The diIIerent market structures have diIIerent view points with respect to competition.

In
monopoly, competition is not Iierce as the monopoly Iirm has an advantage over other Iirms.
This advantage may be in terms oI product, process, technology, etc. In case oI monopolistic
competition, all the Iirms try to achieve this advantage so that they could be more successIul than
their competitors. Firm`s operations in oligopoly and duopoly market structures also aim Ior
sustainable competitive advantage to survive in the market.
In the short run, a Iirm`s competitiveness derives Irom pricing or application attributes oI the
products but in the long run, a Iirm`s competitiveness derives Irom its ability to develop and
grow at low cost and at a Iaster pace than its competitors. The most important point about
competitive advantage is that management must be able to integrate corporate wide technologies
and processes into competencies that provide a solid ground to the individual business so that it
could adopt quickly to the ever changing opportunities. Core competence has been regarded as
an eIIective way to help the organisation in the task oI restructuring its products, markets,
management, organisational setup and technology in the complex and dynamic environment.

In all the market structures, price determination is an important strategy to win competition but
it is the core competence concept which Iocuses on the preservation oI Iirm`s existing superior
skills. For instance, a monopolist would always like to remain a monopolist by continuously
improving and enhancing the product or service because oI which it has hold over the market.
On the other hand, in monopolistic competitive market every Iirm tries to compete through new
ideas and strives to develop core competencies. With respect to core competencies, Prahalad and
Hemal provide the Iollowing key issues:

1. A core competence is one that provides access to various markets. For example, a Iirm
can operate as a monopolist in one business and can operate in a monopolistic
competitive market at the same time in other business.
2. A core competence should make a signiIicant contribution to the perceived customer the
beneIits oI the end product.
3. A core competence should be diIIicult Ior competitors to initiate. For instance, a Iirm
entering a monopoly market may acquire some oI the processes that comprise core
competency but it will not be easier to duplicate monopolist`s pattern oI internal
coordination.
In any market, sustainable competitive advantage plays a major role and core competencies are
nurtured so as to meet the turbulent environment and improve and grow by grabbing the right
opportunity at the right time.

Apart Irom core competence, the possible strategic alternative to have sustainable competitive
advantage Ior diIIerent market structures are as Iollows:

Monopoly Stability is the best strategic alternative. For strengthening the position, vertical
integration (either Iorward or backward) will be most eIIective. II any competitor enters, mergers
and acquisitions may be the appropriate option.

Perfect Competition- The Iirm should not go Ior advertising or price diIIerentiation.
Concentration strategy will improve the economics oI scale and Iirm`s sustainable competitive
advantage will increase.

Monopolistic Competition- Advertising, quality control and branding are the appropriate
measures. Strategic alliances with respect to price may work. DiIIerentiation strategy may work.
DiversiIication strategy may Iurther enhance the competitive strength.


Duopoly and Oligopoly- Wide variety oI options are available. They may go Ior diversiIication,
integration, mergers, etc. They may look into promotional strategies Ior better competitive
advantage.




Market Structure:

