Structure-Conduct-Performance Paradigm of Strategy

Good Essays
Structure-Conduct-Performance
Definition:
The Structure-Conduct-Performance (S-C-P) paradigm of strategy assumes market structure would determine firm conduct which would determine performance.
Structure: The term structure in this model refers to industry structure, measured by such factors as the number of competitors in an industry, the heterogeneity of products, and the cost of entry and exit.
Conduct: Conduct refers to specific firm actions in an industry, including price taking, product differentiation, tacit collusion, and exploitation of market power
Performance: Performance in the S-C-P model has two meanings: the performance of individual firms and the performance of the economy as a whole. According to the structure-conduct-performance paradigm, the market environment have a direct, short term impact on the market structure. The market structure then has a direct influence on the firm's economic conduct which in turn affects its market performance. Therein, feedback effects occur such that market performance may impact conduct and structure or conduct may affect on the market structure.

Extra note on S-C-P model
The Structure-Conduct-Performance (SCP) paradigm is considered to be an important tool of contemporary industrial economics. It states that market performance depends on various elements of market structure, such as entry conditions, market concentration, and number and size of firms, as well as different forms of firm conduct and strategic behavior, such as capacity utilization, advertising and collusion. This study elucidates the basic ideas of SCP theory and reviews important studies pertaining to both developed and developing economies that are based on the SCP paradigm, while exploring the relevance of the SCP paradigm to the Indian industry. The relationship between market concentration and market performance in the Indian industry is discussed in depth, as is the

You May Also Find These Documents Helpful

  • Good Essays

    A Critique of the Structure Conduct Performance Paradigm (SCP) • The SCP approach draws on theories of market structure. These theories can be adapted to examine the behavior of firms and industries. However, these theories do not always give us exact relationships between structure, conduct and performance. • Structure can be measured by a multitude of indicators. Unfortunately, many economists tend to measure structure by concentration. This is primarily because data is easy to find in government…

    • 491 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    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…

    • 1874 Words
    • 6 Pages
    Powerful Essays
  • Satisfactory Essays

    Firm Conduct in Structure Conduct Performance (SCP) Competitive market analysis normally involves some reference to the number and size distributions of firms, the types of product produced, the extent to which established firms control prices, the ease with which firms can enter or exit markets, and the ease with which information flows between firms and consumers and the resulting conditions facing both of these groups. The seminal writers in the field of industrial organization were Edward…

    • 478 Words
    • 2 Pages
    Satisfactory Essays
  • Best Essays

    Market Structure Conduct Performance (SCP) Hypothesis Revisited using Stochastic Frontier Efficiency Analysis Seanicaa Edwards 204 Lloyd-Ricks, West Wing Dept of Agricultural Economics MSU, Mississippi State, MS-39762 Phone: (662) 325 7984; Fax: (662) 325 8777 E-mail: see3@.msstate.edu Albert J. Allen 215 G Lloyd-Ricks, West Wing Dept of Agricultural Economics MSU, Mississippi State, MS-39762 Phone: (662) 325 2883; Fax: (662) 325 8777 E-mail: allen@agecon.msstate.edu Saleem Shaik 1 215 E Lloyd-Ricks…

    • 6532 Words
    • 27 Pages
    Best Essays
  • Good Essays

    Structure-Functional Paradigm- is a framework for the structure of society. The structural-functional approach tells that all parts in the society works together in order to form a harmonious, sensible and stable society. This approach sees society as a macro-level orientation. Each and every component is interrelated and it is concerns with broad patterns that shape society as a whole. Larger Social institution such as population, education, economy, government play very important roles in shaping…

    • 476 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Important structural variables in structure conduct performance (SCP) Structural characteristics often change slowly and can be regarded as fixed over time. Government policies can alter industry structure. We can identify the following as some of the more important structural variables. • Concentration This refers to the amount of market power held in the hands of a few firms and is normally measured by the share of total industry sales, assets or employment controlled by the largest firms…

    • 480 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    INTRODUCTION Before discussing the structure, conduct and recent performance of the UK banking sector, it is useful to provide an insight in the recent global financial crisis caused by the sub-prime mortgage crisis initiated in the US and underline its effects on the banking industry in the UK. It all started with the collapse of the housing bubble in the US, as borrowers were no longer able to meet their financial obligations and as consequence many of these subprime mortgages became default and…

    • 1114 Words
    • 5 Pages
    Powerful Essays
  • Powerful Essays

    Strategy or Structure

    • 3398 Words
    • 14 Pages

    “What comes first? Strategy or structure?” Strategy is a chosen direction that you want to take your company or organization. To establish direction, a strategy must be explained to others. Strategy determines what the key activities and factors are in a business. That is, in addition to establishing a course for the future, one must get others on board for the ride. Most people find that there is a clear definition of the mission or purpose makes possible clear and realistic business objectives…

    • 3398 Words
    • 14 Pages
    Powerful Essays
  • Powerful Essays

    TAXATION OF INCOME TRUSTS IN CANADA: EFFECTS ON STRUCTURE, CONDUCT AND PERFORMANCE P. L. ARYA Abstract: Income trust as a business structure became increasingly popular in Canada since 2003. Income trust structure gave companies advantage of shifting their tax burden on to the investor. The investor, on the other hand, received steady and higher than the market rate of return on invested capital and also received capital gains in the form of ‘return of capital’. When large Canadian corporations…

    • 4157 Words
    • 17 Pages
    Powerful Essays
  • Best Essays

    the Third-Party Logistics Industry in China In Structure-Conduct-Performance Approach Introduction The structure-conduct-performance (SCP) paradigm, which laid the foundation for the development of industrial organization, is based on the analysis of empirical data and neoclassical economics theory. The fundamental logic of SCP is that the industry’s structure influences the conduct of incumbent firms, which in turn influences the performance for each firm. Despite the unidirectional effects…

    • 2347 Words
    • 10 Pages
    Best Essays