Market structure is the physical characteristics of the market within which companies react. This means that there are different kinds of market structure based on how companies work together within a particular industry.
Location and product have the most to do with determining the market structure. There are four defined market types. The first market structure is called the perfectly competitive market. The second market is called a monopoly market structure. The third market is called monopolistic competition market structure.The final market is called oligopoly market structure.
Each market structure is different and both benefits and disadvantages to businesses. The perfectly competitive market is a market in which economic forces operate unimpeded. There are also factors that must occur for a truly perfect competitive market to exist. The first factor is that both buyers and sellers must be price takers. Price takers are those who take the price determined by market supply and demand as given.
The next factor of a perfectly competitive market is that there are a large number of companies.Companies need to be large enough to ensure what happens to one company will not influence the business of the other companies. Another factor to a perfectly competitive market is that no barriers exist for entry into the industry. This includes social, political and economic barriers being nonexistent.
Products in a perfectly competitive market must be identical, absolutely no distinguishing factors. Complete information must be accessible to everyone in the market to facilitate a perfectly competitive market.Information like prices, products and available technology must be made available by the companies to other companies and individuals. The final factor in securing a perfectly competitive market is that selling firms are profit maximizing entrepreneurial companies. This ensures that the companies make decisions to maximize profit regardless of other income.
The monopoly market structure is one in which one company makes up the entire market. Monopoly market structures normally occur when there are barriers to enter the market that make it impossible for other ompanies to enter the market. Patents are one barrier that does not allow other companies to manufacture or sell similar or identical products. Sometimes sociological barriers may occur like customs or traditions of an area.
An example of this would be if an American company wanted to expand into the global market and did not take the local customs into account. The American company would then be barred by the community to enter the market. Natural barriers can occur when there is no way for another company to duplicate the monopoly product or service.Technological barriers can also occur especially when the market can only support one company.
The monopolistic competition market structure is when there are many companies selling differentiated products and there are few barriers to enter the market. In a monopolistic competitive market there are several selling companies. These selling companies have differentiating products. There are also multiple dimensions of competition including price and products. Easy entry into the market is also required for companies. The fourth market structure is called oligopoly.
In an oligopoly market there are only a few companies and companies explicitly take other company’s likely response into account. In an oligopoly market companies become mutually interdependent. There only a few companies in an oligopoly market causing each company’s decisions to affect other companies in the market. Strategic planning is increasingly difficult in an oligopoly market due to the constant need to consider other companies reactions in the decision making process. A company that entered into a market in June of 2008 is Kudler Fine Foods.Kudler Fine Foods is a company that titles themselves as a local upscale specialty food store.
Kudler has three locations within the San Diego metropolitan area. Kudler Fine Foods offer a bakery and pastry department, fresh produce, fresh meat and seafood department, cheese and specialty dairy products, condiments and packaged food along with fine wines from around the world. Their mission statement is about providing the best product and customer service possible giving the customer a delightful and pleasing shopping experience. Kudler Fine Foods uses a strategic plan to be successful.Their strategic plan is in their mission statement.
They want to offer high quality products from around the world and have knowledgeable customer service that gives the shopper a delightful experience. This plan intertwines with their marketing strategy. By advertising they have excellent customer service and products they are hoping to attract not only the average shopper but the higher class shoppers as well. Kudler performs well in its market because it continues to make a profit. Kudler uses customer surveys to determine its success. These surveys are filled out by the customer to explain how their shopping experience was.
The surveys created and given by Kudler include questions about the store itself, merchandise and the customer service. Customers can let Kudler Fine Foods know how convenient the store hours are, how appealing the atmosphere and decor of the store is and if the store provides a good selection of products. Merchandise is assessed by customers answering questions about the selection, value and displays. Customer service is gauged by customer responses about the store workers knowledge and level of courtesy. The customer can also tell about their overall experience.
Using surveys allows the company to help identify its strengths and weaknesses from the customer’s perspective. The company can also look at input from employees and determine the best course of action. Kudler just needs to remember that they need to please their customers and employees to remain successful. Based on the definitions put forth earlier in the paper the author would classify the Kudler Fine Foods business as being in a monopolistic competition market structure. There are many stores that sell identical and similar products to Kudler Fine Foods.
Kudler and its competition sell differentiated products which is another factor of a monopolistic competitive market. There are multiple dimensions of competition between Kudler and its competition. Kudler and its competition must use price, products and service to win over customers and earn a profit. There is an easy entry into the industry with very few barriers. Kathy Kudler the founder of Kudler Fine Foods was able to create and open her store within six months. Kudler can benefit from the competition in its market structure by making its employees stay knowledgeable and friendly.
Without competition the employees may not feel any pressure to perform to the best of their abilities because the customer cannot go somewhere else. On the hand competition is a disadvantage because the customer can go elsewhere if they are not satisfied. Competition also helps determine the prices at Kudler which can either help maximize or minimize their profit. Kudler would have to keep their prices near their competition in order to attract customers.
If competition leads to higher process than necessary the profit would be higher than expected.If the competition leads Kudler to price items lower than the cost then Kudler’s profit would decrease. Since Kudler Fine Foods touts itself as providing high quality merchandise from around the world they must ensure their products are what they say they are. Long-term profitability for Kudler Fine Foods looks promising because they offer a quality product and delightful shopping experience for their customers.
In retail the customer must feel that they are getting a value for their money and be treated nicely to encourage them to return to the store. As long as Kudler stays true to its mission statement it should remain profitable.As Kudler fine Foods looks to the future it needs to maintain its competitive and strategic planning. Continuing to ask the customer how the business is doing is an excellent way to get first-hand information about employees’ overall performance and the merchandise selection. However, over time there may be less people turning in surveys on a consistent basis.
Many people fill out a survey once and think that is enough information and their time for the business. Employee’s input should also be taken into account by the company. Customers are important but so are the employees providing the service to the customers.Marketing is important to ensure that the proper vision of the company is presented to the public. Advertising should also be targeted at the customers that the company wants to attract like the higher class and the gourmet cook in any class. By staying focused on what the vision and mission is of the company Kudler Fine Foods should remain profitable.
There are other stores in the San Diego metropolitan area that sell fine foods. Many grocery stores have fine foods mixed in with their regular food allowing for more exposure among the regular customer.Wal-Mart is a company that has grown because it focuses on providing the customer with a one stop shop with affordable prices and excellent customer service. By appealing to many people Wal-Mart has been able to become successful and spread across the country. Market structure can dictate who and what is able to enter the market. A company needs to be aware of the market structure it exists and make decisions that will allow it to be successful in its market structure type.
Kudler Fine Foods is one example of a thriving business in a monopolistic market structure.
