There are four main market structures namely monopolistic competition, perfect competition, monopoly, and oligopoly. Perfect competition denotes situation where there are many sellers without variation within the product, no influence, or effect on price, and no price tag to exit or enter the market. Monopolistic competition market is the most common category of market structure. Monopolistic competition denotes many sellers with slight price variations within the product, less influence on cost that rely on advertising, and a low entry cost to the market. Oligopoly denotes market structure with few sellers having different products, actual cost of entering the market itself exist. Moreover, it is extremely competitive, and sellers control most price based on competition. Monopoly denotes a market structure of one firm without competition, and the firm set the price. In the opinion of Byrd, Hickman, and McPherson (2013), the effect of market structure in setting the price is significant for financial managers.
Lapse within the process of communication between financial managers, sales, and the market is a problem currently faced by financial managers in the opinion of Prof. Krohmer and Dr. Weissbrich within their article. The communication lapse is partly due to all the technological developments with computers and smart phones. The managers are geographically separated or disconnected on separate hemispheric halves. There is minimal interaction leading to misunderstanding. It is more significant than ever to read from the same script in line with the goals and vision of the company.
Another problem according to Nummy, Livergood, and Hudson (2011), is the world economic recession. The recession has led to increased unemployment rates and failure of age-old companies. The liquidity of all firms assets were affected because less supply, cash, and demand existed. Moreover, this economic stagnation affected the capacity of companies’ market efficiency because less cash flow and assets existed. The economic recession was caused by imbalance and the mismanagement of the world economy that disrupted the usual market structure. There must be a balance of services and goods traded, without which, depression or recession is inevitable.
The market liquidity, efficiency, and competitiveness affect financial managers because the product’s price is dictated by what a purchaser is willing to offer for that product considering a complete cycle to all engaged for continuous, ongoing selling, buying, as well as consumption which maintains the operation of the economy (Boynton, Victor & Pine, 2013). The ease by which a company may turn assets into cash is referred as liquidity. Financial managers must consider the market structure to be in as well as the price of the market entry. Moreover, consider the price control, and the possible effect of other firms engaged within the same market. Competition is the impact or effect of other firms in the quantity and price of produced products within the same market. Market efficiency is the ease by which the market structure functions with the proper ratios of demand, price, and supply.
References
Boynton, A. C., Victor, B., & Pine, B. J. (2013). New competitive strategies: Challenges to organizations and. IBM Systems Journal, 32(1), 40. Retrieved from http://search.proquest.com/docview/222409504?accountid=32521
Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance. Retrieved from http://www.bridgepointeducation.com
Nummy, D., Levergood, J., & Hudson, R. (2011). Public financial management responses to an economically challenging world. The Journal of Government Financial Management, 60(3), 14-20. Retrieved from http://search.proquest.com/docview/896613342?accountid=32521
Weissbrich, D., & Krohmer, H. (2011). Managerial-challenges among marketing, sales, and finance actors. Marketing Review St.Gallen, 28(3), 20-25. doi: http://dx.doi.org/10.1007/s11621-011-0032-2
