Out come 3.

1 Market Structure
The structure of a market relates to the number of buyers, and sellers, in a market, and to the relative power of these buyers and sellers in determining prices.

List of Market Structures
(1) Perfect Competition (2) Monopoly (3) Oligopoly (4) Monopsony

(1) Perfect Competition
In a market condition where no buyer or seller has the power to alter the market price of a good or service. The characteristics of a perfectly competitive market are a large number of buyers and sellers, a homogeneous (similar) good or service, an equal awareness of prices and volume, an absence of discrimination in buying and selling, and complete freedom of entry and exit. Perfect competition is an ideal situation so it exists only as a theory. It is also called pure competition. In a perfectly competitive market we typically find many buyers and sellers of a product. Each individual player in the market is relatively small and can not influence the market, as a whole. Firms in such markets are ''price takers''. In a perfectly competitive market, the product is seen by consumers as ''homogeneous''; there is no difference in quality of product. In a perfectly competitive market, there are no barriers to entry; firms can enter and leave the industry without cost. In a perfectly competitive market, there is no non price competition, such as advertising. Customers come to the market; they know where the market is. You don't have to advertise where you are, in theory. In a perfectly competitive market, we assume that each firm is attempting to maximize their production levels (produce as much as they can), and thus maximize their level of profit.

(2) Monopoly
A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition - which often results in high prices and inferior products. A monopoly is a market containing a single firm. Monopoly is the extreme case in capitalism. Most believe that, with few exceptions, the system just doesn't work when there is only one provider of a good or service because there is no incentive to improve it to meet the demands of consumers. Governments attempt to prevent monopolies from arising through the use of antitrust laws.

the good or service provided has no close substitutes. In privately owned companies where monopolies occur. such as utilities-ensure the delivery of essential products and services at acceptable prices and generally avoid the disadvantages produced by private monopolies. For a monopoly to persist in the long run. In some monopolies. An oligopoly can be perfect-where all firms produce an identical good or service (cement)or imperfect-where each firm's product has a different identity but is essentially similar to the others (cigarettes).In a monopoly. the barriers to entry are exceptionally high. An oligopoly is an intermediate market structure between the extremes of perfect competition and monopoly. through advertising. It was argued that in some markets. and because any change in price or change in market share by one firm is reflected in the sales of the others. This encourages non price competition. Control of the production and distribution of a product or service is in the hand of one firm or a group of firms. or closely regulated by the government. barriers to entry must exist. for price to be kept as low as possible. firms in an oligopolistic market sell similar goods and services which are close substitutes. the barriers to entry are created by government legislation. they have three main sources: • • • A key resource is owned by a single firm. are rigid. the marketer's challenge is to maintain the uniqueness of the product while at the same time discouraging other companies from entering the market. Public monopolies-those operated by the government. entry of new firms is difficult because of entry barriers. so it is impossible for another firm to enter the market. production had to be as high as possible to take advantage of ''economies of scale''. (3) Oligopoly A situation in which a particular market is controlled by a small group of firms. In its pure form. each firm must make its price and output decisions with regard to the responses of the other firms in the oligopoly. An oligopolistic market is one where the market is dominated by a small number of firms (usually under ten). in which only few companies exerts control over most of a market. The cost of production makes a single producer more efficient than a large number of producers. there are at least two firms controlling the market. The government gives a single firm the exclusive right to produce a specific good. once established. An oligopoly is much like a monopoly. and service-a generally nonproductive form of resource allocation. so that oligopoly prices. Oligopoly firms might compete or cooperate in the marketplace. and thus price sensitive. which is characterized by an absence of competition. monopoly. In a monopoly. In an oligopoly. Because each firm in an oligopoly knows its share of the total market for the product or service it produces. there tends to be a high degree of interdependence among firms. These firms gain the majority of total sales revenue. These . As in monopolistic competition. In oligopolies. packaging. such as the post office. leads to high prices and a general lack of responsiveness to the needs and desires of consumers. Although such barriers can take various forms.

The cigarette company therefore virtually controls the price at which it buys tobacco. Though cases of pure monopsony are rare. firms could compete along other dimensions as well. (4) Monopsony A market situation in which the product or service of several sellers is sought by only one buyer. For example. However. a tobacco grower may have no choice but to sell his tobacco to one Cigarette Company that is the only buyer for his product.entry barriers may be structural (natural). monopsonistic elements are found wherever there are many sellers and few purchasers. It is a market similar to a monopoly except that a large buyer not seller controls a large proportion of the market and drives the prices down. choose prices and output to maximize profits. or artificial. due to a restriction of the quantity purchased relative to the optimal competitive outcome. Out come 3. Firms in an oligopoly. known as oligopolists. Monopsony power leads to a market failure. research and development (R&D) and so forth. such as economies of scale. location. It is sometimes referred to as the buyer's monopoly. It is situation in which one buyer dominates. such as advertising. forcing sellers to agree to the buyer's terms. such as limited licenses issued by government.2 Market Forces and Organizational Responses Market Forces The number of market forces in a market are (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Demand and Supply Elasticity Costumer Perceptions and Actions Issues relating to Supply Cost Structure Economies of Scale Growth of Organization The Labor Market The Impact of Technology The Cultural Environment The Competitive Advantage .

