For students in any kind of business program, a basic understanding of market conditions and the impact they have on factors important to business decision-making can be greatly beneficial to their future careers. After all, if the business is a game, then market conditions are the rules.
Taking on a market-focused perspective does not have to mean studying advanced economics in a lengthy university program. In fact, students completing shorter focused programs like the Business Administration Diploma program at Academy of Learning Career College learn all about business economics.
Read on to discover several core market conditions, as well as what they mean for forward-thinking business administrators.
Pure Competition: A Theoretical Market State
A perfect competition market structure is purely theoretical—while it is not possible to attain in a real-world market, it is a concept that is often used as a standard by which to measure other types of market conditions. Under perfect competition, the following conditions are true: All firms sell identical products, all firms have a small market share, firms can freely enter and exit the market, no firms control the market price of their product, and all buyers have complete information about a firm’s products. If any of these conditions change, so does the market condition.
Understanding the Impact of Monopoly in Business
The opposite of perfect competition, a monopoly is a market in which there is no competition and one firm controls the entire output of a good or service. Just like in the board game, as a monopolistic firm gains control, it becomes more difficult for new firms to buy their way into the industry and prices tend to increase.
Many countries have laws in place to prevent monopolies. The only reason you might find yourself working for or engaging with a monopoly after finishing your business admin courses is if you choose to apply your skills at a nationally-owned firm—for example, the Crown Corporation Via Rail has a virtual monopoly on national passenger rail service in Canada. However, even Via Rail has to compete against airlines, bus services, and rideshare platforms, so even they cannot behave like they would under a pure monopoly.
Monopolistic Competition Is a Useful Concept
Monopolistic competition is essentially the middle ground between monopoly and perfect competition, and many real-world markets exist under this condition. Under monopolistic competition, many firms compete with each other to sell similar but slightly different products. This means that consumers perceive non-price competition between products in this market—that is, people choose between different firms’ products for reasons other than prices, like branding or design. Under monopolistic competition, new firms can easily join the market, and price changes impact how many people buy a firm’s product in this market.
For students who may want to work for companies that make products like clothing, food items, or cosmetics, understanding monopolistic competition is especially important.
Learn About Oligopoly in Your Business
In an oligopoly, a very small number of firms control the entire market share. Firms already in the market are able to set the price for their products relatively high. However, barriers to entry are also high, so new firms are rarely able to enter the market. Graduates with a business administration diploma should keep these conditions in mind, as they may come in handy during their future careers. For instance, a business person working for a small firm would be able to predict that a business plan to break into an oligopoly is less likely to be successful than one aiming at a market with monopolistic competition. Familiarity with market conditions is a sure-fire way to make responsible business decisions as you move into your career.
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