TYPES OF

COMPETITION
 COMPETITION AND MARKET
STRUCTURES
• Pure Competition
– Type of market structure where there are
many sellers, none of which controls the prices
and output of the whole industry.
– Products are homogenous
– No barriers to entry
 COMPETITION AND MARKET
STRUCTURES
• Pure Monopoly
– There is only one seller who represents the
whole industry
– There is only one product or service with no
substitutes.
– Have barriers to entry causing no other entities
to compete in the market
 COMPETITION AND MARKET
STRUCTURES
• Oligopoly
– There are few sellers of differentiated products
with strict barriers to entry.
 COMPETITION AND MARKET
STRUCTURES
• Monopolistic Competition
– There are many sellers with unique products,
each trying to gain a competitive advantage.
– In this type of competition, innovating a
product to fit the consumer’s needs is essential
to take advantage of other untapped market
segments.
 TWO FORMS OF BARRIERS TO ENTRY

1. Industry Barrier- where initial capitalization

of business is very expensive.
2. Government Intervention- where licenses
are difficult to secure or taxes are very
high.
 CUSTOMERS
*MARKET- refer to the structure where the firm
belong. In other disciplines, it may also refer to
the type of customers and their number as well.

KNOWING AND UNDERSTANDING YOUR

CUSTOMERS ARE ESSENTIAL TO
IDENTIFY THE SERVICE OR GOOD TO
PRESENT TO THE MARKET.
• Market Segmentation
– Categorizing your customers according to
demographic and geographic groups.
– This is done to meet the demands of different
types of consumers.
• Demographics
– Describe the kind of customers you have in
terms of gender, age and income.
– Customer’s needs and wants are also
identified.
– Three types of Products based on consumer
gender: goods and services for 1) males only 2)
females only and 3) those that could cater
both.
Income- determinant of quantity demanded or
how much a consumer is willing to purchase.
- may also be expressed on economic bracket
where the consumer belongs.
D CONSUMERS- = low income earners
B and C CONSUMERS = upper middle and lower
middle income earners
A CONSUMERS =high income earners
• Geographic Segment
– Refers to consumers belonging to a certain
place.
– They can be classified as Urban or Rural areas,
western, eastern, southern and northern parts
of the country or region, may also refer to
different provinces and cities.
 SUPPLIERS
• Supplier
- defined as the source of materials used in
production by a producer , a seller or a
manufacturing.
 COMPETITORS
Competitors
-Any person or entity which is a rival against
each other.
- A company is the same industry or a similar
industry which offers a similar product or
service.
1. Competitors have the same qualities and
characteristics
- none of them has leverage over other competitors.
- in a purely competitive environment, this happens
when the product is homogenous in nature.
-good thing in this competition is its predictability.
The opportunity in opening a business of this type is
huge. Its easier to enter the market: easier to exit.
2. Type of competitor who tries to get loyal
customers by having a leverage or Competitive
advantage
-innovate the product to make it different from other
products to avoid being predictable among competitors.

The opportunity to be part of this market is relatively

difficult compared with the first type. It is because one
needs to think of a way to sell his/ her commodity or
service by being different in a good way, that customers
will choose his/her product over the others. It will also
make customers come back and become loyal customers
3. Those competitors who collude.
Colluding occurs when competitors conspire as one
having the same objectives.
- there are few competitors that it is easier for them
to coordinate and control prices and output to give
equal benefits to all of them.
-there should be something in common among
competitors like the same material in making their
product and this material should be very difficult to
acquire and the entry to the industry should be very
difficult.
 SUBSTITUTES
Substitutes are goods that can replace other
goods because of similarities, appearances, use,
among others.

*Increase in the price of one good increases the

quantity demand of the substitute.
KEY POINTS TO REMEMBER
• Most of the industries that we have right
now are mixtures of the four market
structures. In reality, these market
structures (theoretically) do not exist but
variations of these exist.
• Pure competition is the first type of market
structure where there are many sellers and
none of them controls the prices and
output of the whole industry.
KEY POINTS TO REMEMBER
• Pure monopoly is where there is only one
seller who represents the whole industry.
• Oligopoly is where there are a few sellers
selling differentiated products with strict
barriers to entry.
• Monopolistic competition is where there
are many sellers with unique products,
each trying to gain competitive advantage.
KEY POINTS TO REMEMBER
• Advertising plays a vital role in promoting
the differences and uniqueness of a
product.
• Many sellers belong to pure competition
and some belong to Monopolistic
competition depending if the seller/supplier
has loyal consumers.
KEY POINTS TO REMEMBER
• The best type of business for a new
competitor is under pure competition where
it is easy to penetrate the industry because
there are no barriers to entry.
• Barriers to entry may come in two forms: 1.)
Industry barrier where initial capitalization of
business is very expensive, and 2.)
Government intervention where licenses
are difficult to secure or taxes are very high.
KEY POINTS TO REMEMBER
• Understanding your customers and
knowing them are essential in identifying
what kind of service or good you are
supposed to present to the market.
• Demographics play an important role in
knowing your customers . Demographics
describe the kind of customers you have in
terms of gender, age and income.
KEY POINTS TO REMEMBER
• Age plays an important part in knowing
your customers.
• Income is one of those determinants that
can predict quantity demanded or how
much a consumer is willing to purchase.
• Geographic segment refers to consumers
belonging to a certain place.
KEY POINTS TO REMEMBER
• A supplier is defined as source of
materials used in production by a
producer, a seller or a manufacturer.
• Substitutes are goods that can replace
other goods because of similarities,
appearances, use, among others.