structure performance conduct module

The SCP paradigm assumes that the market structure determines the conduct of the organization. This conduct, in turn, is the determinant of market performance. Examples of market performance include efficiency, profitability and growth. The framework seeks to establish that certain structures of the industry can lead to certain kinds of conduct or behaviour which then leads to various types of economic performance. The SCP paradigm was developed through evaluation of empirical studies involving American industries. Theoretical models were not used to support the paradigm. The conclusion that was drawn from empirical studies was that market structure determined performance. This is caused by the belief that the laws of competition should not be based on behavioural models but rather on structural remedies. According to J.S. Bain who developed the paradigm in the 1950s, most industries became concentrated than necessary (Ferguson & Ferguson, 1994). In concentrated industries, there are high barriers to entry. New firms cannot enter these markets that easily.
The SCP approach has been subjected to criticism in the recent years. Some critics say that the relationships between structure, conduct and performance are more complicated than originally thought (Ferguson & Ferguson, 1994). Attempts are being made to link the framework back to the neoclassical theory. However, industrial organizations still use the SCP approach for analysis and as a tool in policy formulation. The SCP paradigm remains to be a basic tool used by industrial organizations in competition analysis.
Structure is defined as the components and characteristics of the various markets and industries in an economy. Structure also involves the different sectors of the economy. In the SCP approach, structure is described as the characteristics and relevance of individual markets operating within the economy (Papatheodorou, 2006). It provides a description of the environment in which organizations operate