then people will buy more and more cigarettes but upto a certain limit that will stop doing this because smoking many cigarettes is injurious to health and people are not able to smoke too much. then people will assume that it is also of the low quality therefore . Some of the relevant factors concerning demand are: Price If the price of a certain product of PTC rises. This demand will be low in this case. if the price of PTC. the price of cigarettes will also get high and demand will be low. Some of the other brands in the market are available at low prices which are of low quality. Similarly if the prices of other brands go high then people will switch to PTC's brand. the demand for cigarettes is high than elders and females because of health factors. the demand is low and vice versa but sometime if the price gets low then demand skill doesn’t get high. Especially the youngster hold majority of position of smokers. the prices of complementary goods like lighters will also get high. Similarly. If the price of cigarettes gets low.s product are also cut low. they will not buy it. This is because of several factors. The level of Incomes If the people start earning more money then they will go for spending more money on cigarettes of PTC and demand will be high after sometime they will stop doing so because they might have enough money to buy other goods brands like that of British American tobacco etc. if the price of tobacco gets high. Substitutes If the prices are changed then people will switch to other brands in the market. the number of products that people are wiling and able to buy at a certain price. . Therefore. In the first one the demand for PTC brand is low while in the later one the demand is high. Complementary goods If the prices of cigarettes get high. Demography Cigarettes are popular among all age groups genders. So.(1)Demand and Supply Demand The quantity that potential costumers could buy if the price was set a certain level.

an organization needs to produce more. so. Derived Demand If the demand for cigarettes gets high. The formula for price elasticity. If the production of 100 packs takes 10 hours but took 98. Some factors of supply are: Production In order to increase the supply of the product. that there no stoppage in the goods supplied. This proves that the productivity level is greater than 100 % which shows the actual efficiency is greater than expected. the . then the productivity level is 105 %. The demand of a product is different at different prices. Price Elasticity of demand The price elasticity of demand is that how quantity demanded change as price changes. then the demand for cigarettes will rise if the income elasticity is negative then the demand for cigarettes will be fall. Percentage change in quality demanded Percentage change in price If the price of cigarettes rises by 10% then the demand will 20%. Productivity is a relative measure of hours actually taken and the hours that should have been actually taken to make the output. The elasticity will be 20/ 10=2. This means that greater the level of production greater will be the level of supply. then demand for farming land will also get high because more space will be needed to harvest tobacco. Income elasticity of demand The response for demand as the house holds incomes changes. Supply It is the quantity of the product that suppliers would want to produce at a given price. The formula incomes elasticity is: Percentage change in the amount demanded Percentage change in income The income elasticity may be position zero or negative. If the income elasticity is positive.External Factor In winter the demand for cigarettes is high because it feels good while smoking in a cold weather than in hot so in summer the demand for cigarettes is low except for some chain smokers. Therefore.

costs are reduced and there is an increase in the quantity of product supplied. Then PTC will reduce its production level and the supply of cigarettes will also reduce.productivity should be improved which will enable PTC to achieve its production targets and also increase levels of supply. Changes in Technology Changes in technology will greatly affect the level of supply. But no matter what the distribution channel is. So. The production level will be low. then the supplier will cut their prices to attain costumers which will throw some new entrants out of the market and if the supply is below demand then the prices will be low and then there will be the chance of new suppliers to enter the market. The Costs of Making Product If the costs on making the product get high. As a result the producer of the business will stop making the product and some of them will put off the business and will start another one which will definitely reduce the amount of supply. . the costs will be high and consequently quantity supplied will be low. an organization should ensure the availability of its products. If the costs of tobacco get high. An organization having a good inventory system can maintain and deliver its goods on time to the market. Inventory An inventory system is also important in supply factor. Some of the main factors are as follows: Price If the price of the product gets high. The distribution channel for a tobacco company is a long channel. If any organization does not apply technological changes it will greatly affect the business. The major importance of adopting new technology is that production is increased. then it will also have an affect on the prices of wages. if there is any need of products to be supplied to the market there should be enough stock to supply it. raw materials and cost of money to run business. (2) Issues Relating to Supply There are some issues relating to supply. then there will be more product supplied but if the supply exceeds demand. Prices of Other Products If the prices of the other products increases and the price of a product of PTC does not then the supply be less. Distribution Channel An organization should have a proper distribution channel to supply and deliver its products to its retailers. The channel of distribution is either short or long. If the price of tobacco increases then PTC will be tempted to increase the price of cigarettes to earn more profits and can have more production.

