Market structure

TEXTS

 

8 семестр

MARKET STRUCTURE

 

A market can be defined as any form of contact between buyers and sellers for the purpose of buying and selling goods and services. Markets always have two sides: the demand side composed of buyers, and the supply side, made up of sellers. Markets can be local, national or even international. A market typically has four elements:

1. Buyers - people wishing to acquire goods and services.
2. Sellers - people wishing to sell goods and services.

3. The goods and services, which are going to be exchanged.

4. A means of payment - that includes cash, cheque, credit, standing order and hire purchase.

The demand for a product is the amount of a good that people are willing to buy over a given time period at a particular price. For most goods and services the amount that consumers wish to buy (the quantity demanded) will increase as price falls.

The desired demand is the information showing the amount of the product that consumers are willing to buy at different prices - not what they actually do buy. The demand for a product is not only influenced by price. An individual may be influenced by factors such as personal tastes, the size of income, advertising, the cost and availability of credit. The total market demand will be affected by the size and age distribution of the population and government policy.

The quantity of goods and services that producers offer at each price is called supply. While demand is concerned with the buying side of the market, supply is concerned with the firm's or producer's side of the market. Unlike demand, the quantity supplied of a good will increase as price rises. The supply of a product is not only influenced by price. Supply will be affected by anything that helps or hinders production or alters the costs of production.

Consumers have a wide variety of choice in how they spend their income, and there is a large quantity and many different types of goods and services that the consumer can buy. One difficulty that confronts a firm is to decide what to produce. Satisfying the wants and needs of consumers and anticipating these wants can make the difference between success and failure in business. Some things, such as food, are essential. Food is an example of a single-use consumer good. Most people, having satisfied their needs, can attempt to satisfy their wants by the purchase of items such as cars, TVs, microwave ovens and compact disc players. They are sometimes called consumer durable products. Alternatively, they may purchase services such as dry-cleaning, haircuts, trips to the cinema and meals out.

Today, a successful company is one, which tries to discover what the consumer wants or could be persuaded to buy and then makes that product and sells it at a profit. Such firms are said to be market-oriented. In a market-oriented firm one of the functions of marketing department is to find out consumer requirements. This is in complete contrast to a product-oriented firm, which first produces a product and then tries to sell it in the hope that the consumer will buy it.

Market research involves studying the market to discover exactly what the customer really wants. Companies collect information in order to build up a picture of consumer requirements. It can come from two main sources.

1. Primary information is information that is not already available. One of the techniques used to collect this information here is field research - questioning consumers directly about their tastes and preferences.
2. Secondary information is information that is already available to the firm. It can come from a variety of sources, such as government statistics and business and trade publications. Gathering information this way is called desk research.

Identifying the tastes and preferences of consumers is not simple because there are many different types of consumers with different tastes. Firms normally try to build up a consumer profile, i.e. the age, sex, occupation and location of its consumers.

Every firm usually possesses its own internal information about the popularity of its products and about its own sales. This information, although useful, may be of limited value since it tells the firm nothing about the total size of the market, competitors' products and prices, or consumer preferences. Consumer research can be carried out by the Market Research Department of a company or by Market Research Centers, which specialize in providing this service for others.

Market researchers collect, analyze and interpret data to provide companies with information about the needs and desires of the buying public, they develop forecasts of consumer motivations and buying habits on the basis of these forecasts, they propose strategies for the marketing campaign of current products and suggest areas for market expansion.

Essential Vocabulary

availability of credit - наличие ссудного капитала

buyer n - покупатель

cash n- наличные деньги, наличный расчет

cheque n — банковский чек

consumer durable products - потребительские товары длительного пользования

consumer requirements - потребности потребителя

cost п - стоимость

credit n — кредит

demand n - спрос

desk research - разработка статистической документации

field research - исследования на местах

forecast n - прогноз

hire purchase - покупка в рассрочку

international market - международный рынок

local market - местный рынок

market expansion - расширение границ рынка

market research - изучение конъюнктуры, возможностей рынка

Market Research Center - центр маркетинговых исследований

Market Research Department - отдел маркетинговых исследований

market structure - структура рынка

marketing campaign - кампания по организации и стимулированию сбыта

marketing department - отдел маркетинговых исследований, отдел реализации, отдел сбыта

market-oriented - ориентированный на рынок

national market - национальный рынок

price n - цена

product-oriented - ориентированный на продукцию

purchase n - покупка; закупка, купля (приобретение чего-л. за деньги)

purchase on credit/for cash - покупка в кредит/за наличные (деньги)

purchase v — покупать, закупать (приобретать что-л. за деньги)

seller n - продавец

single-use consumer good - товары одноразового использования

standing order - постоянное платежное поручение

supply n - предложение

total market demand - общий объем спроса на рынке

Exercises

1. Translate the following words and word combinations or find Russian equivalents.

1. market research
2. market research department
3. single-use consumer goods
4. consumer durable products
5. primary information
6. secondary information
7. desk research
8. field research
9. develop forecasts
10. propose strategies
11. interpret data
12. availability of credit.
13. total market demand
14. costs of production
15. age distribution

2* Translate the following sentences into Russian.

