MARKET STRUCTURES Market structure is best defined as the organisational and other characteristics of amarket.

We focus on those characteristics which affect the nature of competition and pricing but it is important not to place too much emphasis simply on the market shareof the existing firms in an industry. Features of Market Structures The number of firms (including the scale and extent of foreign competition. The market share of the largest firms (measured by the concentration ratio seebelow) The nature of costs (including the potential for firms to exploit economies of scaleand also the presence of sunk costs which affects market contestability in the longterm) The degree to which the industry is vertically integrated - vertical integrationexplains the process by which different stages in production and distribution of aproduct are under the ownership and control of a single enterprise. A good exampleof vertical integration is the oil industry, where the major oil companies own the rightsto extract from oilfields, they run a fleet of tankers, operate refineries and havecontrol of sales at their own filling stations. The extent of product differentiation (which affects cross-price elasticity of demand) The structure of buyers in the industry (including the possibility of monopsonypower) The turnover of customers (sometimes known as market churn) i.e. how manycustomers are prepared to switch their supplier over a given time period whenmarket conditions change. The rate of customer churn is affected by the degree of consumer or brand loyalty and the influence of persuasive advertising and marketing

Types of Market Structures

1.Pure competition: The market consist of bu yers and sellers trading in a uniform commodity suchaswheat, copper, or financial securities. No single buyer or seller has much effect onthe goingmarket price. A seller can not change more than the going price, becausebuyer can obtainas much they need at the going price. In a purely competitivemarket, marketing research,product development, pricing, advertising, and salespromotion play little or no role. Thus,sellers in these markets do not spend much timeon marketing strategy. 2.Pure monopoly :In economics, an industry with a single firm that produce a product, for whichthereare no close substitutes and in which significant barriers to entry prevent otherfirms

fromentering the industry to compete for profit is called pure monopoly.E x a m p l e : W h e n the City Cell mobile service company first started their b u s i n e s s inBangladesh, they were the only mobile service provider then. Before the GrameenPhonecame into the market, they enjoyed pure monopoly.There are two types of pure monopoly: 1. Regulated monopoly 2 . Nonregulated monopoly Regulated monopoly: The government permits the company to set rates that willyield a fair return. Example: Power Company. Nonregulated monopoly: Company is free to price at what the market will bear.Example: City Cell ( When it first introduced mobile service in Bangladesh). Advantages: May be appropriate if natural monopoly Encourages R&D Encourages innovation Development of some products not likely without some guarantee of monopoly in production Economies of scale can be gained consumer may benefit

Disadvantages: Exploitation of consumer higher prices Potential for supply to be limited - less choice Potential for inefficiency 3.Monopsony: This is the market situation where there is only one buyer in the market. WhenCityCell first introduced mobile service network in Bangladesh, they were the onlymobile phoneand its accessories buyer from Nokia and Motorolla in Bangladesh. 4.Monopolistic competition:

In economics, the market consist of many buyers and sellers who trade over arangeof prices rather than a single market price is called monopolistic competition. Arange of priceo c c u r s b e c a u s e s e l l e r s c a n d i f f e r e n t i a t e t h e i r o f f e r s t o b u ye r s . S e l l e r s t r yt o d e v e l o p difference by using customer segments, and in addition to price, freelyuses branding,advertising, and personal selling to set their offers apart Examples :restaurants, professions solicitors, etc., building firms plasterers, plumbers, etc. 5.Oligopoly: In economics, the market consist of few sellers who are highly sensitive toeach others pricing and marketing strategies. There are few sellers because it isdifficult for new sellers to enter the market. Each seller is alert to competitorsstrategies and move. Examples : Supermarkets Banking industry Chemicals Oil