The market structure of an industry is the deciding force for how a business runs its operations. Strategies that would excel in a monopoly structure would surely fail in a perfect competition. Market structures vary from industry to industry and define what practices are acceptable. They determine the price of goods, availability of products, barriers to entry and number of firms in competition. To illustrate the effects of market structure on an industry, an analysis of The Ridge Tool Company and the tool manufacturing industry will be done.
The market structure that most closely resembles the tool manufacturing industry is the perfect competition market structure. This is because there are a large number of firms, interchangeable goods and low barriers to entry. According to D Woodsmall, there are 42 large firms that manufacture tools and countless small firms that manufacture tools for the American Market. Considering that most tools produced are for common tasks for various repair and construction activities, most goods produced are homogenous. Any tool produced for a particular task or situation will likely be interchangeable with another produced for the same task. With most
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The steel used by Ridgid is more durable than their Chinese made counterparts in most cases. In the case of the pipe wrench, inferior wrenches tend to slip and mar the materials and misshape the pipe, rendering the pipe wrench useless. The Ridgid pipe wrench is machined properly to ensure that it grips the pipe, while minimizing slippage; this keeps the pipe in the proper shape, allowing for more turns. It is this product differentiation that keeps Ridgid profitable year after year. In addition to product differentiation, Ridgid takes advantage to barriers to entry to maintain its position in the
In order to fully understand the island of Tap’s market for corn, the broad term market structure must be defined. Market structure exists as the makeup of companies operating in a specific market. The two basic types of structures remain as perfectly competitive markets and monopoly markets. These exist as the two most basic and opposite forms of market structure, many other forms exist in between these two. Applying these two forms of structure to the corn market in Tap, results in different outcomes of both quantity of corn produced and price at which corn sells. The examination and application to Tap’s corn market will correspond with the two forms.
Also, the competition between existing players in this industry is high. There are about 619,000 metal enterprises in the USA in 2005 (IBISWorld, 2007).There are many companies that produce different kinds of metal products in the market. Besides, the bargaining power of buyers is high because product difference for the buyers of the metal products is small. It is not easy to differentiate the quality of one metal product from another. In addition, the cost of switching for the buyers is low. The number of substitutes of metal products is also high thus the buyers have great bargaining power.
ToolsCorp is not exempt from the need of profit. Financial objectives should be outlined and include increasing income, profit increases, maximizing of investment utilization, and decreasing costs (Dodangh, Mojahed, and Nasehifar, 2010). However, their financial plan goes beyond that of just numbers. It seeks to compensate its employees and investors to allow them to live life. Through continuous quality improvement, the company seeks to reach Six Sigma standards to reach for zero defects and waste, which will pass savings onto the customer. It will also provide a quality product that will create loyalty through repeat sales (Ridley, 2014).
Black & Decker (B&D) is a global manufacturer and the world’s largest producer of power tools, power tool accessories, electric lawn and garden tools, and residential security hardware. The company was a pioneer in innovation and development of power tools and has used that position to build strong brand names that enjoy worldwide recognition. Key Causes for Poor Performance in the Professional-Tradesmen Segment The reason B&D has performed poorly in the professional-tradesmen segment is due to the positioning of the B&D brand in this segment. Poor positioning of the brand has resulted in customer confusion and negatively impacted customer perception of the brand in terms of being a quality product. B&D Performance in the Power Tool Industry Overall Any adjustments to B&D’s strategy in the professional-tradesmen segment must not have an adverse impact on their success in the consumer or professional-industrial segments. Therefore, a thorough understanding of the needs of each segment will be important in building a viable strategy to challenge Makita in the professional-tradesmen segment, while continuing to maintain share in the other two segments. _Consumer _Segment Professional-Tradesmen Segment This category consists of professionals who are buying a product for their own use on a job site. Their livelihood depends on the quality and performance, as well as the reflection on their skills that using a particular tool brings from others on the job site. Since they are purchasing their own tools, this segment needs this high quality performance at a reasonable price. However, since Makita and Milwaukee are both priced higher than B&D and are seeing greater success in this category, tradesmen are clearly willing to pay more for a product they perceive will be more effective for their use. Key needs for this market segment include: Performance and quality - {text:change} does the job needed to be done, doesn’t break down, produces high-quality results and more efficiently gets the job done. Reliability and durability - does the job every time and can be used for an extended period of heavy continual use. Safety Support from the Manufacturer – if the product breaks or performs poorly, access to replacement parts and service will be key in maximizing performance up-time.
