Market Structure by Bizzy Brain

MARKET STRUCTURE

The market is a place where goods are exchanged from sellers to buyers, for a certain level. In other words, it refers to a group of shops situated in a particular locality selling a variety of commodities to the buyers. But in economics, the term ‘market’ is used in a special sense. It refers to world, where buyers and sellers are in close contact with one another either personally or through exchange of letters, or phone or e-mail/online so that they can buy and sell goods on agreed price. According to Prof. benham, “market is any area over which buyers and sellers are in such close touch with one another, either directly or through dealers that the price obtainable in one part of the market and affects the prices paid in other parts” prof. Philip kotler expressed in his work titled. Marketing Management that the term market refers to an area or atmosphere for a potential exchange. Hence market is an arrangement that provides opportunity for exchanging goods and services for money or money’s worth. The seller will decide how much of quantity is to be sold and at what price. Similarly, the buyer will also decide how much to be purchased and at what price. From the point of view of producers or sellers both the factors are important and from the point of view of buyers, the price is an important factor while buying. It is in the market that the forces of supply and demand determine the price of the commodity. Supply of the commodity depends upon the cost of production in relation to its price and the demand depends upon the utility of the commodity in relation to its price.

        The quantity to be sold by a firm in the market depends upon various factors called internal factors and external factors. The internal factors are:

1. Price
2. Cost involved in the production, selling and distribution expenses.
3. Additional features in thee product compared to the competitors.
4. Quantity of sales at which he is at break-even, margin of safety.
5. Capacity to produce.

In addition to these internal factors, the buyers and sellers, consider the external factors which are also responsible for the market behavior. They are:

1. Supply and demand for the products
2. Market in which he is selling like internal market or international market.
3. Type of market environment and situations, that is, number of players in the market, knowledge of these players, situations of selling and buying and the like.
4. Political environment, social behavior of the players in the market, international situation and so on.

FACTORS DETERMINING THE DEVELOPMENT OF THE MARKET

The development of the market in a country depends upon various factores such as:

1. Nature of commodity like necessariues comfort durables, luxuries of life, FMCGs and so on
2. Types of production like manufactured products, services, agro-products and so on.
3. Nature of demand for the products likes elastics demand, price elastic or cross elastics and so on.
4. Development of infrastructure like transport and communication system, financial services, technology, use of software and currency and credit system.
5. Policy of the government to encourage development, liberalize the process and procedures.
6. Degree of knowledge management.
7. Ability of labour force.
8. Honesty in international transactions etc.

In the decision making process the executives of the organization should have knowledge of all these factors and  also the structure of competition in which they are operating, their business in the industry.

The market and also the market activities are dynamic. Hence,although most of the times the strategies of the market are learnt from the situations, the executives should have the knowledge of economic analysis of the anatomy of types of competition.

        CLASSIFICATION OF MARKETS

Markets may be classified into three, these are

1. Local market
2. National market
3. International market

On the basis of time into:

1. Market period
2. Short period
3. Long period
4. Secular period

On the basis of nature of competition into:

1. Perfect markets
2. Imperfect markets

Markets Structure

The concept competition is used in two ways in economics. One way is as a a type of market structure and another wayu as a process is rivalry among firms. It involves one firm trying to develop a strategy to take away market share from the other firms. Competition as a market structure is the end result of the competitive process undert certain conditions. Market structure refers to the nature and degree opf competition within a market.  It consists of various forms sof market, classified on thje basis opf the number of sellers and buyers of a good or service in the market and the nature of products produced by ythe firms whether the products are homogebnoius or diofferentiated on the basis of competition, markets are classified into perfect competitive market and imperfect competitive markets. The imperfect competitive markets are monopoly, monopolistic competition, duopoly, oligopoly, monophony, duopoly, oligopoly and bilateral monopoly market.

        Out of all these various forms of market, we shall deal with only some of the important market situations and the nature of price-output determination in these markets.

PERFECT COMPETITION

Perfect competition refers to a market situation in which there are very large number of sellers and buyers of homogenous products, free entry and free exit of firms, perfect knowledge among the sellers and buyers of existing marketr conditions, free mobility of factors of production among alternative uses and a uniform price for the commodity in the entire market.

David C. Colander defines perfectly competitive market is “a market in which economic forces operate unimpeded or without any hurdles or impediments.

        According to Boulding, “perfectly competitive market is a situation where large number of buyers and sellers are engaged in the purchase and sale of identically similar commodities, who are in contact with one another and who buy and sell freely among themselves.”

        According to Mrs. Joan Robinson, “Perfect competition prevails when the demand for the output of each producer is perfectly elastic.”