a market is a gathering oI people Ior buying and selling, the place where they meet.
According to the character oI concluded contracts there are two types oI markets: spot markets
and Iutures markets. In the spot market you can buy or sell goods, currency or securities that are
available Ior immediate delivery. Futures market means the buying and selling oI these things Ior
delivery at a Iuture date Ior a price Iixed in advance.
We also can deIine several types oI markets according to their Iunction:
O Commodity markets/exchanges
O Stock markets/exchanges
O Foreign exchange markets
Commodity markets are the places where raw materials and some manuIactured goods are
bought and sold Ior immediate or Iuture delivery. Main terminal markets are situated in London
and New York. By the word 'terminal market I mean markets dealing mainly in commodities
that will be available in the Iuture (Iutures) rather than goods that are available immediately
(they are called actuals, by the way). Most terminal markets are outside the countries that
produce the goods.
Deals on some commodities like, Ior example, teas are concluded at the auctions where dealers
are supposed to inspect every lot Ior sale. But in Iact they deal with certified stock which
means a commodity stock which had been checked and acknowledged proper Ior delivery under
the Iutures market contracts. The actuals and Iutures deals are concluded by way oI daily
callovers where the dealers are represented by commodity brokers who buy and sell raw
materials or manuIactured products Ior a Iee in a commodities market.
The second type oI markets according to their Iunction is stock markets - these are markets
where stocks and shares are bought and sold under Iixed rules, but at prices controlled by supply
and demand. The main idea oI stock exchanges is to enable public companies, the state and local
authorities to attract capital by way oI selling securities to investors. These markets can be called
primary iI they trade new issues oI securities, or secondary iI they trade existing securities.
Frankly speaking new issues make up an insigniIicant part oI the market turnover. The
development oI the secondary market provides Ior liquidity and reducing the risks oI
investments.
Foreign exchange markets are the markets where Ioreign currencies are traded. Market makers
acting on the Ioreign exchange markets are either dealers (Iirms hired by commercial banks and
acting as principals buying and selling currencies Ior a proIit Ior themselves) or Ioreign
exchange brokers, who buy and sell Ior clients and act as gobetweens thereIore.
The is such a concept as free markets, where prices are allowed to rise and Iall according to
supply and demand, without prices being Iixed by governments (this situation is called clean
Iloating`). Countries with such a policy tend to remove all exchange controls this set oI
restrictions imposed by a government on buying and selling Ioreign currencies. However, the
Central Banks oI various counties, acting on behalI oI their governments, inIluence to some
extent the market situations resorting to the Exchange Rate Mechanism, which aim is to stabilise
exchange rate Iluctuations.
Foreign exchange deals can be concluded either on spot currency markets with immediate
delivery or on Iorward exchange contract markets.
All I said above concerned the diIIerent types oI markets, and now I`d like to say a Iew words
about companies acting there.
In most markets there is a deIinite market leader: the Iirm with the largest market share (that`s a
company`s sales expressed as a percentage oI a total market). This is oIten the Iirst company to
have entered the Iield, or at least the Iirst to have succeeded in it. The market leader is Irequently
able to lead other Iirms in the introduction oI new products, in price changes, in the level or
intensity oI promotions and so on. And despite the Iact oI being already the leader, very oIten
these companies want to increase their market share even Iurther, or at least to protect their
current market share. One way oI market expanding is to stimulate more usage, nowadays, Ior
instance, Ior many Iamilies one TVset isn`t enough.
In many markets, there is oIten also a distinct market challenger, with the secondlargest
market share. Market challengers can either attempt to attack the leader, or to increase their
market share by attacking various market followers who concentrate on market segmentation:
Iinding a proIitable niche (a small and speciIic market segment) in the market that is not satisIied
by other goods or services and that oIIers growth potential or gives the company a diIIerential
advantage because oI its speciIic competencies. Market Iollowers present no threat to the leader.
A market Iollower who doesn`t establish its own niche is in a vulnerable position: iI its product
doesn`t have a unique selling proposition` there is no reason Ior anyone to buy it. Although
small companies are generally Ilexible and can quickly respond to market conditions, their
narrow range oI customers causes problematic Iluctuations in turnover (a business`s total sales
revenue) and proIit. Furthermore they are vulnerable in a recession when, largely Ior
psychological reasons, distributors, retailers and customers all preIer to buy Irom big, well
known suppliers.
II we look at the ways diIIerent Iirms operate we`ll see that under some market Iorms Iirms have
no control over price, in others they have the power to adjust price in a way that adds to its
proIits. So the last theme I`d like to cover speaking on this topic is diIIerent market structures.
Economists distinguish them according to
1) how many Iirms they include
2) whether the products oI the diIIerent Iirms are identical or somewhat diIIerent
3) how easy it`s Ior new Iirms to enter the market.

There are Iour main market structures with perIect competition at one extreme and pure
monopoly at the other. In between are hybrid Iorms called monopolistic competition and
oligopoly that share some oI the characteristics oI both perIect competition and monopoly. So
let me explain what all oI them mean.
Perfect competition exists when products are homogeneous, and there are many Iirms too small
to have any inIluence on the market price, and Iirms can easily enter and exit the industry.
And the situation where even one producer can aIIect the price oI a good by increasing or
withholding output is called imperfect competition.
Monopolistic competition exists when many producers oI slightly diIIerentiated products are
able to sell them at well above their marginal cost.
The core oI the argument Ior competition is that as long as competition exists in markets no one
producer or group oI producers can aIIord to abuse power by charging too much or by selling
shoddy goods Ior Iear that consumers might turn away Irom them to buy Irom another producers.
In line with that argument one oI the government`s tasks is to keep competition alive and
Iunctioning.
Russian economy nowadays is a long way Irom being perIectly competitive. There are hints oI
competition, but monopolistic tendency is more tangible.
A monopoly as a market in a particular product in which a single producer can Iix an artiIicial
price. The opposite situation, where there is only one buyer is described as monopsony.
The situation where there are only a Iew sellers is called an oligopoly. This Irequently arises in
manuIacturing industry because oI economies oI scale continuously declining unit costs as
production increases and the cost barriers oI entering an industry (in general, barriers to entry
are economic or technical Iactors that make it diIIicult or impossible Ior Iirms to entry a market
or compete with existing suppliers). One more barrier Ior new comers is cartel where
companies in the same industry collaborate by coordinating prices, sharing out markets, etc. In
many countries this is illegal, under antitrust laws.
One type oI oligopoly is called a dominant-firm ologopoly in which a market leader can
indicate its preIerred price to smaller competitors.
The situation in which there are only a small number oI relatively large buyers in the market is
an oligopsony.
Some monopolies are legal. For example, investors are granted patents that give them
monopolistic privileges Ior a certain length oI time. There are also natural monopolies, such as
water, gas, electricity and telephone where it may not be economic to have a large number oI
competing companies laying cables or pipes to the same consumers. Consequently, utility
companies such as these are Irequently granted monopolies, but with prices regulated by the
government.
In theory there are three types oI monopolies: state monopoly, natural monopoly and legal
monopoly. In practice one more types is added buying goods Ior speculative purposes. It
appeared due to the Iact that some companies got the total control under some goods. This
activity is supposed to be illegal in many countries.
There are much arguing against and in favour of market concentration. The arguments
against monopoly are obvious: monopolists are always able to make excessive proIits, and
businesses Iacing no competition have no incentive to Iind ways to reduce costs. The only
common argument in Iavour oI monopoly concerns patents: it`s right that investor should be
granted a temporary monopoly as a reward Ior innovation or discovery.
Although some people argue that any barrier to competition will inevitably lead to ineIIiciency, a
counter argument is that erecting barriers Ior example, by process innovation, product
diIIerentiation, persuasive advertising, or pricing policy in order to be successIul and to make
competitors less successIul, is a normal part oI rivalry and competition. According to this view,
market concentration arises naturally Irom a Iew successIul Iirms growing larger as a result oI
increased eIIiciency, innovation, and economies oI scale in production, distribution, R`n`D,
capital Iinancing and so on.
Some people even argue that monopolies are always temporary and consequently not a problem.
For example, although entrepreneurs introduce new products and techniques and open up new
markets, their proIits are soon competed away by rivals. Even the proIits made by a natural
monopoly will be temporary, because they are an incentive Ior entrepreneurs to discover and
implement new lowcost technologies. An example here would be telecommunications.
According to this position, the government only needs to ensure that there is no monopoly over
important inputs, because there will never be a monopoly oI scientiIic or artistic genius or
business ideas.

