Market Structures
Market Structures
University of Phoenix
December 17, 2007
Introduction
Economics is a social science that seeks to analyze and describe the production, distribution, and consumption of wealth (Encyclopedia Britannica, 2007). Through this study, economists have grouped industries into four separate market structures: pure competition, pure monopoly, monopolistic competition, and oligopoly (McConnell & Brue, 2004). To gain a better understanding of these market structures, each member of Learning Team B evaluated a current company that operates in each market structure and examined the pricing and non-pricing strategies of each company.
Following a study of real-world companies, the examination shifts to a simulated computer company, Quasar Computers, as it transforms through all four market structures, from pure monopoly to pure competition.
Pure Competition (Fiji Water)
“Pure competition involves a very large number of firms producing a standardized product…” (McConnell & Brue, 2004). The bottled water industry is defined as a pure competition market. Its product is the same. Every company is selling pure spring or natural water to the consumers concerned about the purity of the water they drink. “Because each purely competitive firm offers only a negligible fraction of total market supply, it must accept the price predetermined by the market; it is a price taker, not a price maker” (McConnell & Brue, 2004). Seeing how a firm marketing strategy in the pure competition market adjusts to the market price that they cannot change can be interesting and informative. Fiji Water is an excellent example of a company operating in the “pure competition” market structure. Beverage marketers have relied on advertising, creative packaging and even flavor extensions to further excel their brand in the market. “Fiji Water has a pretty simple brand strategy-focus on what’s inside the bottle. And it’s been a tremendously successful strategy for the sole reason...
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