Introduction 2
The City Economy 3
The High-Technology Products Industry 4
The Service Industry 7
The Construction Industry 8
The Public Services 8
Conclusion 9
References 10
MARKET STRUCTURES IN THE CITY
Introduction
The city has four main sectors: 1) high-technology products industry, 2) service industry, 3) public services industry and 4) construction industry. Because the city could gather some innovative people thanks to the developing high-technology products producers in the city, the city is attracting new people every other day. The attractiveness of the city is enlarging the population of the city.
The migration received from the other cities and the other countries provide an essential opportunity for the city. The newcomers are the workers who are willing to work for the high-technology companies, service companies, construction companies, public officers, and potential entrepreneurs. These people are supporting the potential of the city economy.
The high-technology products industry produces cell phones, computers, tablet computers, cameras, and some other similar electronic tools. The high-technology companies hire many foreigner engineers who are experts in their fields, as well as the citizen engineers. As a result of this, the city has a multinational and multicultural population. The high-technology products industry is the driving force in the socioeconomic development of the city. The service sector is developed as a derived industry depending on the needs of the newcomers to the city. The city was not planned to have a high population in the past. After the newcomers arrived in the city, the residents have been in need of accommodation. Depending on this need, a construction industry is developed in the city. Public service industry provides the services supplied by the local government and municipality, and the amount of public services produced has been increased according to the increase in the city population.
This essay will analyze the main industries in the city and suggest essential policies to the mayor of the city. While accessing the industries, the market structures information from the science of economics will be used. In the following part, the general information about the city economy will be provided, and after that part, each section will analyze an industry separately. In the conclusion part, I will make some essential strategies on the socioeconomic development of the city.
The City Economy
The city economy mainly depends on the high-technology products industry. Almost 50% of the entire gross domestic product of the city comes from this industry. Also, 40% of all the workers in the city work in the high-technology companies. Thus, the high-technology productions industry is the core industry for the city.
The service industry includes restaurants, shopping malls, barbers, wines and spirit shops, private schools, and many other varying shops those provide daily needs of the people. The increasing population in the city increases the demand for the services. Many newcomers are willing start their businesses in this industry. At the current time, almost 30% of all the workers are hired in this industry. Almost 30% of the entire gross domestic product comes from the service industry.
Construction industry has developed in the recent five years depending on the increasing need of accommodation for the newcomers. The city population was around 100,000 five years ago, and it has gone up to 500,000 people in the last five years. Thus, the demand for the houses and service buildings increased five times more than the need five years ago. The construction companies are mostly not city-originated companies. Many of them are centered in the other big cities. After the population increase, the construction companies have started their projects in the city. 15% of the entire gross domestic product comes from this industry, and 20% of the entire workers are hired in this industry.
The public services have increased in accordance with the increasing population. More public schools, hospitals, and other public service buildings opened in the city. Because there also exist other private health and education institutions, an increase in the public services has increased less comparatively to the private sector service industry investments.
The High-Technology Products Industry
This industry includes very close substitute high-technology products such as cell phones, computers, etc. The companies hire high-quality workers because they make large investments in the research and development projects. This industry is very dynamic industry, and the demand for the high-technology products is very high in the national and international markets. Especially, the young generation has a big curiosity for these products, and providing variety of products with different options play an essential role. Thus, the companies need to develop new products every year to have the desired market share.
The high-technological products have a short life cycles compared to the other products. The machines can be used for long years; however, the developing softwares and the hardware required to use the new softwares are changed by the companies. In fact, redesigning, developing, or changing the products or the softwares do not increase the efficiency of the electronic tools; however, this is a part of the marketing strategy of the high-technology producing companies. If they sell the same products for long years, the price of the technological products will not be so high, and the high-technology producing companies’ profit margins will not be satisfying.
The question at this point is why the consumers are willing to pay high prices for the high-technology products even though they know that the new technology does contribute to their life comfort so much. The answer is very simple: using high-technology products is a prestige for many people. From the point view of the consumers, a consumer might demand a high-technology product for three main reasons: 1) to develop relatively better business applications those might increase the productivity and the efficiency at the workplaces, 2) to increase the comfort of accommodations and buildings, and 3) to have the high-technology products for prestige. The consumers aiming at reaching the first two goals are truly looking for real high-technology, and if the new technology is not contributing physically, and then they might not be interested in purchasing a new technology. The consumers who are looking for prestige through having the high-technology are willing to buy the products to have a social status. The most important point is that the third kind of consumers is almost 80% percent of the entire consumers. Thus, the high-technology producing companies target the third kind of consumers.