Behind every product manufactured there are parts, fasteners, gloves, welds, holes that are drilled, and maybe a headache or two. These are all products that are sold and manufactured by the companies W.W. Grainger and Fastenal Company. Both of these companies are in the top ten in revenue for the industrial supply industry and I just so happen to work at one of them, that being Fastenal Co.
The 5-Force Industry Analysis first introduced by Michel Porter, Harvard Business School professor, a quarter-century ago. This theory examines the suppliers, buyers, product substitutes, existing firms’ rivalry and new entrants in a firm’s product market.
Firms may be categorized in a variety of different market structures. Perfectly competitive, monopolistically competitive, oligopolistic,
There are many industries. Economist group them into four market models: 1) pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2) Pure monopoly is a market structure in which one firm is the sole seller a product or service like a local electric company. Entry of additional firms is blocked so that one firm is the industry. 3)Monopolistic competition is characterized by a relatively large number of sellers producing differentiated product. 4)Oligopoly involves only a few sellers; this “fewness” means that each firm is affected by the decisions of rival and must take these decisions into account in determining its own price and output. Pure competition assumes that firms and resources are mobile among different kinds of industries.
There are four major market structures; perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition is the market structure in which there are many sellers and buyers, firms produce a homogeneous product, and there is free entry into and exit out of the industry (Amacher & Pate, 2013). A perfect competition is characterized by the fact that homogeneous products are being created. With this being the case consumers have no tendency to buy one product over the other, because they are all the same. Perfect competitions are also set up so that there is companies are free to enter and leave a market as they choose. They are allowed to do with without any type of restriction, from either the government or the other companies. This structure is purely theoretical, and represents and extreme end of the market structure. The opposite end of the market structure from perfect competition is monopoly.
In a world of free trade, growing competition and accessibility to foreign markets, the need for methodical market analysis and assumptions is steadily rising in today’s business environment. It is just a normal way of thinking to primarily intent to eliminate the financial before entering a new and foreign market. This suggests that enterprises have to develop an overall strategy for their business in order to gain competitive advantage and consequently market share. With the words of Michael E. Porter, professor at Harvard University and leading authority on competitive strategy, this desirable market success is indirectly linked to the individual structure of a market. The unique structure of a single market influences the strategic behaviour and the development of a competitive strategy within a firm. The competitive strategy finally decides whether a company performs successfully on the market or not. Referring to this interpretation of business success, M. E. Porter established his five forces framework that enables directives to gather useful information about the business environment and the competitive forces in industries.
A perfectly competitive market is based on a model of perfect competition. For a market to fall under this model it must have a number of firms, homogeneous products, and easy exit and entry levels into the market (McTaggart, 1992).
In conclusion, market structure is important because it leads to strategic decision making. Having a working knowledge of market structure impacts decision making because organizations will learn the characteristics of their competition and how the market will response to changes. This report discussed the four different types of market structures: monopoly, oligopoly, monopolistic competition, and pure competition. It went into detail about what each market structure was and gave every day examples of them. Additionally, it will outlined the type of market structure AutoEdge fits into, how that market structure impacts the level of competition, elasticity of demand, price, and position in the industry.
Highly competitive industries normally enjoy less profits as a result of the high costs associated with trying to compete. The automobile industry is considered to be an Oligopoly (much like a monopoly,however, instead of one company exerting total control of the market, there are at least two firms doing so), which helps to minimize the effects of price-based competition. Historically automobile manufacturers have tried to avoid price-based competition, but more recently the com...
Market structure is when an industry has a number of firms making identical products. An industry’s market structure depends on the how many firms are in that in industry and how they will compete in the market. We can focus on those specific factors that will affect how it will change competition and also price. The types of market structure include oligopolies, monopolies, perfect competition and monopolistic competition.
Business structure is a critical factor to determine a company 's success or failure. Generally, larger organization has a more complex organizational structure. In the case of H&M, they had adopted matrix structure, one of the traditional organizational structure, into their business. As shown in figure 1, range of functional groups is listed horizontally across the table and on the other is product/task with a manager taking control of each. The functional structure is divided