competition varies widely in diIIerent market structures. PerIect competition and monopoly are the
two extremes. At one end, we Iind intense competition. While, no competition exists in case oI
monopoly. A monopolist produces a product which is distinct and which cannot be produced by any
competitor. He himselI will set the price at which he will sell his output. The demand curve oI the
Iirm and the industry are the same. The monopolist Iirm controls both the price and supply oI the
commodity. Depending upon the categories oI customer, the monopolist may decide diIIerent prices
in discriminating monopoly.
In monopolistic competition, each seller has an independent priceoutput policy. Patent rights, quality
diIIerentiation, packing, advertising, etc. are used to diIIerentiate product. Each individual Iirm
enjoys some monopolistic power due to product diIIerentiation. No seller is big enough to inIluence
the market price.
In duopoly, the two sellers in the market compete with each other. They respond to each other`s
strategies. This competition normally leads to strategic alliance as they start Ieeling that their survival
depends on cooperation and not on conIrontation.
In oligopoly, the Iirms go Ior advertising, product diIIerentiation, quality improvement, etc.
Competition amongst them bring the element oI interdependence. There may be two possible
scenarios:

One in which an oligopolist eliminates a Iew other competitors.

Alternatively, there may be collusion amongst competing Iirms. MRTP laws regulate collusions as
this would result in higher price.




structure fo||ows strategy

1hose Lhree slmple LlLle words have sparked much debaLe over many years as Lhe converse Lhe ldea
LhaL sLraLegy follows sLrucLure has been promoLed as valld as well So whlch ls lL?

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operaLlons 1oo many levels Lo Lhe hlerarchy and Lhe good ldeas of Lhe folks ln Lhe Lrenches who can
wlLh auLhorlLy oplne on Lhe processes ln whlch Lhey're engaged are muffled lf noL enLlrely losL 1oo
flaL an organlzaLlon and you have conLrolled chaos aL besL anarchy aL worsL (noLe LhaL sLrucLure ls parL
of Lhe organlzaLlonal conLexL ln whlch we vlew processes a componenL of envlronmenL")

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LogeLher mulLldlsclpllne pro[ecL Leams for new producL launches Cn Lhe oLher hand an organlzaLlon
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sulLed for Lhe demands of hlghly repeLlLlve processes dellverlng unlform ouLpuLs 1he dlvlslonallzed
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rarely collaboraLe (eg a properLy casualLy dlvlslon a llfe and healLh dlvlslon eLc) and besL
characLerlzes larger organlzaLlons LhaL have wlLh Llme requlred selfconLalned dlvlslons Lo address Lhe
unlque needs of a cerLaln cusLomer base 1he maLrlx form mlghL come abouL as a maLLer of necesslLy Lo
faclllLaLe growLh ln a younger smaller organlzaLlon one LhaL ls perhaps more focused Lhan lLs
dlvlslonallzed counLerparL (eg personal auLo lnsurance only) and worklng Lo creaLe a nlche for lLself
1hese cases supporL Lhe noLlon LhaL lndeed sLrucLure follows sLraLegy

8uL anoLher perspecLlve Lurns Lhls ldea on lLs head Lhe noLlon LhaL sLraLegy follows sLrucLure Loo ls
valld when you conLemplaLe Lhose organlzaLlons LhaL Lake lnvenLory" of Lhelr avallable resources and
respond by lnLroduclng new producLs or breaklng lnLo new markeLs as a nn of such
avallablllLy and Lhe sLrucLure ln whlch Lhey operaLe ln Lhls lnsLance sLraLegy follows sLrucLure