Market Differentiation

Factors Influencing Market Structure

These are the most prominent factors (but there are more)

Product Differentiation and Innovation

• process to distinguish products from others in the market

• goal: make it more appealing for target audience

• example:

  • tesla
    • we had EV before
    • but they grabbed the capital share by virtue of more features at a more competitive price

Entry Barriers

• obstacles that make it difficult for new competitors to enter a market.
• various forms
  • high start-up costs
  • brand loyalty
    • Kurkure over kata-kat
  • strict regulatory requirements
    • tough to crack when you are starting out

Economies of scale

• cost advantages that a business experiences as it increases its production output
• the average cost per unit typically decreases
• reasons for reduction
  • efficient use of resources
  • bulk purchases → negotiating price

Market Profitability

• when you start a new business, you need some demand else you cannot expect to get profits

Different Market Types

1. Perfect Competition
   • identical products
   • small firms compete against each other
2. Monopoly
   • significant pricing power by a single firm
   • IRCTC
3. Duopoly
   • Two firms dominate the market
   • pricing and output decisions are interdependent
   • Cocacola and Pepsi
4. Oligopoly
   • few large firms dominate the market
   • jio, airtel and Vi
5. Monopolistic Competition
   • competition in the same sector but offer differentiated products and thus have pricing power due to differentiated products
   • mcdonalds and burger king

Pros of Market Structure

Holistic Framework

Policy Insights

Predictive Power

Interconnectedness

• better understanding of the market

Cons of Market Structure

Oversimplification

• They are segmented, but we think that they are not so that its easier to study them

Static Nature

• rapid nature of technology
• the market type changes faster than we can categorize them

Neglect of innovation

Final Ideas and Takeaways

• essential for businesses, consumers and policyholders

• insights on how competition operates

• affects prices and choices

• shapes overall economic landscape

• informed decisions can be make that enhance market efficiency