of the extent of this power; these are:- a. Supplier power is likely to be high when; There is concentration of suppliers. Switching cost is high (from supplier to another). There is possibility for the supplier to integrate forward. ; The suppliers customers are of little importance. . Buyers power is likely to be high; When there is concentration of buyers. When there are alternative sources of supply. ; If the component or material cost is a high percentage of their total cost. ; there is a threat of backward integration. . The threat of substitutes:- When Substitution threat may take different forms; it might be from one product to another. Substitution may hold down or depress margins. It concerns with the danger that substitute may encroach upon an organization activities as well as the steps can be taken to minimize the risk of such substitution. 4.
The extent of competitive rivalry:- It reflects the concern of competitors with the degree of rivalry between themselves in their own industry. This degree of rivalry based on; ; The extent to which competitors in the industry are in Balance. ; A market in slow growth. High fixed cost. Importance of product differentiation. The condition or status of extra capacity. The degree of the exit parries to an industry. 5. The significance of identifying market segment:- As a part of structural analysis it becomes useful to indemnify how the market may be segmented and which competitors are concentrating on which segment.
Each of these have a tangible and obvious impact on supply and demand, Show the impact of the market structure on the organization Market structures can also be described as the number of firms in the market that produce identical goods and services. The market structure has great influence on the behavior of individuals firms in the market. The market structure will affect how firm price their product in the industry . For example in a competitive market the firms are price takers while the industry has the sole duty of price setting.
The market structure will affect the supply of different commodity in the market. When the competition is high there is a high supply of commodity as different companies tries to dominate the markets. A market structure will affect the barrier to entry for the companies that intend to Join that market. A monopoly markets structure has the biggest level of barriers to entry other factors that influence the firm behavior under a market structure are the efficiency. Firm will be more efficient in a competitive market while firms will be least efficient in a monopoly structure.
The level of competition in firms will be influenced by the market structure. A competitive market structure and a monopoly will have different levels of competition.. Task 3: Judge how business and cultural environment shape the behavior of a selected organization , Explain the behavior of organization in coping with the market structure . Ultra of society change and adjust over time, means policies, which were acceptable twenty years ago, may not be so today, as the value of society, attitudes to work, authority, equality and whole range of other important issues are shaped and changed by society at large.
In most cases individuals have a degree of loyalty to a certain groups either formal or informal of the org. They are involved in which affects directly or indirectly (trade unions, political groups, and professional bodies). Nature of the business The nature of a business influence attitudes of organization is often concerned with he market situation and the nature of the product: Market situation; The values of the people within the organization will also change when the external condition change.
