Discuss why markets may fail to generate socially desirable outcomes.
The term market refers to the group of consumers (households, firms or government) that is interested in product or service and has the resources to purchase that product. Acquiring the product and/or getting a service are always permitted by law and other regulations. The market definition begins with the total population and progressively narrows as show in the following diagram.
Market definition
Conceptual diagram
The size of the market is not fixed and depends on the product price. It is increasing while increasing the prices and decreasing while decreasing the prices. In addition, qualified markets can be increased through changes in legislation that is resulted in fewer restrictions on who can buy the product.
Market promotes competition. The competition is considered to be useful for consumers since it is providing choice, quality and very often lower prices too. Other times, competition creates monopolies or included natural monopolies that are considered to be harmful for the consumer as per some scientist point of view.
Market failure describes the failure of the market economy to achieve an efficient allocation of resources. There are several important circumstances under which markets fail to allocate resources with reasonable efficiency: such as common property resources, public goods, externalities, asymmetric information, missing markets and monopoly power (I shall discuss these points in more details through the report).
In this analysis, I am going to identify various competitive market models (theoretical perspective) and implement the same on Nike Corporation market, pointing out similarities and difference between ...
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...onditions. The outsourcing strategy in this part reflected bad reputation on Nike history where it affected their customers. Nike could successfully overcome this problem and established credibility with their current and future customers.
I think government intervene is useful and needed to a certain extent. It regulates the environment and put people under specific liabilities to maintain there freedom in the correct approach. It prevents them from abusing the provided freedom.
References:
http://www.economics.unsw.edu.au/courses/econ5103/topic/5103notesT2.pdf
http://www.netmba.com/econ/micro/cost/opportunity/
B200 Markets text book & binder
...st people would buy Nike products during sales when the products are sold at a cheaper price or during sports related events, such as the FIFA World Cup every four years, when there is a “sports fever”. They look for performance and design in the products and also whether or not it is “value for money”. Nike also tries to attract people of different user status to buy their products. Nike attracts ex-users to use their products again by showing that they provide superior customer value when compared to other competitors, potential users and first-time users are attracted by the benefits that the product can offer them. Nike retain their hard core loyals by offering premium quality products with unique designs to allow consumers to stand-out, soft core loyals are captured by providing products at cheaper price as compared to similar products offered by competitors.
As Nike is an international company that has their product selling worldwide, they have countless of competitors, including many domestic local firm. However, not all of these companies have the power to compete with Nike, only a few international companies are Nike¡¦s major competitors, for instance, Adidas and Reebok.
The market today has become so important that society takes it as completely natural. From “The Economic Problem” Heilbroner describes three main solutions, with the market being one. Furthermore into the market, Polanyis book “The great Transformation” gives insight on how much society actually allows the market to dominate. To Polanyi a market society is seen as social relations embedded in the economy instead of the economy being embedded in social relations. Examining both of these books gives a great understanding on how life was without the market and how it came to be. Taking note of Rineharts work as well on how the workplace has drastically been changed by the market is key to analyzing the transformation as a whole. As a result of the transformation, not only has human labour been altered, but another author known as Weber states that certain peoples view on the world have also be affected. This essay will establish how “the great transformation” (Polanyi) from a traditional society to one based on a market economy has vastly impacted societal workplaces, and societal beliefs around faith of idealogical conditions.
Under Amour Company ventured into a market segment that was overcrowded, it had thousands of companies that competed against each other. Out of the many companies involved in the trade, the two most formidable threats seemed to be orchestrated by Nike and Adidas. These are two giant sports apparel and footwear, which pride themselves as having been long term veterans in the industry. Nike in particular was christened as the ultimate shoe and athletic apparel company with revenues of $18.6 billion, net income of $1.9 billion and more than thirty two thousand employees globally in the year 2008. This makes it the largest athletic shoe and apparel seller in the world. This company has seen major expansions in outlets throughout the world over the years. Adidas on its part has managed to build a powerful brand through its technological innovations and aggressive marketing where they spend up to thirteen per cent of their revenue besides offering high quality services. These scenarios seem to present Under Armour with a massive competitive disadvantage.
