types of market structures

TYPES OF

COMPETITIONIntroduction to Business

2/2009

MARKET STRUCTURE

PERFECT

MONOPOLISTIC

OLIGOPOLY

MONOPOLY

PERFECT

• NO• SAME

• MANY• EASY

Ease of Entry

COMPETITORS

CONTROL OVER PRICE

PRODUCTS

PERFECT

MONOPOLISTIC

• YES• DIFFERENTIATED

• MANY• EASY

Ease of Entry COMPETITORS

CONTROL OVER PRICE

PRODUCTS

MONOPOLISTIC

OLIGOPOLY

• YES• SAME-

DIFFERENT

• FEW• DIFFICULT

Ease of Entry COMPETITORS

CONTROL OVER PRICE

PRODUCTS

OLIGOPOLY

MONOPOLY

• YES ( under

LAW regulation)

• -

• NONE• DIFFICULT

Ease of Entry COMPETITORS

CONTROL OVER PRICE

PRODUCTS

MONOPOLY

A monopoly is a company

that dominates and controls

a specific industry.

QUESTIONS & ANSWERS

From Wal-Mart ‘s case study

1. What industry Wal-Mart

is competing in?

GENERAL

MERCHANDISE

RETAILING

INDUSTRY

2. Which market structure should Wal-

Mart be considered?

Monopolistic• There are a lot of retailers (competitors) like Wal-Mart in the market.

• It is easy to be general merchandise retailers.

• Wal-Mart can control over the price by dumping it down while

others(small retailers) cannot.

• The products are differentiated by product testing tactics to

let the customers perceived that they are The new, improved Great

Value products and redesigning Great Value packaging graphics

although it may be still similar or same.

According to

theory

Wal-Mart

might be

considered as

“Oligopoly”

Wal- Mart is the 1st in

retailing market.

In a world where most

retailers are categorized as

having a monopolistic

competition market

structure, Wal-Mart Stores

Inc. appears to have an

oligopoly market structure.

Nevertheless, because

there are far too many

retailers to deal with, then

they also have a

monopolistic competition

market structure.

Regardless, Wal-Mart would

rather have it this way

because it has not hurt them

at all by having competition.

The other general merchandisers cannot exist.

The customers buy the cheaper products at only Wal-Mart.

More convenience More services

The other small retailing businesses can’t cut their price like Wal-Mart

( cannot compete with Wal-Mart’s dumping )

When the prices at Wal-Mart are much lower.

3. Which determinant of demand/supply is affected causing change in

demand/supply of products in the general merchandise industry? How? Explain

and draw the diagram to illustrate the effect.

PRICE

DETERMINANT

4. As the result of Wal-Mart’s action, which determinant of

demand/supply is affected causing change in demand/supply of

superior products? How? Explain and draw the diagram to illustrate

the effect.

LEVI top brands had declining sales

Levi hooked up with Wal-Mart to produce a low cost jeans.

The price pressures meant that Levi Strauss has ceased all manufacturing operations.

Resells Asian-made jeans under its trademark. Its quality is far inferior to the original one.

They're cannibalizing sales of Levis top brands.But the new jeans are cheap.

EXAMPLE OF EFFECTS from Wal-Mart to Superior Products

Wal-Mart has

squeezed suppliers till

they scream, and

forced them to move

jobs abroad to keep

cutting costs