Determining Databases and Data Communications University of Phoenix BIS/320 * * Determining Databases and Data Communications A firm can fall under several market structures. The market structure of a firm also can change based on a number of items such as technology, mergers, product or service offering, etc. The simulation of East West brought to light the various market structures and the advantages and disadvantages of each. East West’s Consumer good Division was a perfect competition market. It offered goods to consumers at market price.
This can create challenges for the division. The main challenge is it may not drive the profit it needs to remain in business. The next simulation illustrated is the monopoly market structure. East West’s Coal Division is able to establish its own price to earn the highest profits based on the demand by consumers. If the demand of coal were to decrease, the Coal Division would have to consider lowering its price, but would still remain profitable. Coal is a source of energy needed, there will always be a demand unless an alternative becomes available.
This secures the Coal Division’s ability to set the price for optimal profits. The third simulation highlights oligopoly market structures. East West’s Chemical Division has another competitor, but can set prices with the competitor to establish higher profit margins. If the competitor lowers or raises prices this could help or hurt the Chemical Division and vice versa. If the Chemical Division agrees to set a price with the competitor to earn maximum profits, consumers may be hurt by having to pay unnecessarily inflated prices.
This form of oligopoly market is also known as duopoly. East West’s Forest Products Division simulation illustrates a monopolistic completion. In this type of market there are several buyers and sellers, but the products offered are different enough from each other that there is room for several competitors. The advantage of this market for the seller is that they may be able to demand a higher price for their specialty product. The product is all about the features it offers to benefit the buyer. The buyer must discern what would best serve their needs and budget and then purchase.
East West’s multiple divisions show how even with a company it can experience several different market structures. A company that experiences each of the market structures under one roof is Best Buy. While the company as a whole operates as a Oligopoly the various departments and items it offers may fall under different market structures. Best Buy has competitors such as Fry’s Electronics, HH Gregg, and Wal-Mart. The prices established for the technology offered is often time similar between each competitor.
The amount of capital needed to open such as store is quite large. Expertise is needed to ensure it is obtaining good products to offer customers at a good price. The rate in which the technology changes is also quite rapid. It must be careful not to purchase too much of a product it cannot sell out of before the next new thing becomes available. Within the big, box store it has several different market structures. For example, a monopolistic competition exists among the sale of accessories for the various electronics such as cables, cases, and blank media.
The offerings are large, the cost is low to get into the market, and the profits are high for the supplier and the retailer. At one time the service Geek Squad would have been viewed as a Monopoly. There were no other retail stores that offered such a service. Recently the market has changed and it is more of a oligopoly. When it originally launched the price of the services offered were very high, and customers that lacked knowledge had no other place to go. Media sold at Best Buy would be considered a perfect competition market.
There is very little profit made from the sale of the product. Several competitors exist from specialty music stores like Virgin or Tower Records to mega, superstores like Wal-Mart. The pricing of products in the media department will vary based on various factors such as popularity and pricing at competing stores. Managers of the store spend a great deal of time educating staff on each of these aspects of the business to help drive a better profit. References Colander, D. C. (2008). Economics (7th Ed. ). Burr Ridge, Il. : Irwin/McGraw-Hill