MARKETING MANAGEMENT
Market Definition:
An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods, services, or contracts or instruments, for money or barter.
Meaning
Markets include following methods-
(1) Determining price of the traded item,
(2) Communicating the price information,
(3) Facilitating deals and transactions, and
(4) Effecting distribution.
The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.
Types of Market
Generally, the market is classified on the basis of:
Place,
Time and
Competition.
· On The Basis Of Place, The Market Is Classified Into:
1. Local Market or Regional Market.
2. National Market or Countrywide Market.
3. International Market or Global Market.
· On The Basis Of Time, The Market Is Classified Into:
1. Very Short Period Market.
2. Short Period Market.
3. Long Period Market.
4. Very Long Period Market.
· On The Basis Of Competition, The Market Is Classified Into:
1. Perfectly Competitive Market Structure.
2. Imperfectly Competitive Market Structure.
Perfectly Competitive Market Structure :-
A market structure in which the following five criteria are met:
1) All firms sell an identical product;
2) All firms are price takers - they cannot control the market price of their product;
3) All firms have a relatively small market share;
4) Buyers have complete information about the product being sold and the prices charged by each firm; and
5) The industry is characterized by freedom of entry and exit.
Perfect competition is sometimes referred to As "pure competition".
Under Imperfect competition, there are different forms of markets like:
1) monopoly, (One seller)
2) duopoly, (Two sellers)
3) oligopoly (Market is controlled by a small group of firms.)
4) monopolistic competition.
The suffix poly has its origin from Greek word Polus which means many or more than one.
1) MONOPOLY, (ONE SELLER) :-
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity.
This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly and duopoly which consists of a few sellers dominating a market.
Monopolies are thus characterized by a lack of economic competition to produce the good or service, a lack of viable substitute goods, and the possibility of a high monopoly price well above the seller's marginal cost that leads to a high monopoly profit.
Examples of Monopoly:
• Indian Railways has monopoly in Railroad transportation
• State Electricity board have monopoly over generation and distribution of electricity in many of the states.
• Hindustan Aeronautics Limited has monopoly over production of aircraft.
• There is Government monopoly over production of nuclear power.
• Operation of bus transportation within many cities.
• Land line telephone service in most of the country is provided only by the government run BSNL.
2) DUOPOLY :-
A duopoly is a type of oligopoly where two firms have dominant or exclusive control over a market.
It is the most commonly studied form of oligopoly due to its simplicity. Duopolies sell to consumers in a competitive market where the choice of an individual consumer can not affect the firm.
The defining characteristic of both duopolies and oligopolies is that decisions made by sellers are dependent on each other.
Example of Duopoly:-
• Coca-Cola and Pepsi in the soft drink market.
• McDonald's and Burger King in the fast food hamburger market.
3) OLIGOPOLY (Market is controlled by a small group of firms.) :-
An oligopoly is a market form wherein a market or industry is dominated by a small group of large sellers (oligopolists).
Oligopolies can result from various forms of collusion that reduce market competition which then leads to higher prices for consumers and lower wages for the employees of oligopolies.
Oligopolies have their own market structure.
Examples of Oligopoly:
• Airlines industry
• Petroleum refining
• Power generation and supply in most of the parts of the country
• Automobile industry
• Long distance road transportation by bus. Many of there routes have buses operated by limited numbers of operators.
• Mobile telephony.
• Internet service providers
4) MONOPOLISTIC COMPETITION :
A type of competition within an industry where:
1. All firms produce similar yet not perfectly substitutable products.
2. All firms are able to enter the industry if the profits are attractive.
3. All firms are profit maximizes.
4. All firms have some market power, which means none are price takers.
INVESTOPEDIA EXPLAINS 'MONOPOLISTIC COMPETITION:
Monopolistic competition differs from perfect competition in that production does not take place at the lowest possible cost. Because of this, firms are left with excess production capacity.
Examples:
• Some restaurants enjoy monopolistic competition because of their popularity and reputation.
• Demand for some specific models of automobiles outstrips the production capacity. This creates situation of monopolistic competition.
• Similar monopolistic situation develops for some given periods for different capital goods product from time to time.
• Some newspaper in some places enjoy almost monopolistic position in spite of existence of other competitors.
• Manufacture of some high precision products, such as multi-cylinder diesel engine fuel injection pumps, enjoy monopolistic competition because their competitors are not able to match their quality.
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