AutoEdge’s Market Fit
Phineas C. Cody
CTU Online Phase 2 IP
ECON616-1501B-02 Professor: Hagen
In order to answer the question as where AutoEdge fits in its industry in comparison to its competitors it will be helpful to look at market structure and the various areas or types of market structure. So what is a market structure? A market structure may be defined as “the characteristics of the market” (Whatiseconomics, 2014). The word characteristics is the key to fully grasping this seemingly simple definition of what market structure is. Market structure or the characteristics of the market can be sorted into two categories where one is organizational characteristics and the other is competitive characteristics. Consideration should be given to other features that may also be a good description of a product or service market. Features such the number of businesses in a specific market where this would provide a broader view of both national and international competitors, concentration ratios show which entity is holding the larger percentage of the market, nature costs illustrates the effects of contestability thats inclusive of economic scale and suck costs. It great depends on the characteristics that will show the greatest value of information. Often the market characteristics that offer such valued data are the area of competition and pricing. Examining these areas of market structure and give information on competitors who are producing the same products or services as AutoEdge. Even the behavior of a market can be carefully analyzed with the use of market structure because the information collected will illustrate how consumers are spending, their responses and behavior to a product or service, and the price of a product or service. In the following paragraphs there are four types of market structures that will be looked at; the monopoly structure, the oligopoly structure, the monopolistic competition structure, and the pure competition structure. All these market structures will be looked at in order to properly evaluate AutoEdge’s position in the market place. Monopoly Structures
Like Milton Bradley’s fun filled board, the firm that owns most of a particular market may be considered to have a or be a monopoly. To be more accurate “a pure monopoly is a single supplier in a market”. To this end where regulations have defined that a business entity that controls at least 25% or a particular market will have monopoly power. With that it may be possible to have several monopolies in a single market, but that is for another conversation. Companies like Microsoft and Capsilon both have monopoly powers over their products, Windows and Doc Velocity, because they are the only entities able to manipulate the product(s) that gives them exclusive rights. Some monopoly powers are granted by government entities as such, the United States Post Office has exclusive privileges in reference to the delivery of public mail. To the question of competition surrounding monopoly structure there is very little to consider. In fact, with presence of barriers to entry the monopoly market, while not ironclad, is protected. Barriers to entry of a monopolized market serve to block potential newcomers from saturating the monopoly. High startup cost, sunk costs, and patent can be potential barriers to entering a monopolized market. Unfortunately, not only not does new businesses have a disadvantage in a monopoly so does consumers in the area of price. In a monopoly when “demand is inelastic, the level of consumer surplus is high, raising the possibility that the monopolist can reduce output and raise price above cost thereby operating with a higher profit margin. In other words the monopolist has all the control because with a High Price/Low Value strategy Microsoft or Capsilon are the company, in their related industry, that these products or service. These monopolies don't have to be concerned...
Please join StudyMode to read the full document