Marketing and competitiveness

12.2 Market conditions and competition

One dominant business:

• In some markets there is no competition because there is only one business operating - a monopoly. Monopolies are bad for consumers because they restrict output, pushing up prices and restricting consumer choice. For this reason governments have legal powers to regulate against monopoly power. 
• Firms impliment their marketing stratefy through the marketing mix. In markets dominated by a single large business, firms do not need to spend heavily on promotion because consumers are, to a degree, captive. Prices can be pushed up and the product element of the marketing mix can be focused on creating innovations that make it harder for new enterants to break into the market.

Competition against a few giants:

• The UK supermarket industry is a good example of a market dominated by a few large companies - oligopolistic. The rivalry that exists within such markets can be intense. 
• In markets made up of a few giants, firms tend to focus on non-price competition when designing the marketing mix. Firms in these markets tend to be reluctant to compete by cutting price. They fear that the other firms in the industry will respond by cutting their prices too, creating a price war.

The fiercely competitive market:

• Fiercely competitive markets can also be fragmented, made up of hundreds of relatively small firms, each of which competes activity against the others. In some of these markets competition is amplified by the fact that firms sell near-identical products, called commodities. 
• Rivalry in commodity markets, firms have to manage their production costs very carefully…