The Best Market Structures For Kudler Organization (Essay Sample)

The Best Market Structures For Kudler Organization
Student’s Name
Institution
Introduction
Development in the theoretical studies in the business industry has shown how competition and regulation gets its way in effecting the performance in the industry. This interaction can result to a variety of structure that will depend on the rules that are set up to operate and control the regulatory mechanism. As such, these interactions have an effect in how the business can operate and how it can be able to meet up with the competition within its setting. There are quite a number of problems that come up between regulation and competition. These problems are as a result of how these two aspects interact and this result to what many researchers have termed as Market structure. Market structure can be defined as those market characteristics that have a significant effect on the behavior as well as the integrations of sellers and buyers. It can also be defined as related rather connected market characteristics that include the relative strength and the number of sellers and buyers and the extent of collusion between them. It also includes the competition forms, product differentiation level not to mention the ease of exit and entry into the market. This gives four basic types of market structures; Perfect competition, oligopoly, monopoly and monopolistic competition. This paper aims at analyzing all this market structures and evaluating the deference between them. At the end of it all the paper is aimed at looking at the competitive strategies employed by Kudler fine food Virtual organization to see how they are alive to the market structure and how they affect the long term profitability of the firm.
Types of market structures
Perfect competition
This is I rare form of competition in the business industry, but it is quite important because it gives the firm the chance to analyze those characteristics that are similar to pure competition. Perfect competition can be defined as the situation where the market has a number of firms that are producing and selling products that are identical, but the products are not much enough for the market and thus they are not able to influence the prices. This situation occurs when each producer has a demand of output that is perfectly elastic.
There are major features that characterizes a perfect market
1 Many sellers. In this kind of market it is assumed that the number of sellers is so high to the extent that one seller cannot be able to make a decision that can impact on the overall price in the market. In this case, there are so many sellers, but each seller is so small as compared to the entire market to the extent that even if they change the quantity of the product they sell they cannot be able to bring an impact to the market price. Each seller sells a very small quantity of the product that in case one opts out of the market there will be no impact on the total supply of the product sold to the extent of influencing the price. This is to say that a single firm does not have the capacity to influence the price in the market by merely increasing the quantity of the products they sell (Jain & Khanna. 2008).
2 Products are homogenous. In a perfect competition the products sold by every firm are identical. In this case, the product sold by this seller are exactly the same to those sold by the other seller thus the buyer has no reason to consider the products of one seller to the other one. In this kind of market therefore, a firm is just merely a price taker and cannot be a price maker.
3 Firms in this kind of market are just price takers. No firm operating in a perfect competition environment has the capacity to change the price or dictate the price. They just take the price as it comes. In this case, the price is determined by the industry and each seller will just take the same price.
4 There is free exit and entry into the market. For this kind of market, there are no barriers that can prevent a firm from entering into the market. At the same time, there are no barriers that will block a firm from exiting the market.
Monopoly
This is a kind of market that is dominated entirely by one seller. This can be well explained with the following examples. You consume electricity produced by only one agency which is the State electrical board, you travel using a railway that is owned by the government or in your town there is only a single company that deals with cooking gas. All this instances give a perfect example of monopoly. This kind of market is always characterized by a single seller that controls the entire market. Secondly, the product that the seller provides is unique and thus no other seller can produce it. Thirdly, the firm is the sole price maker and has control over it because he has control over the quantity that is to be supplied (Vogelsang, 1990). Finally, in such a market the entry and exit are quite blocked.
The barriers to entry into a market that is monopolized include the economies of scale. An economy of scale is one of the major barriers to entry into a market that is monopolized. This is to mean that the lowest cost of units, the low price of units is determined by the existence of a very few number of large firms or one firm. The dominance of one large firm that is efficient in service delivery and products makes it quite hard for new firms to venture into the industry. Legal barriers also exist in the form of licenses and patents.
Monopolistic competition
This is kind of market where there is more than one producer of a product, but every producer is producing the same product but with a slight difference. The slight difference is what brings about the issue of monopolistic. A good example of this is clothing stores and the fast food restaurants. The difference in the product can come in the form of different brands but the same product, different shape, color and even quality. As well, it can be manifested in the form of a different trade mark or different service or facilities that are offered to the consumer (Aumann & Hart, 1992).
The major characteristic of such a market is that there are a lot of firms, but each of these firms holds a percentage in the entire market. There is also a differential in the product and this marks a difference between this and a pure competition market. As well, there is easy of entry and exit into such kind of a market.
Oligopoly
This exist in the case that there are a few big firms that produce a differentiated or homogenous product and have dominance in the market. This is common especially in the gasoline and automobile industry. In this kind of model, the price set up by one company should consider the price that is set by the other company. In this situation a company can enter into a contract and increase the price, but if there is no agreement, then an increase in the price can lead to loses.
The major characteristics of this model are that; there are few, but large firms that must watch, considers the response, reaction and decision of the rivals over the outputs, prices and even advertisements. Entry into such a market is also very had since there are huge capital investments required, economies of scales and other barriers that will make it hard to get into the market(McEachern, 2005).
The Kudler organization in the market
Kudler Fine Food Virtual Organization has a greater chance of developing products that are competitive in the market and those that are needed by its customer. Most of the customers in this locality are quite alive to the fact that they should get quality services ...