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Differiating Between Market Structures - Essay Example

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Differentiating Market Structures Name Institution Date Introduction Markets in economics are classified according to the structure of the industry serving the market. Ideally, the industry structure is categorized on the basis of market structure variables, which in turn determine the characteristics and extent of competition (Stackelberg et…
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Download file to see previous pages The first part of the paper will identify the market structure of the high technology industry; outline the market share of Samsung Corporation, explain why I decided upon this marketing structure and how different the marketing structure is from other alternatives. Part two of the paper will identify four competitive strategies that may be used by Samsung to maximize its profits effectively within the high tech industry’s competitive environment. More so the paper will evaluate the efficiency of these strategies in the market structure. Market structure of the high technology industry High technology industries are prone to the same market forces just like any other industry, but there exist few forces that are stronger in the high tech industry. Research claims that these forces affected the market structure of high technology industry in the 1890s and are still affecting the same industry to date. The high technology industry falls under an imperfectly competitive market structure, which means that products and services are highly differentiated (Varian, 2001). There are vast factors that arise from effective price discrimination that affects the high technology industry. These factors include personalization of products and pricing, versioning, bundling, switching costs, lock-in and economics of scale. Differentiation of products and services - The information technology allows flexible observation and analysis of consumer behavior, which in turn brings in various kinds of marketing strategies that seemed impossible on a large scale. For instance, a seller can offer prices and goods that are differentiated through individualized behavior and characteristics. Ideally, the high technology industry allows the market of one phenomenon where customers can personalize their prices (Varian, 2001). The high technology industry customers can personalize their adverts on the front pages online and can still buy a personally configured computer. According to the theory of monopoly first degree price discrimination in most industries charge the highest prices they can to each customer, but the technology industry’s case is different because online sellers face competition from each other as well as from online sellers; hence, further stiffening the competition. Versioning - Versioning is a second-degree price discrimination that usually falls under product quality, which means that sellers design product line that appeals to different market segmentation. For instance, the latest trend of DVD version sells at a higher price and has a lot of content, an aspect that studios uses to discriminate prices between collectors and viewers, as well as between buyers and renters. Bundling - Bundling is the process of selling two or more distinct goods together for a single price. In the technology industry, these goods are “small” information goods like the individual items of web content that are sold in extremely large bundles. Bundling affects the economy by reducing the dispersion of willingness to pay as well as increase entry barriers, but it enhances firm profits and overall efficiency (Varian, 2001). For instance, instead of a soft w3are company selling a word processor and a spreadsheet separately at different prices, the company could combine the two products and sell them at a higher price. Switching cost - Unlike other industries, switching costs in the high technolo ...Download file to see next pagesRead More
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