1. A market can be defined as any form of contact between buyers and sellers for the purpose of buying and selling goods and services.
2. It has been established that social position and occupation often determine consumers' buying habits.
3. Gathering information from a variety of sources, such as government statistics and business and trade publications is called desk research.

 

COMPETITION AND MARKET CONDITIONS

Competition is the economic rivalry that occurs among businesses when producers in a given industry attempt to gain a larger share of the market. Economists use the term 'market structure' to describe how competitive specific industries are. Perfect competition and pure monopoly are the opposite extremes of the market structure continuum. Perfect competition has many sellers of the same product, while pure monopoly has only one. Perfect competition exists when there are many buyers and sellers, none of whom control prices. In contrast, pure monopoly exists when a single firm controls the total production or sale of a good or service.

The most competitive type of industry is that with perfect competition. Four conditions must be present in the market structure for perfect competition to exist.

First: a particular good or service must have many sellers and buyers available. In addition, each seller must account for just a small share of the overall sales in the market. The goal of these sellers is to attract enough buyers to their businesses to earn a profit.

Second: the good or service being offered by one competing firm must be similar or identical to those offered by other firms. In such a situation, buyers may choose freely from the selection.

Third: buyers must have easy access to information on the products and prices available. This information allows buyers to make intelligent choices about which goods to purchase based on price and quality.

Fourth: entrance to and exit from the industry must be relatively easy and inexpensive. In a purely competitive market structure, firms can easily enter a profitable industry or leave an unprofitable one. Low start-up costs, the need for little technical know-how and the lack of control the existing companies have in the industry determine the ease a new firm has in gaining entry.

The conditions necessary for the existence of pure monopoly are very different from those necessary for the existence of perfect competition. In general, pure monopolies exist when three specific conditions are present.

First: one firm is the sole producer or seller of a good or service. Even though monopolies do not have to compete with other firms for a share of the market, monopolies often advertise their product or service to promote the company's image.

Second: no close substitute goods are available. Electric power companies are examples of monopolies because each company is the exclusive supplier of electricity in a specific geographic area. While consumers may choose to substitute kerosene lamps and wood stoves for electricity, these substitutes are not close substitutes.

Third: prohibitive barriers to entry in the industry must exist. Most often high investment costs and the need for technological expertise prevent firms from trying to enter monopolistic markets. In addition, a number of legal restrictions make entry into government supported monopolies nearly impossible.

In many countries, airlines are monopolies. For example, only Aviaco, an airline owned by the Spanish government, provides service between Spanish cities. In theory, Aviaco has the freedom to charge any price for airline tickets. In reality, however, Aviaco must consider the law of demand when setting fares. If the price is too high travellers will use alternate forms of transportation, such as automobiles, trains, or buses. In addition, the Spanish government sets limits on what fares Aviaco charges.

The United States government has determined that four types of monopolies are beneficial to the entire economy and are thus legal enterprises. These monopolies include natural monopolies, technological monopolies, government monopolies, and geographic monopolies.

Natural monopolies. Public utilities are the leading examples of natural monopolies. The government gives utility companies the exclusive right to provide service in a specific geographic region. In return, the government closely regulates the natural monopoly to ensure that it provides quality service at reasonable prices. In the communications industry, the American Telephone & Telegraph Company (AT&T) is an example of natural monopoly on telephone service.

Technological monopoly occurs when a firm develops new technology that changes the way goods are produced or creates an entirely new product. General Dynamics, for example, is the only defence contractor in the United States with the technology to build Trident submarines.

Firms and individuals apply for patents to protect their technological discoveries. A patent grants a firm or individual the exclusive right to produce, use or dispose of an invention or discovery. Patent laws encourage firms to invest in the research and development of new products and production techniques. The new and protected technology helps firms to gain an advantage over competitors.

Written works and works of art are protected in the same way as scientific works. By granting a copyright, the United States Copyright Office gives authors, composers, and artists exclusive rights to publish, duplicate, perform, display, or sell their creative works. The huge income from the works of recording artists, for example, makes protection of the works extremely important to those artists.

Government monopolies is the third type of legal monopoly. Towns and cities own and operate water and sewer services as government monopolies. The states control the building and maintenance of roads, bridges, and canals as government monopolies. The federal government dominates mail delivery through the Postal Service. The Tennessee Valley Authority (TVA), the major producer of electricity in the southeastern United States, is also a federal government monopoly. Most government monopolies tend to provide goods or services that enhance the general welfare rather than seek profits.

Geographic monopoly is the fourth type of legal monopoly. A geographic monopoly occurs when a firm is the only producer or seller of a good or service in a specific location. Geographic monopolies form when business or the potential for profit is insufficient to attract a competitor to the area.

