Each branch has its own marketspecificity – the production of different goods, a various industry ofproducers, the size of enterprises, the features of technology, the compositionand specificity of buyers, the specifics of competition.
Inmicroeconomics, the most typical market structures are generalized and thebehavior of manufacturing firms is studied, leading to the receipt of thegreatest benefits for them-the receipt of the maximum profit. At the heart ofthese generalizations, specific recommendations are improved that haveimportant applied importance in the choice of the company’s behavior strategyin specific market conditions.The object ofthe analysis of competition is the branch. For example, a group of competitorsproducing goods/services and directly competing with each other. The purpose ofthe analysis is to identify the competitive advantages of the firm and thechoice of a competition strategy.There are four main market structures: perfectcompetition, monopolistic competition, oligopoly and monopoly.
Perfectcompetition indicates a market structure, in which a plenty number of small companiescompete against each other. Moreover, firms do not have a significant impact onpower ofmarket. Consequently, the manufacture generally produces the absolute l levelof production, which in turn lead to market hasmany buyers and producers trading identical products so that each buyer andseller is a price taker.Perfectcompetition relies on the following elements:· All small firms arefocused to maximize profits.· The goods whichoffered by the different sellers are largely the typical.· There are not specificpreferences between different sellers. It does not matter for the customer fromwhich firms buy the products.
· All firms have freeaccess and exit to the market.· There is perfectinformation and knowledge about homogenous products.At present,according to Nelson statistics (2017) 3885567619 out of the global population7519028970 people use the internet. Approximately 3.9 billion internet usersare both producers and consumers. The above mentioned example demonstrates thatthe internet is a market, where a myriads number of consumers/producers operatewithout any influence on market power which in turn lead to equal opportunitiesin this market, exemplifying one of the features of perfect competition.
Example of perfectcompetition. Internetrelated industries. The internet has a strong influence on perfect competitionmarket due to the fact that the internet has made the way of comparison andcheck prices easily, quickly and efficiently (perfect information). Consequently,selling any kinds of good on the internet through a service such as Alibaba,Aliexpress and E-bay is extremely similar to perfect competition. For instance,it is becoming more and more popular to use the above mentioned onlinemagazines to compare prices of any types of product and buy cheaper ones.Like perfectcompetition online magazines namely Alibaba, Aliexpress and E-bay relies on thefollowing elements:· There also a largenumber of sellers.· Perfect informationand knowledge.
It is easy to compare the prices of goods.· There are nosignificant barriers to entry and to exit to the market. Monopolisticcompetition is a type of market structure consisting of many small companiesthat produce differentiated products and free entry to the market and exit fromthe market. The products of these firms are close, however not completely interchangeable, it means that thereis a difference in price, features, branding and marketing.By differentiating the product, the /monopolistic competitorreduces price elasticity.
Raising the price, the monopolistic competitor is notdeprived of all consumers, as it happens in the conditions of perfectcompetition. The market is somewhat narrowed, but there remain those whosteadily prefer the products of only this manufacturer. Monopolisticcompetition relies on the following elements:· availability ofmany sellers and buyers (the market consists of a large number of independentfirms and buyers);· free access to andexit from the market (no barriers that keep new firms from entering the marketleaving the market);· Differentiated, variedproducts offered by competing firms. Moreover, products may differ from oneanother in one or a number of properties (for example, in chemicalcomposition);· perfect awarenessof sellers and buyers about market conditions;· influence on theprice level, but in a rather narrow framework Example of monopolistic competition:One of the most convenient example for themonopolistic competition is washing powder.There arequite a few different companies in Poland such as, Ariel, Tide, Ares, Perwoll,Lenor, Vizir, Perlux, Maxi trat, FF, Persil, Losk, Surf, Bio Power, Origami andso forth. As a result, for the production of newvarieties of detergent powders it is not required to create a large enterprise.
Therefore, if firms producing powders will receive large economic profits, thiswill lead to the inflow of new firms into the industry. New firms will offerconsumers washing powder of new brands, sometimes not much different from thosealready produced in a new package, another color or designed for washingdifferent types of fabrics.The market of oligopoly is characterized by thepresence on the market of a minimal number of large sellers, whose goods can beeither homogeneous or differentiated. The entrance to the oligopolistic marketis extremely difficult, the entrance barriers are very high. Control ofindividual companies over prices is limited. Examples of oligopoly can servethe automotive market, cellular communication markets, household appliances,metals.
The peculiarity of the oligopoly is that the decisions of the companiesabout the prices for the goods and the volumes of its supply areinterdependent. The situation on the market depends heavily on how companiesreact when the price of a product changes with one of the market participants.Two types of reaction are possible: the first is reaction ,when otheroligopolists agree with the new price and set prices for their goods at thesame level (follow the initiator of the price change);the second ignoringreaction – other oligopolists ignore the price change by the initiating firmand maintain the previous level of prices for their products. Thus, for theoligopoly market, a broken demand curve is characteristic.Features andconditions of oligopoly: · the number ofsellers in the industry: small; · size of firms:large; · number ofcustomers: large; · goods: homogeneousor differentiated; · control over theprice: significant; · access to marketinformation: difficult; · barriers to entryinto the industry: high; · methods ofcompetition: non-price competition, very limited price.Cellularservices today are the most profitable and rapidly growing segment of thetelecommunications market in Russia. A small number of sellers dominate theRussian cellular market, which is one of the most obvious example foroligopoly.
The leading players here are MTS, Megafon, Beeline, Tele2. A featureof the Russian cellular market is that it is characterized by a high level ofcompetition. MTS successfully relies on the price leadership strategy;Megaphone applies the strategy of minimum prices for services; Beeline relieson a pricing strategy based on individual costs; Tele2 provides the widestrange of tariff plans at low prices. Monopolyoccurs when an enterprise produces products for which there is no substitute. Theopposite of perfect competition is a pure monopoly – a market where only onefirm operates, which by virtue of this circumstance can influence the marketequilibrium and market price.Monopoly – amarket structure that meets the following conditions:· The release ofgoods throughout the industry is controlled by one seller of this product, whichmeans that the monopolist is the only producer of this good and personifies theentire industry.
· The productproduced by the monopolist is special in its own way (unique) and has no closesubstitutes.· Monopoly iscompletely closed to enter the industry of new firms, therefore in theconditions of monopoly there is no any competitive struggle.The mostprominent example of a pure monopoly in the United States is the United StatesPostal Service (USPS). People have all heard that the Postal Service is losingmoney. According to a report published in 2014, the USPS lost a staggering $2billion dollars in just 3 months, despite cutbacks in service.
With such aglaring need for improved operations, you might wonder why other businesseshaven’t entered the market to compete with the Post Office for first-class andstandard mail delivery. Moreover, it should be noticed that the Post Office isa government-protected monopoly. The Private Express Statutes established in1792 gives the USPS exclusive rights to deliver letters for a fee, with veryfew exceptions. Letters that aredesignated to be ‘extremely urgent’ may be delivered by other providers buteven then, the Post Office is allowed to set the minimum price that the privatecompetition must charge. This is an example of a legal barrier toentering the market.
In conclusion, there are four main kinds of market structure: perfectcompetition, monopolistic competition, oligopoly and monopoly. The perfectcompetition illustrates a market structure, where myriads of small firmscontend with each other, while monopolistic competition also has a lot of smallfirms, which compete with each other with the help of varied products. Besides,Oligopoly demonstrates a marker structure with small number of firms. Monopolyis the opposite of perfect competition, where only one firm controls allmarket.