Following the American Psychological Association’s Guidelines
NONCOMPETITIVE MARKETS: A CASE STUDY
Introduction
Competition is the most crucial property of a developed market which ensures higher quality products at reasonable costs. For a perfect market or a market close to perfect requires a background inclusive of some dimensions: information gathering has to be possible; information has to be open to everybody; a developed participation in the market operations is a must. In an environment that anybody can have the market information, it is possible to see that many companies are founded and developing, thus a highly competitive and a strong market mechanism can be built. Subsequently, there is no major power which can lead the market in order to maximize its utility cannot exist.
It is impossible to build a perfect competition or in another word no perfect competition exists in reality. In this essay, a company and one of its products will be chosen and a market analysis will be developed. I want to study on Apple and tablet computers this company produces.
What type of markets exists for the tablet computers?
Apple produces tablet computers, cell phones and other similar electronics and it has a leading position in the industry. It is possible to claim that even though the Apple products are more expensive relatively, the sales of the company are much higher than other companies.
The Apples’ tablet computers use a different operation system and its appearance is more attractive than other brands computers. The industry analysis shows that people trust the Apples’ products and it is attractive for many people. Even some professional like designers, fashion industry workers, architects, computer programmers and some other similar workers prefer using the Apples’ computers.
Another essential feature of the Apple Company is that it develops new models every year and they market a new product every year. Following the development line of the Ipad, Iphone and new generation products, we can easily see that each product is taking people’s attention easily and some people have become so desperate to have one Iphone, although there are many other brands producing similar products.
How is the Apple Company managing to be a power in the market? Apple is following a strategy which enables the company products to be attractive for many people even though they are more expensive and including programs and some hardware not compatible with other computers; for example, the programs used in the Apple’s computers’ operating system are completely different from other companies’ software.
The answer is that Apple is capable of managing change and Apple is always one step ahead from other companies. We observe that many new applications, software and hardware are put into market by Apple. At the beginning of the Apple story, we have had the Apple Computers. These products were using a completely different operating system and it was hard to get used to using these devices for many people, however, it has not been so hard to get used to, and people have got addicted to it. Other companies have followed Apple and they have copied some applications from Apple and even we have seen similar operating systems for free. However, each time, Apple could manage to develop a new technology, a new application, etc. and it has always been one step ahead from other companies.
The strategy that Apple is following is indicating us that the market of the tablet computers is a monopolistic competition market. The companies in the market basically are producing the same product; it is a tablet computer with an electronic pen and all the products of the different brands are satisfying the same needs of the customers. However, whichever company can produce differentiated products and can have a better advertising strategy is becoming the leading company in the market. Analyzing the Apple Company, one can see that Apple is doing innovations in its products, it has a good image in the public and Apple has developed very well designed advertising strategy.
Monopolistic competition market is a market between perfect competition and monopoly. In the short run, all companies in market try to differentiate their products and create an image for their products which makes customers believe that this particular product is “different” (in another word “better”). If that could be succeeded, then customers become addicted to this product and even though this product is not the best, they would be still interested in it. Making people addicted to a particular product means that the price elasticity of demand for this product gets smaller, thus the company can change the price of this particular product easily. In another word, this company gets some monopoly power in the short run.
However, in the long run, other brands (companies) can figure out why this particular product is preferred by customers over their products and they follow the leading company, even they might steal or copy product. By following the same strategy with the leader company, all the companies can be more competitive and the leader company loses its advantage (monopoly power) in the market. Therefore, in the long run, the market gets closes to perfect competition market. In the long run, all the secrets can be revealed by the other companies.
In the monopolistic competition market, there is a highly developed competition between the companies. They all try to develop new technologies, new applications, new services, new sale strategy designs, new advertising styles and that gives them some monopoly power, however, in the long run, all these advantages disappears. To differentiate and innovate their products, the companies in the monopolistic competition markets uses many resources for R&D and they hide their information from the other companies and this hidden information developed by these companies grants them a big advantage in the short run.
Monopolistic competition is different from oligopolistic markets also. In oligopolistic markets, a few companies try to make an agreement to determine the market price and other variables in the market. On the contrary, in monopolistic competition market, the companies are in a big struggle of competing in technology and advertising. In oligopoly, if there is no agreement, then the companies are competing and the competition becomes very harsh. Otherwise, if they can reach an agreement, then they behave like a monopolistic company.
Strategy Recommendations
- A company in a monopolistic competition needs to be able to do R&D continuously.
A dynamic R&D is important to be leader in the monopolistic competition market. All the companies are producing substitutable products, thus if a company fails to prove that its products are better than other brands’ products, then this company loses its power.
- Monitoring other companies’ technology development and marketing strategies and developing new technologies, products and marketing to respond other companies strategies.
A company in the monopolistic competition market should always observe other companies behaviors to decide new strategies. Being a leader company and continuing this situation is truly hard, because of that, it is very important to know what other companies do.
- Researching consumer behaviors and develop new products which match their needs.
The target is to cover consumers’ needs. The aim in the monopolistic competition markets is to make consumers addicted your companies’ products. To succeed this, high quality consumer researches has to be done. Knowing your customers’ attitudes and needs is a very big advantage for companies.
- A price determining strategy for the new products and old products.
Apple is innovating its products every year. They need to charge higher prices for their new products while they have the monopoly power, and for their old products, because other companies have probably made close substitutes, they can charge only market price.
References
Netessine, S., and Shumsky, R. A. (2005). Revenue Management Games: Horizontal and Vertical Competition. Management Science, Vol. 51, No. 5, pp. 813-831.
Riordan, Michael H. (1986). Monopolistic Competition with Experience Goods. The Quarterly Journal of Economics, Vol. 101, No. 2, pp. 265-280.
