Organization, Competition and Environment - Assignment Example

In other type of markets which are not perfect competitive and these markets include monopoly, oligopoly, duopoly and competitive monopoly. In a monopoly market we have only one firm in an industry, the firm is a price maker and there are restriction to entry in the industry, the monopoly market the product produced by the firm has no close substitute and therefore the product is unique in nature.1 In a duopoly there exist two firms that produce the same product, there are still barriers to entry in this market, and both firms in the industry take into consideration the reaction of the other firm when making decisions about production and prices.

2 In an oligopoly market the number of firms is few and the firm is faced with a kinked demand curve because any decision made by the firm will take into consideration the decision by other firms, if a firm raises its prices other will not follow and therefore the demand curve is kinked.3 Therefore in the transport industry the type of market that exists is competitive, firms in the industry are price takers and there is free entry and exit by firms. This means that the price of transport is determined by the demand and supply in this competitive market, in this market still the buyers and sellers have perfect information about products and services.

The competitive market will respond to market forces, the first example we will illustrate is an increase in the supply of services, according to our case study about imperial transport shifts from transporting cars when the automobile industry expands to transporting materials for the construction industry, the reason why the organization responds by exiting the transportation of cars is because there was an in increase in the supply of lorries as the automobile industry expands, this resulted into higher supply than the demand for transport which resulted to lower prices therefore the firm did not experience optimal profits, this led to the firm to exit this industry to the transportation of building materials.

Therefore a firm will exit an industry if it has zero profits due to the low prices set by the market forces when the supply for its products increases, the firm will exit and enter another industry which has less supply of the products produced.Another example of the response of the firm due to market forces is if there is an increase in the cost of production due to an increase in the price of inputs, in the case of the imperial transport the price level of diesel rose leading to an increase in the cost of transport, this forced the firms to increase the transportation cost, therefore the increase in diesel cost led to an increase in production or transportation, the firms were not in a position to accept lower profits due to high production cost and therefore they increased their transport charges to maintain high profits.

An increase in the demand for transportation of certain goods makes the price of transporting those goods to be higher, therefore more firms will enter the industry, this is evident in our case where the imperial transport exited the beer transporting industry in order to gain more profits from transportation of more expensive goods such as cigarettes and electronics. Therefore when a firm in a competitive market if a