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PERFECT COMPETITION
This is an ideal situation where there are many firms each producing only a small fraction of the total output required in the market and none of the firms can influence the price in the market.
CHARACTERISTICS OR ASSUMPTIONS FOR PERFECT COMPETITION
1. Many buyers and sellers.
The market has many firms that sell a similar commodity in small quantities. The action of one seller cannot influence the price in the market.
There are also many buyers in the market who are disorganized. These buyers buy a small quantity of a product and cannot influence the price in the market.
2. The commodity supplied is homogeneous or identical
The commodity sold in the market by all seller is identical. The product or commodity cannot be differentiated by factors such as size, quality, colour or texture.
3. Free entry and exit into the Industry
Sellers and buyers are free to enter or exit the market. Sellers can supply any quantity of the product to the market and leave at their will. Buyers are also allowed to enter, buy any quantity that they may want and exit the market if they wish.
4. Perfect knowledge of the market
Buyers are assumed to have adequate knowledge about the market conditions that can enable them to know where the price is fair. The sellers are also aware of what the other sell are charging and the profit that they are making. This therefore means that none of the market players can influence the price and output in the market.
5. No Government Interference
It is assumed that there is no external intervention with the activities in the market for example there is no price control or quantity control. This ensures that entry and exit is voluntary and the market is controlled by force of demand and supply.
6. No Transport Cost
Buyers and sellers are assumed to be located in the same place. There is no cost of transport incurred by other sellers or buyers to and from the market.
7. Perfect mobility of factors of production.
It is assumed that resources such as Land, Labour and Capital can be easily moved from one place to another. There is also a market structure known as pure competition. This is a market structure with three features that may easily be fulfilled. Those conditions include:-
(i) There are many buyers and sellers in the market who are organized.
(ii) The commodity supplied is homogenous or identical.
(iii) Free entry and exit in the industry.
MONOPOLY MARKET STRUCTURE
This is a market structure with only one supplier who sells a product that has no close substitutes.
A market structure with only one buyer in the market is called Monopsony. The supplier or the seller is only made up of one firm.
CHARACTERISTIC’S OR ASSUMPTIONS UNDER MONOPOLY MARKET STRUCTURE
1. Single supplier
A single seller or producer in the market provides total supply of a commodity. The firm therefore has the ability to influence the market by reducing the quantity supplied.
2. The product has no close substitutes
The supplier sell a product that does not have close substitute. Therefore the firm does not face competition in the market.
3. There is no entry into the Industry.
Firms are not free to join the Industry. Barriers have been put in place to prevent other firms from joining the Industry. The barrier include total control over the supply of raw materials, government policy and technical knowledge about the industry.
Source of monopoly power
– Monopoly can only exist in a situation where there is no entry of other firms into the industry. This gives the firm monopoly power. This power enables the monopolist to continue existing in the market without competitors. The sources of monopoly power includes:-
- High initial costs of investment
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This occurs where the initial cost of investment in the production of a commodity is extremely high and only one firm can afford to invest. In most cases such a venture is undertaken by the government. Examples of such firms are Tanzania Electricity and Supply Company (TANESCO) and Kenya Power in Kenya.
2. Control resources
If a firm has total control over a resource like mineral ore, potential competitors will not be able to acquire the raw material. The firms is the only supplier of the resource and bars other from entering the firm. For example the Kenya Power In Kenya.
3. Ownership of production rights.
These are rights that protects a single firm in the market such rights include patent rights, copyrights and royalties the firms is given legal body. Legal protection or right by the government. The government may licence only one firm to produce and supply a given product.
4. The size of the market
The size of the market may be too small to support several firms profitably. in some situations some firms may close down leaving only one firm to operate as a monopolist.
5. Technology
The technology required for the production of a product may only be with a single firm. If the firm is not ready to share technology with other firms,. It will remain as a monopolist.
6. Amalgamation
This refers to the coming together of several firms from one enterprise. It may be through mergers, cartels, and takeovers. Such combinations enable the firm to control price and output.
7. Internal economies of scale
A firm may be benefiting from a large scale production to the extent that it is able to lower it price and still make some profits. This may prevent other firms from either entering into the industry or the existing ones may simply leave because they may not afford the high cost of producing on large scale.
MONOPOLISTIC COMPETITION
It is a market structure that falls in between perfect competition and monopoly structure.
CHARACTERISTICS OR ASSUMPTIONS UNDER MONOPOLISTIC COMPETITION
- Large number of sellers and buyers.
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This market structure has many firms that are independent or each other. The buyers are also many and unorganized.
- No barrier to entry into the industry or exit. Firms are free to enter or leave any time they wish
- Differentiation product
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This is an attempt by a firm to make a different in product from those of its competitors.
This is done through colour, packaging and advertising.
- Knowledge of the market
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Buyers and sellers have perfect knowledge of the market.
- The firms are the price determinants.
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As a result of product differentiation, products are unique and hence firms are able to decide the commodity price.
OLIGOPOLY
This is a market structure that is dominated by few firms that sell products which are close substitutes. The firms are relatively large and each dominate a substantial part of the market. A market structure with only two firms is called duopoly.
CHARACTERISTICS OF AN OLIGOPOLY MARKET STRUCTURE
This types of market structure has the following features;
- Few sellers
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The firms within the industry are few but produce commodities in large scale. The product may either be identical or differentiated. Oligopolist firms that sell identical products give rise to pure or perfect oligopoly, imperfect oligopoly refers to the sale of differentiated products.
