How Market Structures Determine the Pricing and Output of Businesses

1408 Words Oct 7th, 2013 6 Pages
How Market Structures Determine the Pricing and Output of Businesses

There are several different market structures in which organisations can operate. The type of structure will influence a company’s behaviour and the level of profits it can generate. The structure of a market refers to the number of businesses in a market, their market shares and other features which affect the level of competition in the market. Structures are classified in term of the presence or absence of competition. When there is no competition, the market is said to be concentrated. A scale from perfect competition to monopoly can be found below.

Perfect Competition
A perfectly competitive market is a market where competition is at its
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This will also increase profits as the company will have judged their margins correctly to be able to supply and sell as much of their product as possible, without over stocking or bringing added finances to the business. Poor judgement could lead to a misinterpretation of market forces, either leaving customers empty handed as not enough product has been supplied or leaving their business overstocked as customers do not want the quantities supplied. In both cases a company’s profits will be greatly affected and the organisation’s reputation may be tarnished. The relationship between market forces and organisation response is therefore vital in terms of business success and customer satisfaction. For this reason, market research is key in order to determine market forces so that an organisation can respond correctly to the market they are operating in. It is also important to continue monitoring market forces to ensure that an organisation can respond to any changes in market conditions.

How Business and Cultural Environments Shape the Behaviour of Tesco

Tesco being the biggest retailor in the UK and the third biggest in the world means it can easily acquire or drive competition out of the market and get huge economies of scale. Economy of scale is when the average cost of production is reduced due to the increase in total output. Tesco has a very large scale business

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