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Market Structures
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RECORDED ON
Dec 01, 2010
SOURCE
University of Phoenix, 2010
CATEGORY
ECO561
SPEAKER
Talent
So, do you want to know the key to my success? I develop mobile phones. I’ve survived in
the market for so long because I’ve found ways to increase and sustain my profits. How did
I do that? Well, I had to understand the market structure my business was operating in and
who my competitors were.
Okay. There are four main market structures that describe the competitive market for any
industry. An industry can be in one of these structures for a long time—or, if a product is
successful and attracts a lot of competition, the structure can change rapidly. As my
company moved through the different structures, I had to change the way I responded.
It seems so long ago now…when I invented the very first mobile phone, this is what it
looked like: Oh, and, um…here’s the battery:
University of Phoenix
It weighed in at about 20 pounds…a real heavyweight…and needed a daily recharge. But
back then, this was state-of-the-art. Nobody had ever used a telephone that worked
outside a building.
TAGS
At first, I had the market all to myself: a monopoly.
ORGANIZATION
maket structure, barriers to entry,
product differentiation, pricing
strategy, monopoly, oligopoly,
pure competition, monopolistic
competition, commoditization
Now, when you have a monopoly on a new product, it’s fairly easy to make a profit
especially if you develop something that’s unique and useful. The hardest part is balancing
supply and demand. I quickly discovered that lots of people wanted the phone—emergency
workers, journalists. . . executives—all willing to pay a fair price for this new gadget. So I
raised prices to match; but not too much—I kept a close eye on what the market could
handle. I streamlined the production process and brought costs down, which increased my
profits even more.
Technology was changing rapidly and I wanted to stay on the cutting edge, so I kept
innovating and refining my designs and got several patents to keep a strong hold on the
market; but, soon enough a few competitors came along and riled things up.
At first, my competition had a phone nearly identical to mine, and I could easily keep tabs
on what they were doing and react to their strategies. With these few competitors, I was
now in a market structure called an OLIGOPOLY. My company no longer controlled the
market, so I had to be more clever and compete for customers.
Suddenly, one competitor began dropping prices. That caught me off guard and I lost a lot
of customers. So I dropped my prices and won a lot of customers back, but my profits took
a hit; I know it hurt my competitors too.
Then I took a big gamble and nudged prices up a bit. Soon enough, my competitors raised
their prices too.
Finally, things steadied out and we all kept our prices—and our profits—a little more stable.
But that didn’t last long.
Technology was changing in the blink of an eye. Mobile phones were getting smaller,
faster, and more inventive. It wasn’t long before more competitors joined the market,
offering phones with all kinds of eye-catching features to stand out from the rest.
Once again the market structure had changed and I was now working in a
MONOPOLISTIC COMPETITION, where many companies compete by making their
products slightly different from their competitors’.
Now I had to work harder to get and keep customers. I couldn’t keep track of all my
competitors—there were too many! So I had to find ways to let the world know why my
© University of Phoenix 2010
Market Structures
Page 1
VIDEO TRANSCRIPT
product was the best. I did it through mass-market advertising. It got me more customers,
but it cost a lot and ate into my profits.
Today, in the mobile phone market it seems like the price of a product is the only thing that
matters—not the different functions or features. This is COMMODITIZATION—when many
companies are selling basically the same thing. The competition is still intense, but it’s all
based on the prevailing price in the market.
This market structure is called PURE COMPETITION.
It’s tougher than ever to make a profit; we can’t lower our prices any more. And even if we
did we wouldn’t get more business because the market now determines the price. Some of
the companies that got crazy and slashed prices are no longer in business.
But I can still squeeze out enough profit to keep me in business if I bring my costs down by
increasing efficiency, reducing downtime, and improving quality control.
I still try to innovate and develop new products to create new markets – products like smart
phones and other cutting-edge devices that could give me another shot at creating a
monopoly. That’s where the biggest profits are for a businessman like me.
But I also know that markets are dynamic and can move quickly to a new structure.
I wouldn’t be here today if I hadn’t been paying attention to market structure and the
strategic opportunities at each one. That’s what helped me make the right decisions to
attract new customers, increase profits, and stay in business.
Remember, as a future business professional, it’s important to study the structure of the
market and know which environment your business is operating in. This is the key to your
success—it was the key to mine.
© University of Phoenix 2010
Market Structures
Page 2
This is due Friday. I need a 100-125 word response for each question.
References if possible.
Question 1 When using nonprice barriers, you might encounter ethically
challenging situations. How can an organization maintain market power
and align with current values, legal requirements, and ethical standards?
Locate a recent news, journal, popular press, reputable blog, or scholarly
article pertaining to this topic and describe the ethical dilemma the
organization faces. Reflect on how ethics and current values affect current
business decisions.
Question 2 Market Structure Video (I attached the transcript for this video)
This is due Saturday. I need a 100-125 word response for each
question. References if possible.
Question 1 When using nonprice barriers, you might encounter ethically
challenging situations. How can an organization maintain market power
and align with current values, legal requirements, and ethical standards?
Locate a recent news, journal, popular press, reputable blog, or scholarly
article pertaining to this topic and describe the ethical dilemma the
organization faces. Reflect on how ethics and current values affect current
business decisions.
Question 2 Market Structure Video (I attached the transcript for this video)