Words and Expressions

access n - доступ;

easy access - свободный, открытый доступ

apply for a patent - подавать заявку на патент

beneficial adj - выгодный, полезный, прибыльный

compete v - соперничать, конкурировать

competition n - конкуренция

competitive market - конкурентный рынок (рынок конкурирующих продавцов и покупателей)

competitor n - конкурент

control prices - регулировать цены

copyright n - авторское право

earn a profit = make a profit - получать прибыль

enhance v - увеличивать, усиливать, улучшать (особ, качество, значимость, ценность, важность, привлекательность чего-л.)

exclusive right - эксклюзивное, исключительное право

general welfare - всеобщее благосостояние

geographic monopoly - географическая монополия

government monopoly - государственная монополия

grant v — дарить, предоставлять

invention n - изобретение

mail delivery - доставка писем

natural monopoly - естественная монополия

patent laws - патентное законодательство

perfect competition - свободная (немонополистическая) конкуренция

public utilities - предприятия общественного пользования (средства связи, городской транспорт и т. п.)

pure monopoly - чистая монополия

share of the market - доля рынка

supplier n - поставщик

technological monopoly - монополия на технологию

total production - общий объем произведенной продукции, совокупный продукт

water and sewer services - служба водоснабжения и канализации

 

MARKET SEGMENTATION: TARGETING AND POSITIONING

 

Markets can be segmented on the basis of geography, demography, social class, consumer behaviour, etc.

TARGETING OF SEGMENTS

Undifferentiated marketing

The company might decide (to ignore market segment differences and go for the whole market with one market offer. This approach focuses on what is common in the needs of consumers rather than on what is different. Product and marketing programmes are designed to appeal to most buyers. Mass distribution and mass advertising are relied on. An example of undifferentiated marketing would be the launch of a new chocolate bar targeted at everyone

This approach provides cost economics. Production, inventory and transportation costs are kept low by the single product line. Similarly, advertising, market research and product management costs are kept low. However, most modern marketers have strong doubts about this strategy. It is very difficult to develop a product or brand that will satisfy all consumers. Heavy competition will usually be attracted and therefore margins will often be low.

Differentiated marketing

A company may decide to target several market segments and design separate offers for each. General Motors tries to produce a car for every 'purse, purpose and personality'. By establishing a strong position in several segments, consumers' overall identification with the company will be strengthened and therefore provide a better chance of repeat purchasing. Differentiated marketing typically creates more total sales than undifferentiated marketing. But the production and marketing costs are increased. In some cases, 'oversegmentation' can occur and a company may try to broaden its base. For "example, the target market for Johnson & Johnson's baby shampoo was broadened to include adults.

Concentrated marketing

Many countries see a third possibility that is especially appealing when company resources-are limited. Instead of going for a small share of a large market, the firm goes for a large share of a submarket. Many examples of concentrated marketing can be found. In computers, Sinclair targeted the bottom end of the home computer market; in cars. Saab focuses on the luxury sports car market; in clothes, Laura Ashley originally targeted a distinct segment of [he women's clothes market.

Through this approach, a strong market position can he achieved, operating costs can be kept low and, if targeted well, the firm can earn a high rate of return on its investment. At the same time, higher than normal risks are involved. The particular market segment can turn sour; larger competitors may well enter the same segment with many more marketing resources. For these reasons, many companies prefer to diversify in several segments.

In terms of application, many factors must be considered when choosing one of the above strategies. When a firm's resources are limited, concentrated marketing makes the most sense. Undifferentiated marketing is more suited when the product is homogeneous like grapefruit or steel. The product's stage in its life cycle must also be considered. When a new product is introduced, it is often practical to launch just one version and in that case undifferentiated or concentrated marketing makes the most sense. Differentiated marketing is more applicable to maturer products. Finally, competitors' marketing strategies are important. It can be suicidal to use undifferentiated marketing when the competitors are actively segmenting the market.

 

ESSENTIALS OF MARKETING

 

Essential Vocabulary

adapt v – приспосабливать; (to, for) приспосабливаться (to - к чему-л.)

advertising n – рекламирование, реклама

affect v – воздействовать, влиять

anticipate v – предвидеть; предвосхищать, предугадывать

bargain n – выгодная покупка; дешево купленная вещь

bulk buying – оптовые закупки

charge a price – назначить цену

cheap adj – дешевый, недорогой

cheap and cheerful – дешево и сердито (дешево и добротно)

cheap and nasty – дешево да гнило (дешево и некачественно)

cheerful adj – радостный, веселый; живой, энергичный

coverage of the market – границы рынка

discount n – скидка

distribution channel – канал распределения

forward-thinking – прогрессивно мыслящий

identify v – распознавать

interest-free – беспроцентный

inventory n – инвентарь, опись товаров

lack n – отсутствие (чего-л.)

launch n – выпуск новых товаров на рынок

launch v – выпускать товар на рынок

length n – продолжительность, срок

list prices – прейскурантные цены

marketing n – маркетинг (комплекс мероприятий по изучению спроса и оптимальному сбыту продукции)

marketing mix – маркетинговая смесь

meet v – удовлетворять, соответствовать

nasty adj – отвратительный, неприятный, плохой, скверный

opportunity n – благоприятная возможность

personal selling – личная продажа, персональная продажа