Management Essay Example | Topics and Well Written Essays - 750 words

Management - Essay Example Strategically, a firm that has a monopoly wants to keep any competitors from entering the market and can do so through force, lobbying, or collusion. A firm that owns a monopoly wants to keep other companies out of the market so they can set the price of the product in order to maximize profit. In monopolistic competition, the price that other firms set for the product is not as much of a concern for the firm strategically because there is product as well as brand differentiation. Therefore a firm can set its price without being influenced too much by competitors. In the long run, monopolistic competition becomes more and more like perfect competition. In an oligopoly, strategic decisions made by a firm are heavily influence by competitors because there are only a few sellers who control the market. A firm in this market structure often uses the same tactics as a firm who has a monopoly on the market to maintain or increase market share. Competition is fierce in this type of market w hich leads to lower prices and higher production. 2. Economic Factors If a firm believes that the benefits of entering or exiting a market outweigh the costs, their desire to do so will increase. Some economic factors that affect a firm’s desire to enter and exit a market are market growth, profit sustainability of that market over time, industry life cycle considerations, technological opportunities, barriers to market entry, and the number of competitors in the market. A growing market is more appealing to new entrants as is a market where growth does not appear to be slowing down any time soon. On the other hand, a declining market where there is no growth on the horizon is conducive to exiting. A market where product innovation is high also indicates that it is profitable to enter that market, whereas a market where product innovation has pretty much run its course is not a positive sign. Also, a â€Å"first-mover† has a better chance of making a substantial profit as opposed to someone who is trying to enter a market that has been around for a long time. Therefore, new markets are a good signal that entry will be profitable. Barriers to entry, such as the financial cost of entry, also discourage entry into a market. Conversely, the costs of exiting a market can discourage a firm from exit. As an example, Amazon.com entered the book selling market because they knew they could offer more books online than other bookstores could at brick and mortar stores. They entered the growing market of e-commerce and although it took them a while to turn a profit, they are now one of the most profitable e-commerce bookstores and also offer a wide variety of products now besides just books. As the e-commerce industry has grown, Amazon.com has grown as well. 3. Barring Entry In the internet marketing world, barriers to entry are relatively low. Basically anyone can learn about e-marketing and look for clients who need help with increasing their rank in searc h engines and so forth. However, it seems that larger companies in this industry have greater economies of scale. This is because they can generally produce more content, links, social media, and so on in order to generate more traffic than a very small internet marketing company with only a few people can. There are relatively low benefits in attempting to bar someone from entering this industry because it tends toward perfect competition where there are low barriers to entry and relatively low start-up costs. So the best way to