Introduction to basic market structure

April 17, 2013

Market structure can be categozed under four types;


a)      perfect competition

Under perfect competition, it consist of buyers and sellers that trades in uniform goods such as wheat, rice or financial securities. Buyer or seller does not have much effect in determining the market price. For instance, if seller increases the product price, buyer can easily go to another seller as buyer can obtain as much they need at the market price. In a purely competitive market, sellers do not spend much on marketing strategy as marketing research,   advertising, promotion play little or no role in creating the product awareness. Thus, sellers in these markets do not spend much time on marketing strategy. The best example for such market structure is in selling mineral water.

 b)       Monopoly

Under monopoly market structure, seller can raise the prices and at the same time still retain customers because the monopoly has no competitors. Seller is said to have the market power as they can influence the price whilst buyer is either has to pay for the product despite increase in price or do without it. The main character for such market is high barriers of entry. Barriers can be in terms of the control of scarce resources, increasing returns to scale and technological superiority. In some cases the government has created barriers to entry in order to control the market supply and price. Examples for such market are TNB and Telekom.

 c)       Olygopoly

In Oligopoly market structure there are only few firms that dominate the market. The market is said to be highly concentrated as it is only shared between a few firms. The best example for such market would be the petroluem industry where there only 3-8 players

d)      Monopolistic Competition

In Monopolistic Competition market there are many buyer and many sellers. The products are generally differentiated. Products sold can be sold under range of prices because sellers can differentiate the product they offered. This can be done through selling difference to different market segments.  Sellers also are freely to do product branding, advertising, and personal selling in order to set their offers apart from the rest. The best example for such market are offee, tea, cocoa, malt industry.

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