Investigate the Behaviour of Organisations and the Market Environment
Introduction
In this assignment I will identify the structure of markets within the economy and explain how they deviate from the model of perfect competition. I will also expand on which market forces dominate the market place, identifying the organisational responses to demand including the adoption of competitive strategies within the free market. Finally I will explain the role of the competition commission and regulatory bodies.
Market Types
The most important factor within any market is the number of rivals competing for a share of the business. Competition, as described by Stigler, G (2008) arises whenever two or more parties strive for something that all cannot obtain. Perfect competition is seen as a theoretical ideal and sets the standard for comparison. “Perfect competition exists when a market has many buyers and sellers of the same good. Few markets are perfectly competitive because barriers keep companies from entering or leaving the market easily” (O’Sullivan and Sheffrin, 2007). Perfect Competition is normally unattainable in practice and is often used as a comparative tool by economists to evaluate different markets. In terms of competitive nature, we can classify real world organisations under the following headings, Monopoly, Monopsony, Oligopoly, duopoly and Monopolistic Competition.
Monopoly
In the UK, a business controlling 25% of the market is considered a monopoly. According to Stigler, G (2008) a monopoly is “an enterprise that is the only seller of a good or service”. In order for a true monopoly to arise, a company must hold a significant advantage, imposing barriers for entry to prevent others from entering the same market. Holding key resources and patents can make it difficult for another company to break into a market. It is now rare to see true monopolistic organisations, particularly in the private sector however there are some publically owned services that can be categorised as monopolies. In an effort to prevent
In this assignment I will identify the structure of markets within the economy and explain how they deviate from the model of perfect competition. I will also expand on which market forces dominate the market place, identifying the organisational responses to demand including the adoption of competitive strategies within the free market. Finally I will explain the role of the competition commission and regulatory bodies.
Market Types
The most important factor within any market is the number of rivals competing for a share of the business. Competition, as described by Stigler, G (2008) arises whenever two or more parties strive for something that all cannot obtain. Perfect competition is seen as a theoretical ideal and sets the standard for comparison. “Perfect competition exists when a market has many buyers and sellers of the same good. Few markets are perfectly competitive because barriers keep companies from entering or leaving the market easily” (O’Sullivan and Sheffrin, 2007). Perfect Competition is normally unattainable in practice and is often used as a comparative tool by economists to evaluate different markets. In terms of competitive nature, we can classify real world organisations under the following headings, Monopoly, Monopsony, Oligopoly, duopoly and Monopolistic Competition.
Monopoly
In the UK, a business controlling 25% of the market is considered a monopoly. According to Stigler, G (2008) a monopoly is “an enterprise that is the only seller of a good or service”. In order for a true monopoly to arise, a company must hold a significant advantage, imposing barriers for entry to prevent others from entering the same market. Holding key resources and patents can make it difficult for another company to break into a market. It is now rare to see true monopolistic organisations, particularly in the private sector however there are some publically owned services that can be categorised as monopolies. In an effort to prevent
Bibliography: BPP Learning Media, 2010. Business Essentials - Business Environment. pp. 185-288 Fair trading act, 1973[online] Available at:<http://www.legislation.gov.uk/ukpga/1973/41> Hirschey, M. Managerial Economics[online] Available at:<http://books.google.co.uk/books?hl=en&lr=&id=igRaLAYvaCgC&oi=fnd&pg=PR5&dq=Hirschey.+Managerial+Economics&ots=ECGfUH9R9w&sig=UjBpXo5Shl-zaf0J80kXk4Mjq9c#v=onepage&q&f=false>