There is an emergence of new filters and papers from which cigarettes are made There is also a change in branding and packaging of the products due to the new technology revolutions.3 Gaining of Competitive Advantage over competitors . natural disasters such as earthquake and floods and strikes can reduce the quantity supplied. It affects the business in the following way: Types of Product There is a change in the way the types of products are made There is a change in one thing or another due to technology. It is because of the computerized inventory system that such a huge amount is well organized and controlled. The quantity of nicotine and tar are also monitored through advanced machines. The flow of goods can be monitored by scanners and bar codes in super markets and shops which make it easy to reorder. Computerized Inventory System Now it is easy to control the flow of stock in an inventory. Delivery of Products The delivery of products has become fast due to the fast moving vehicles which can deliver the product to any part of the country in lesser time. Central Computerized System To make a company or organization work better all the departments should work faster and in co ordination. The tobacco used in the cigarettes is fine blended. For this purpose central computerized system is used to coordinate the departments and it's also helpful to faster the activities of each department Out come 3. There are new and fine filters introduced. Quality of Product Due to the usage of new technology the quality of the products of PTC has improved.Other Factors Factors such as weather which is important for agriculture. Nothing can be done about these factors and the consequences have to be faced by the suppliers in terms of short supply to the market (3) The Impact of Technology There is a greater impact of technology on the business of tobacco. Today the product of PTC can be seen in the far flung areas of the country. Availability of Goods The availability of goods has also improved due to some new technological factors.

Discouragement of new entry might also be feasible in some circumstances. But it hardly exists. which may capture the market though its unique selling proposition. very few are able to achieve both of these goals simultaneously.A business is basically a system that process different (or single) raw materials and produces what the customers will buy. The toughest part is to embed in the customers mind that our firm’s product is better than the competitor. there must be free entry and exit for any firm. that is to say. the firm must” add value” to its services or products. The extra costs of advertisement and other promotion techniques will make it difficult for new firm to create an image. But it will only be possible if the firm is a market leader or second to it. a company might set up an extra factory to discourage it.. But as it’s easier said than done. the firm has to work very hard and keep the following factors inn mind (porter’s 5 forces)      Threat of new entrants Threat of substitute products Bargaining power of customers Bargaining power of buyers The level of competition within an industry  Threat of new entrants: There is always a threat for a new entry in the market. there are several barriers to entry for a new firm which add to the advantage of the existing one. . that too at a profit. for example. to sell it more than the competitor Every firm wants to be the market leader and maximize its sales for increasing profit. In a ideal economic system. So the firms needs to be up to dated in technological as well as surrounding factors to keep a check on new entrants. These include • • Economies of scale. Since there will be other firms as well operating in the market. For achieving that. make it different or more attractive than the rival product. if current firm can gain economies of scale. it will be difficult for new one to compete because of the extra costs The image built up by the existing firm might also add up for its advantage. foreseeing a new entry.

which might be very difficult to achieve  Threat of substitute products: According to porters 5 forces. use of cars instead of cycle( although not practical) an the use of tennis balls for playing cricket instead of Kookaburra hard balls ( most of the cricket in Pakistan is played by tennis ball).  Level of Competition within Industry: The level of competition also defines the situation in the market. thus incurring extra promotional costs. It’s easy to gain competitive advantage when there are few large firms in a market. and to follow it becomes inevitable in some circumstances. the more it will be harder to get competitive advantage. It has to restructure its manufacturing unit or restructure its pricing policy. Thus there is always a threat of substitute product from other industry  Bargaining power of Customers: Bargaining power of the customer also plays a pivotal role in gaining competitive advantage. achieving this might be very difficult. for example. Effective distribution might be needed from the very start of business operations. But in a large market where many firms operate. the firm has to be lenient as well as compromise on what the supplier ask. When the customer is in a condition to bargain strongly and can change the firm’s prices or quality (through different platforms’) it negatively affects firm. it will be fatal for the firm. which might not be profitable. and continue to stock the competitors. If it stop stocking firm’s products at his store. So in most of the cases. one firm might reduce the rates to extra ordinary extent.  Bargaining power of the Supplier Bargaining power of the supplier is also very crucial. Loyal customer might be very hard to change. threat of substitute means threat from products from other industries. Thus the firm will then be more interested in minimizing profits and maximizing market share. The more will be the competition. If the supplier is at a important position (say the most visited store in town ) it will have an upper hand as far as the firm is concerned. Competitive Strategies . In intense competition.• • • Large investment might be required to start new business along with additional taxes.

This could also reduce the over all costs and help achieve economies of scale. more attractive or with more features as compared to the competitor. Once a particular segment has been chosen.There are basically 3 types of competitive strategies 1: Pricing Strategy: This might be the simplest of all. 2: Differentiation Strategy: Its core theme is that competitive advantage can be best gained through making the products different. such as Toyota segmenting cars on geographical basis. By doing so. It might also be needed to kick out a potential firm which might be dangerous in future. still may be very difficult to implement. It might be the only option available in certain circumstances. the firm can gain market share which it can later use as a tool in its operations. It aims at reducing the cost to the lowest possible extent. It can also be technologically better. different for Europe and different for Asia. or to sell goods at the lowest rate as compared to the whole industry. The wrapping can also be made attractive (in case of kid’s products) and the sizes may also be increased\ decreased (as in the case of mobile screens) 3: segmentation strategy: Aims at selecting a particular group of people to be targeted or particular geographical area to be targeted. the firm can then specializes in that and can produce better goods as a result. . Thus it can gain competitive advantage.