Market Segmentation

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  • Created by: lowrixo
  • Created on: 27-03-18 09:31

Perfect Competition

  • Large number of businesses competing and no one business is large enough the influence the activities of others.
  • There are no market leaders and no price leaders so each business must accept the going price on the market- they're price takers.
  • The goods sold are homogenous- no way of telling the goods apart.
  • Businesses have equal access to technology, meaning they have equal levels of productivity and businesses will benefit in the same way from any economies of scale made available.
  • Competitors in a perfectly competitive market have full market information, they know what's being sold and the price the goods are being sold at. 
  • Businesses are free to leave or enter the market at any time: there are no barriers to entry or exit.
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Monopoly

  • A single producer within a market- one business has 100% of the marketplace.
  • They're likely to erect barriers to prevent others from entering the market.
  • Monopolists are called price makers as they have a significiant influence on price. Although, they cannot simply charge what they want as the law of supply and demand still operates.

ADVANTAGES- MASSIVE ECONOMIES OF SCALE, REDUCING PRICES AND MAKES GOODS AFFORDABLE. PROFITS CAN BE USED FOR INVESTMENT INTO IMPROVING PRODUCTS.

DISADVANTAGES- RARE AND THERE'S A POTENTIAL OF POWER ABUSE.

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Oligopoly

  • There are many businesses but only a few dominate the market.
  • Each business tends to have differentiated productd with a strong brand identity.
  • Brand identity is encouraged by the use of heavy advertising and promotion.
  • Prices can be stable for a while but short price wars do occur.
  • Some barriers to entry do exist: high start up costs in relation to manufacturing.

Cartels: When businesses in an oligopolistic market act together. They try to keep prices high, whilst the businesses involved share the market between themselves

ADVANTAGES: ECONOMIES OF SCALE, MONEY FOR INVESTMENT AND INNOVATION AND OLIGOPOLIES TARGETING A WIDE RANGE OF MARKET SEGMENTS PROVIDE VARIETY AND CHOICE.

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Monopolistic

  • A large number of relatively small businesses all in competition with each other.
  • There are few barriers to entry.
  • Products are similar, but differentiated from each other.
  • Brand identity is relatively weak.
  • Businesses are not price takers but they only have a limited degree of control as to what to charge.
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