Report On Marketing Structure

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This is a solution of Report On Marketing Structure in which we discuss  the basis of various relevant data as well as examples with the intention of comparing.

Report On Marketing StructureIntroduction

The objective of this report is to discuss on the basis of various relevant data as well as examples with the intention of comparing as well as contrasting the characteristics and performances of the monopoly and monopolistic competition. Monopoly can be defined as the marketing planning in which there exists a single entity for the product or service offering, with that dominant being the only entity for meeting the demands of that commodity in the market (Perloff, 2008). Some of the characteristics which can be observed for this type of market structure include the absence of any economic competition for producing the specific commodity as well as the absence of any practicable substitute good. Also the entity operating in this structure is benefited through a high monopoly profit which is achieved through a high monopoly price that is significantly higher than the marginal cost of the firm. This market structure can be observed in various global industries which will be referred later.
However, this is often confused with monopolistic competition which is significantly different than the previous marketing strategy.  Monopolistic competition is the type of market structure in which there exists a number of entities producing and selling commodities which are different from other products available in the market. This difference in quality makes the products unique and hence it can be said that none of the products in this particular market structure are substitute of each other. This factors give the producers in this market a monopolist-like power which means that these entities can decide the pricing of their own products without considering the pricing strategy of the other companies in the same space (Pindyck, 2003).
In this report, the author would be trying to delineate as well as differentiate between these two types of market structure on the basis of various theory as well as the examples of these types of markets.

Report On Marketing StructureAbstract

The objective of this report is to discuss on the basis of various relevant data as well as examples with the intention of comparing as well as contrasting the characteristics and performances of the monopoly and monopolistic competition. Monopoly can be defined as the market structure in which there exists a single entity for the product or service offering, with that dominant being the only entity for meeting the demands of that commodity in the market. However, this is often confused with monopolistic competition which is significantly different than the previous market structure.  Monopolistic competition is the type of market structure in which there exists a number of entities producing and selling commodities which are different from other products available in the market.

Report On Marketing StructureMonopoly

In this section, a detailed discussion on the monopoly market structure will be done. The definition of monopoly can be given as the market structure in which there exists a single entity for the product or service offering, with that dominant being the only entity for meeting the demands of that commodity in the market. In the pure monopoly the market has a single entity producing as well as sealing the necessary commodity. However, this happens quite rarely in view of the fact that almost all the current practical market conditions will have some or the other substitute for the commodity produced and sold. However, this is available to be achieved in case there is some regulatory binding on the market which facilities a single entity producing as well as sealing the necessary commodity. Some of the characteristics which can be observed for this type of market structure include the absence of any economic competition for producing the specific commodity as well as the absence of any practicable substitute good. Also the entity operating in this structure is benefited through a high monopoly profit which is achieved through a high monopoly price that is significantly higher than the marginal cost of the firm. Despite being fairly rare, this market structure can be observed in some of the global industries (Perloff, 2008).
There are various sources of monopoly powers, which if achieved by the seller and the producer of the commodity in the market, can be utilized for the purpose of attaining monopoly and thus the high level of profit earned by the entity. Some of these sources of monopoly powers include the following:
Artificial Intelligence:  There can be scenarios in which a single entity in the market attains monopoly through a high level of technological excellence which is not possible to be emulated by the companies in the same industry within a short span of time.
Market Barriers incusing the Legal or Economic Barrier: When the entry of new entities in the market is restricted through the legal or the economic barriers, it may be possible for the company already present in the market to achieve a monopoly like power. These barriers also include the barrier imposed by the government of the country. There are various examples from the developing economies including China, India etc. where some industries are closed and only the Government entities can run entities present in those markets. This is an example of monopoly (Pindyck, 2003).
There are few other factors as well which lead to monopoly power for the specific entity in some industry. These factors include requirement of huge capital expenditure, control of natural resources, absence of substitute commodities etc.