The consumers care the social status they will receive through having the high-technology product, they give relatively less importance to the price. With the economic terms, their price elasticity is comparatively lower. Even, we observe that many low-income or middle-income people buy high priced devices to have a social status. Thus, we might claim that the demand for the high-technology devices is comparatively independent of the income.
The information given above tells us that the high-technology products market is monopolistic competition market. Each company is spending effort to produce new things or new features for their devices because they want to convince their customers to believe that their products are better and different than other companies’ products. For this, they might follow the following strategies: 1) they truly produce new technology and exhibit it to the customers, 2) they might make slight changes and support their products by advertising, and 3) they do not do anything and they spend a lot on advertising to create the belief in their products.
When a company can manage to make the customers believe in that their products are better, and then this company can have the monopoly power for a limited period. The company needs to spend effort to continue their monopoly power in the market. When they lose the belief among the customers, and then the company loses all the monopoly power. The belief created among the consumers decreases the consumers' price elasticity. With a simple explanation, the belief that the customer has made his or her buy the product without caring the high price.
The monopolistic competition market is an inefficient market type because the companies spend a lot of effort and financial resources on advertising to keep their customer loyal to their brand. Thus, the companies care the protection of the loyalty instead of developing relatively better and cheaper products for the customers, and the customers follow their beliefs, but not the high prices.
In the long term, the companies cannot keep their monopoly power because spending on advertisements is not a sustainable strategy. Thus, in the long term the companies those cannot keep the monopoly power, and the monopolistic competition market approaches the perfect competition market.
The Service Industry
In the service industry, there are a large number of new entrepreneurs in the city. In the short time, there might be a market close to the perfect competition because the new entrepreneurs will try to supply the best possible service to their customers to create a market share in the beginning. Even it is possible to observe price fighting between the service suppliers.
The essential problem for the service suppliers will be playing location selection game. Probably, the early comers will be choosing the best locations in the city, and the relatively late comers will decide their location choices by taking the other service suppliers’ locations. Because the number of locations for the varying businesses is limited, the companies will fight to get the best locations.
In the long term, some service suppliers will gain the loyalty of their customers, and they will get a monopoly power in their locations. Some companies will make relatively more profit, and they will be able to open new shops, and it is possible to see some chain supply providers in the city. Thus, depending on their power in the long term, we will see the market getting away from the perfect competition.
The Construction Industry
The construction business requires a high amount of capital; therefore, a limited number of companies might operate in the city. Because the city is developing recently, many construction companies from the other cities will do projects in the city. Because of the high entry costs to the construction industry, we might face an oligopoly market. A few large companies will build all the buildings.
At the early times, there will be more construction projects in the city because there will be more lands to use. In the future, when the limit is reached, then only one company or less number of companies might stay in the market.
This market is also limited by the city development plans which are designed and published by the municipality. There are strict rules on the market. Thus, the oligopoly is inevitable in the sector.
The Public Services
The public services are provided by the governmental organizations and the municipality. Every public institution is formed and run by the government or a municipality; therefore, there is not competition. Consequently, we observe that the public services market is a monopoly market protected and regulated strictly by law.
The only place there exists a competition in the public services industry is the purchases that the governmental institutions purchase their needs from the private producers. The competition in this field is regulated by legal framework.
Conclusion
The city is a developing city, and the city needs to provide enough job opportunities, services, public services, and infrastructure for the new-comers. The driving force of the city is the high-technology products industry. The services industry, the construction industry, and the public services industry are the complementary or the necessary industry for the development.
The high-technology industry makes an essential contribution to the city as well as to the human capital development. On the other site, this industry requires high-quality workers, and high-quality workers would like to have lively and clean city to where they can bring their families. This is the vulnerable aspect of the industry. If the city’s social and natural environment is not satisfactory, the industry cannot hire high-quality workers, and it might not develop. Thus, the municipality needs to develop required physical and social infrastructure.
The construction industry might create important troubles. The companies aim at making the possible highest profit, and they might be willing to do some projects that might cause negative influences on the city development. Each new building in the city needs to make a contribution to the city development framework. Therefore, the municipality has to develop an appropriate zoning plan, and develop a system to monitor the construction companies.
The service industry is an essential industry to develop the social services and some other services in the city. Thus, if a high level of competition exists in the industry, the residents can benefit relatively more from this industry. The municipality needs to develop a system to monitor the competition and some standards in the industry. Developing competition in this sector is very important.
The municipality needs to develop the public services provided by the municipality and other public institutions. Depending on the population projections, the amount and the quality of the public services need to be developed in accordance with the city development plan.
References
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