Differenciating Between Market Structures

Differentiating Between Market Structures

BCOM/275

13 Mar 2013

Abstract

This paper is meant to show the differences between all the market structures. The author was instructed to complete a “Differentiating between Market Structures Table” and relate it to an industry and an organization of their choice. The author of this paper chose to compare the soft drink industry using PepsiCo as the organization and determine what market structure it was part of and also how it competes with competitors within that market.

Different Market Structures

According to (Colander, 2010) “there are four types of market structures; perfect competition, monopoly, monopolistic competition and oligopoly.” Perfect competition does not really exist due to the very stringent conditions the market must meet to be considered a perfectly competitive market. There are no barriers to enter a perfect competition market, the number of firms is infinite and there is no price elasticity of demand. When there is only one firm in a market that is considered a monopoly. Monopolies have some sort of barrier that makes it next to impossible for a competitor to get in. Monopolistic competition and oligopoly are alike in many ways but has a few characteristics that separate the two. Monopolistic competition has many firms selling similar products but is differentiated in some way and has very few barriers to entry. An oligopoly has significant barriers to entry, consists of only a few firms and they are likely to take the response of other firms’ into account before making a decision.

PepsiCo is an example of a monopolistic competition since there are few barriers of entry, has many competitors and sells similar products as the competition but differentiates their product to stand out to consumers. There are several strategies the company uses to compete with its competitors including advertising, Product development, celebrity endorsements and diversification of their product....