- Price is determined by the firm
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This interdependence of firm is in the following ways;
(a) Price wars
A situation in which rival firms undertake a series of price reductions with an aim of capturing a greater market. The firms keep on watching the behavior of the rival firms.
(b) Collusion
Firms in the industry come together in an agreement so as to charge the same price.
(c) Cartel
This is formed when firms in an industry openly and formally agree on market price and market share.
(d) Price leadership.
This situation arises when one firm sets the price and other watchful firms in the Industry subsequently change the prevailing price.
THE CONCEPT OF MARKETING MIX
Marketing mix is a set of controllable variables that the firm can use to influence the buyers response. It is a combination of four elements, namely: product, price, promotion and place. These elements are used to satisfy needs of organization’s target market and at the same time achieve its marketing objectives.
These four elements are commonly referred to as 4Ps of the marketing mix.
Product
A product is anything that can be offered in a market for attention, acquisition, use or consumption. It includes goods, services and ideas.
FEATURES OF A PRODUCT
Branding
This is the process of designing a name, sign, symbol, mark or combination of these with a intention of identifying a product and differentiate them from those of the competitors.
TERMS USED IN BRANDING
(a) Brand
This is the name, mark, symbol or sign given to a product with the aim of identifying the product and differentiating it from the competitor’s products.
(b) Brand name
This is the part of a brand which can be pronounced when a buyer orders for the product. It consist of words or letter and numbers. Example including Uhai, Fanta, Omo, Pepsi etc.
(c) Brand Mark
This is that part of a brand which can be recognized by sight but cannot be pronounced . it takes the form of symbol, sign or Mark
(d) Trade Mark
This is that part of a brand which is given legal protection but is capable of exclusive appropriation. It is made of a word, letter number plus pictorial design.
v Once a brand is registered, no other manufacturers are allowed to use it unless there is a special arrangement with the owner.
v Such a trade mark bears an ”R” in a circle which always appears like R.
Copyrights
A copyrights is the exclusive legal right to reproduce, publish and sell the product in the form of Literacy, musical or artistic work.
ADVANTAGES OF BRANDING
A. Advantages to the manufacturers
- Wholesalers and retailers prefer branded goods as the branded goods can easily be sold.
- It enables the manufacturers to control price of the product because of branded goods, retail selling price is fixed by the manufacturer.
- It is possible for a manufacturer to eliminate a wholesale and sell the products directly to the retailers or customers in order to increase profit and sales volume.
- The individuality of the product is established. This helps a manufacturer to differentiate his or her products from those of his or her competitors.
- Advertising costs may be reduced. Once a brand such as Coca Cola has been made popular, retailers are forced to keep the product in their stock because of their popularity.
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B. Advantages of the consumers
- Consumers cannot be charged higher prices by the retailers as price of branded goods are well advertised and known in the market.
- Branded goods are easily available. This consumer can get such goods easily at the point of their choice.
- Quality of branded goods is protected. Branded goods are usually sold in sealed packages. Thus branded goods are protected from dust and water hence are more secured.
- Manufacturers and producers do not easily change the price of branded goods as opposed to the price of non branded goods.
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C. Advantages to the wholesalers and retailers
(i) It helps in standardization of quality, thus it serves the wholesalers and retailers in choosing and buying stocks.
(ii) It help in displaying programmes in retail stores.
(iii) It helps to reduce price comparison and also in stabilizing prices.
(iv)
Less risk is involved in the case of branded goods as they have a steady demand in the market.
Disadvantages of Branding
(i) It creates a venue for production of fake goods especially for the products whose brand is popular.
(ii) It creates monopoly of the product since manufacturers who cannot brand their goods leave the market.
(iii) Branded goods tend to be highly priced due to working and advertising costs.
PACKAGING AND PACKING
Packaging:
Is an activity which involves designing a producer’s container or wrapper in which goods are packed. It can be paper, bottle or box.
Packing
Is the whole process of putting or arranging goods manufactured by a firm in a package.
FACTORS TO CONSIDER WHEN DESIGN A PACKAGE
- Size and weight of goods
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The size and weight of goods must be considered since large and heavy goods require a strong package.
- Shape
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The shape of the package must be elegant to the consumer’s view and easy to be handle in a store room.
- Nature of the goods to be packed
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A product may be perishable or durable, liquid or solid, therefore a package should be designed according to the product to be packed.
- Promotional policies and strategies. An attractive package has an impact to consumers in buying decision.
- Cost
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The cost of the materials required to make a package should not be expensive since this will raise the cost of the goods.
REASONS FOR PACKAGING AND PACKING
- To protect goods from damage.
- To facilitate branding and labeling.
- To make the handling of goods convenient.
- To make the product look attractive.
- To protect the quality of goods against atmospheric conditions such as bad weather condition.
- To prevent loss by evaporation in the case of products like petroleum and gas.
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ADVANTAGE OF PACKAGING AND PACKING
- A package can be used for other purposes when the product in it has been consumed. Plastic bottles for instance are used for storage of water.
- Packaging and packing facilitates branding and advertising. Most of the branded goods are packed and making easy to advertise them.
- Package ensures hygiene for food products stored with other goods.
- Packed goods are convenient to handle
- Goods are protected from damage when being transported from the area of production to the area of consumption.
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DISADVANTAGE OF PACKAGING AND PACKING
- It increases the cost of production to the manufacturers.
- Packed goods are more expensive than unpacked goods as the cost of packaging and packing is usually passed on to the consumers in terms of increased price.
- Consumers are denied the right of inspecting the quality and quantity of packed goods.
- In the process of opening or unwrapping consumers may not open the package properly thereby damaging a product thus a loss to a consumer.