Characteristics of Monopoly

Following are some of the key characteristics of monopoly:
Economies of scale
One of the major characteristic of monopolies is the reducing costs for the entity for production of relatively large range of commodities. These reducing costs along with the huge initial capital expenses required by the entities for entering the market provide the entities with the monopoly with an advantage against the potential entrants of the market. Hence it is possible for the monopolies to cut down on the pricing with the help of its diminishing marginal cost to outrival the new entrant which will have a high operating costs and thus a higher pricing. Also the industry size relative to the minimum efficient scale can lead to a lack of feasibility of the market for the companies and thus decreasing the number of entities which can effectively compete in the market. E.g. in case the market is big enough for supporting a single entity of minimum efficient scale, the other entities or the new entrants of the market space will operate at less than MES size. This leads to an average production cost for the other companies which will be significantly higher than that of the dominant company. This also enhances the chance of monopoly (Perloff, 2008).
Product differentiation and brand loyalty
Due to the presence of a single brand in the monopoly market the product differentiation tends to be on the lower side and as a result the quality of the product also tends to go down. Hence the product differentiation is at minimal for such entity. Also the brand loyalty is minimal for this due to the absence of any other brand.
Lower costs for an established firm
As has been mentioned due to the relatively large range of commodities the monopolies can achieve a reducing costs for production of the commodities. These reducing costs along with the huge initial capital expenses required by the entities for entering the market provide the entities with the monopoly with an advantage against the potential entrants of the market. Also in case the market can support a single entity of minimum efficient scale, the other entities or the new entrants of the market space will operate at less than MES size. This leads to an average production cost for the other companies which will be significantly higher than that of the dominant company. This also leads to the lower cost for the already established firm (Ayers, 2003).
Ownership/control of key factors
The control which the established firm already develops and exercises on various market factors e.g. natural resources, technological developments, research and development etc. give the monopoly an important edge over the other new potential entrants.
Ownership/control over outlets
Similar to the market factors, the control which the established firm already develops and exercises for the outlets for the market reach can also add to the monopoly powers for the entities (Pindyck, 2003).
Legal protection
In case the entity is legally protected by the government of the country or the legal regulations, there can be development of monopoly in the industry. The legal protection can also lead to entry barrier for the companies in the industry as imposed by the government of the country. There are various examples from the developing economies including China, India etc. where some industries are closed and only the Government entities can run entities present in those markets. This is an example of monopoly.
Mergers and takeovers
In the monopoly structure there are change management and acquisitions which are used by the established firm for ensuring that the new companies do not become significant in the scheme of the overall things in the market.
Aggressive tactics
In monopoly, the established entity utilizes aggressive strategies a lot of times for making sure that the monopoly continues in the industry.
Monopolistic or Imperfect Competition
Monopolistic or Imperfect competition, is the market structure in which a high number of firms exist in the industry with significantly differentiated commodity offerings. These entities have some element of control over the price of the commodities of them in view of the fact that that they are able to differentiate their product in some way from their rivals. Hence the commodities which are produced in this type of market includes despite being close are not perfect substitutes (Pindyck, 2003). Monopolistic competition is the type of market structure in which there exists a number of entities producing and selling commodities which are different from other products available in the market. This difference in quality makes the products unique and hence it can be said that none of the products in this particular market structure are substitute of each other. This factors give the producers in this market a monopolist-like power which means that these entities can decide the pricing of their own products without considering the pricing strategy of the other companies in the same space (Ayers, 2003).
Also the entry and the exit from this type of industry is relatively easy apart from the few low barriers for entry and exit. The consumer and producer knowledge which exist in this type of market is imperfect.

Some of the type of industries which can have

  • Restaurants
  • Solicitors
  • Private schools
  • Insurance brokers
  • Hairdressers
  • Estate agents

Characteristics of Monopolistic or Imperfect Competition
One of the major characteristics of the monopolistic or imperfect competition is the independence for pricing strategy of the firms in the market. All the firms in this type of market sets the pricing independently in view of the fact that they consider their products differentiated. The firms also do not consider to what effect its decision may have on competitors (Ayers, 2003).
The market power also remains with all the entities to some degree which means the control which the firms have over the pricing strategies. It is possible for the monopolistic firms to increase prices without losing all the customers. The firm can also decrease the pricing without engaging into a price war.

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