chapter 34: marketing and comopetitiveness
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Chapter 34: Marketing and Comopetitiveness
Markets and market structure• In general, four different market structures explain the broad
range of competitive environments in which most firms operate:• Monopoly – if there is little or no competition in providing a
particular product or service, and therefore few or no alternative supplies of it, monopolists can charge high prices and offer poor service
• Oligopoly – a market dominated by a small number of large businesses, rivalry between firms usually takes the form of ‘non-price competition’ such as special offers and advertising
• Monopolistic Competition – where a large number of firms are competing in a market, each having enough product differentiation to achieve a degree of monopoly power and therefore some control over the price they charge
• Perfect Competition – all the sellers produce homogeneous (identical) products and are ‘price takers’, meaning that they accept the ruling market price.
Characteristic Perfect Competition
Monopolistic Competition
Oligopoly Monopoly
No. and size of firms
Many and small Many and small Few and large One (in theory it’ more than 25% of market)
Nature of Product Identical Differentiated Differentiated Unique
Examples Foreign exchange market, stock market, fruit and veg
Hairdressers, plumbers, cafes and insurance companies
Supermarkets, banks, motor vehicle manufacturers
Nationalised industries (pre-1980s), Royal Mail (for letters)
Barriers to entry
None; it’s easy to enter or leave market
None; it’s easy to enter or leave the market
High barriers to entry
High barriers to entry
Effect on business
Price takers, cost-efficiency needed to survive, very low profit margins
Some control over price, benefits from marketing
Non-price competition, high overheads, high profit margins, collusion between firms
Price setter, can become complacent, power depends on importance of the product, high profit margins
Porter’s five competitive forces
• 5 features of markets that determine how a successful business might cope with its competitors
• Intensity of competitive rivalry• Threat of entry to the industry by new
competitors• Threat from substitute products or services• Power of suppliers• Power of buyers
Factors that determine whether a firm is competitive
• Investment in new equipment and technology• Staff skills, education and training• Innovation through investment in research and
development• Enterprise• The effectiveness of the marketing mix• Incentive schemes for staff• Improvements to operational procedures• Quality procedures• Financial planning and control
Methods of improving competitiveness
• Marketing
• Reducing costs
• Improving quality
• Staff training
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