Market Structures

Topics: Marketing, Monopoly, Pricing Pages: 11 (4118 words) Published: November 2, 2007

Market Structures
University of Phoenix

Market Structures
In this paper, we will discuss the four market structures of Monopoly, Oligopoly, Monopolistic Competition and Pure Competition. We have identified four companies that operate in each of these market structures: Salt River Project, The Coca Cola Company, Russ's Market, and Columbia House. In each market structure we will describe the pricing and non-pricing strategies of the companies operating in that market. We will also examine Quasar, a notebook computer company. They entered the market with a new product and we will explain the progress from one market segment to the next as the lifecycle of the product changes and the number of suppliers and consumers also that changed along with it. Monopoly Market Structure

The concept of monopoly arises when one firm is the sole producer and marketer of a product or service. According to McConnell and Brue (2004) monopolies come in being when a single firm is the sole producer of a product that has no close substitutes. Monopolies are characterized by a single seller, no close substitutes, price maker, blocked entry and non price competition. The market structure that Salt River Project called SRP operates in is monopoly. SRP is the sole generator of electricity in the Phoenix metropolitan area. The SRP website (2007) state that the company established in 1937 generates hydro, thermal and gas operated electricity. The Phoenix area is specifically assigned to SRB by the government and no other company competes with it. The company uses different pricing strategies to deal with its customers. The strategies are penetration pricing which is designed to initially capture a customer by charging low prices, (Koh, 2005). They also use price matching which matches the price charged by other monopolies like APS, geographical pricing which results in charging different prices in different geographical areas and differentiated pricing in which they charge higher prices in summer because of excessive demand due to the high temperature and lower prices in the winter due to low demand, (Strategic Pricing, 2007). The company also uses the following non-price strategies to stimulate demand. According to Contact (2007) a monthly newsletter of SRP, the company states that customers can pay the same amount every month irrespective of the period and this is calculated by the average monthly payment of the previous year. The company also has energy saving devices like wind power, landfill gas energy, geothermal generation that uses water which is converted into steam and land fill gas energy. SRP is also environmental friendly and embarks on tree planting, archeology sponsorship, bird protection, air quality promotion and incentives to become a member of the company by having an account in SRP Credit Union which entitles customers to vote for directors and policies that have effect on the operations of the company. The company provides efficient services to its customers but since it is a monopoly in the Phoenix area, its effectiveness cannot be adequately assessed in terms of price since there are no competitors. Oligopoly Market Structure

Oligopoly is a market structure characterized by a small number of large firms that dominate the market, selling either identical or differentiated products and having significant barriers to entry such as patents, resource ownership, franchises, start-up cost, brand name recognition and decreasing average cost. Oligopolistic industries are "price makers" but like the monopolist can set its price and output levels to maximize its profits (McConnell and Brue, 2004, p.467). Since there are few firms in the market for an oligopolistic industry, there is mutual interdependence when means that "each firm's profit depends not entirely on its own price and sales strategies but also on those of the other...
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