Many global companies like Nike, Inc. are seen as role models both in the market place as well as in society in large. That is why they are expected to act responsibly in their dealings with humanity and the natural world. Nike benefits from the global sourcing opportunities, therefore areas such as production and logistics have been outsourced to partner companies in low-wage countries like China, Vietnam, Indonesia and Thailand. As a result the company is limited nowadays to its core competencies of Design and Marketing.
Nike’s goal is to remain unique and different from others in terms of the items offered on the market. Arguably, Nike belongs to a monopolistically competitive market as there only a few organizations with the ability to regulate the amount charged for their product which means they cannot make their prices high as this is likely to make customers move on to other available choices (Nike, Inc., 2012). However, Nike can find a balance between the prices to charge for their products and remaining competitive with other companies in the industry. Nike has formed a distinction between the appearance and performance of their footwear and that of their competitors. Although products are differentiated from other companies, they still influence each other because they are items of the same
Market failure in a free market is defined as a condition where the allocation of goods is inefficiently done, resulting in an over allocation or under allocation of its resources. Market failures occur due to the presence of externalities.
In the matter of minutes, one click on their app or their website, you can learn about the new running shoe or see the upcoming apparel for the new season. Or maybe you are flipping through a sports magazine and come across a Nike ad. Not to mention all the apps that Nike has, the commercials on television that reminds you to “JUST DO IT”. The strategies that have allowed Nike to be successful in the U.S. as well as their international branches. They have different strategies to cater to specific needs of consumer in the US and other countries as well. The is the reason Nike has remained to be successful in the U.S. and internationally. Their strategy has always been about: putting the consumer first; building a strategy based off what the consumer needs in that region; and having the ability to sell their products through websites, major sports facilities, and smaller sneaker
Nike’s positioning in the market has more of a mass appeal compared to their main competitor Adidas who strive to make products for elite athletes. The positioning strategy for Nike is currently working at a satisfactory level as Nikes global annual sales between 2013-2014 was reported as 27.8 billion (Statista, 2014) compared to Adidas’ 19.95 billion (Statista, 2014). The global market for sports apparel is expected to grow at a compound annual growth rate of 4% between 2012-2019, Nikes compound annual growth rate during 2010-2012 was 12.3% which is an excellent result as the brand’s growth was larger than the market as well as outgrowing Nike’s closest competitors Adidas, Puma and Asics (Forbes,
international markets. The company wants to generate more than half of its revenue from overseas. In my opinion, Nike’s strategies and tactics are to seek on the opportunity to do the marketing on its radical, rebellious and anti-establishment images to the international markets and to benefit from its use of overseas factories to outsource manufacturing processes. For example,
Consumers must be aware of the changes that might occur in Nike through media and social awareness
As with all markets and their respective economies, having equilibrium is one of the key factors of a successful system. Although most markets do not reach equilibrium, they attempt at getting close. There are numerous methods devised to reach equilibrium, whether they involve human intervention directly or a cumulative decision by all factors involved. These factors may be a seller's willingness to lower overall revenue, or a buyer's willingness to withhold some demand for a certain product. Of course, the basics of supply and demand retrospectively control the equilibrium in the market.
Therefore a free market is not desirable as maximizing their utility is priority. So government is expected to correct the market failure by choosing to char...
With there being several firms for 3 of the markets, the consumer benefits as they can find the cheapest producer, resulting in the producer being at a disadvantage as they could loose business. In a perfect competition market, the firm is unable to choose the price whereas in an oligopoly the price is chosen by the firm this is beneficial for the producer as it increases their profit margins. However, this is harmful for consumers as they will have to pay the higher prices.
This essay will examine the concept of market failure and the measures that governments take remedy the failure of the market.