Unit 18
Market structure and competition
Hgkegjr 1 Market structure
1 a Discussion 1 b Reading 1 c Comprehension 1 d Vocabulary
2 Competition
2 a Vocabulary 2 b Comprehension 2 c Reading 2 d Discussion
1 Market structure
MICHELN SIEMEN SONY Hertz Kodak
1 a Discussion
Think of some durable consumer goods that your family possesses ? perhaps a car, a television, a stereo, a camera, a personal computer, a cooker, a fridge, a hair dryer, and so on. Think of your casual clothes, especially jeans and sports shoes. Think of toys you had as a child. Think of the brands of food and drink you habitually consume, including breakfast cereals, chocolate, tea and instant coffee. Think of the products you use to wash yourself and clothes.
In each case, do you know whether the company that makes them is one of the following? the market leader (with the biggest market share) the market challenger (the second-biggest company in the industry) one of many smaller market followers
If you buy or have bought products that are not produced by the market leader or a well-known market challenger, what is the reason? chance price Because the product has a ‘unique selling proposition’ that appeals to you Because you need something special, and are part of a particular niche or market segment
Reference answer :
Gives examples. Last year, I bought a itoos MP
  4. I am sure that most of us has never heard the brand before. The reason why I bought is that the MP4 is not only very cheap but also very beautiful.
1b Reading
Reading the following text and write short headings of each paragraph.
MARKET LEADERS, CHALLENGERS, AND FOLLOWERS 1…………………………………………….. In most market there is a definite market leader: the firm with the largest market share. This is often the first company to have entered the field, or at lest the first to have succeeded in it. The market leader is frequently able to lead other firms in he introduction of the new products, in price changes, in the level or intensity of promotions, and so on.
2……………………………………………………… Market leaders usually `want to increase their market share even further, or at least to protect their current market share. One way to do this is to try to find ways to increase the size of the entire market. Contrary to a common belief, wholly dominating a market, or having a monopolyk is seldom, is seldom an advantage: competitors expand markets and find new uses and users for products, which enriches everyone in the filed,
but the market leader more than its competitors. A market can also be expanded by stimulating more usages; for example, many households no longer have only one radio or cassette player, but perhaps one in each room, one in the car ,plus a minidisc player or a walkman or two. 3………………………………………………………… In many markets, there is often also a distinct market challenger, with the second-largest market share. In the car hire business, the challenger actually advertises this
fact for many years Avis used the slogan ‘We’re number two. We try harder’. Market challengers can either attempt to attack the leader, or to increase their market share by attacking various market followers. 4 ……………………………………………… The majority of companies in any industry are merely market followers which present no threat to the leader. Many market followers concentrate on market segmentation: finding a profitable niche in the market that is not satisfied
by other goods of services, and that offers growth potential or gives the company a differential advantage because of its specific competencies. 5 ……................................................................. A market follower which does not establish its own niche is in a vulnerable position: if its produce does not have a ‘unique selling proposition’ there is no reason for anyone to buy it. In fact, in most established industries, there is only room for two or three major companies:think of soft drinks, soap and washing powders, jeans, sports shoes, and so on. Although small companies are generally flexible, and can quickly respond to market conditions, their narrow
range of customers causes problematic fluctuations in turnover and profit. Furthermore ,they are vulnerable in a recession when, largely for psychological reasons, distributors, retailers and customers all prefer to buy from big ,well-known suppliers.
Key:1 the market leader 2the ways of market leaders increase or protect their market share 3the distinct market challenger 4market followers 5The disadvantages of market followers
1c comprehension
Which of the following three paragraphs most accurately summarizes the text, y attacking eutherand what is wrong with the others? First summary; In most markets there is a definite market leader, with the largest market share, which frequently helps other firms to introduce new produces. In many cases, there is also a market challenger, which wants to replace the leader, and various market followers, which seek out
particular niches that do not interest the leader. Other followers merely imitate the products of larger companies, but this is a dangerous strategy during recessions. Second summary: In most markets there is a leader that strongly influences other firms in the introduction of new products, price changes, promotions, and so on. There is frequently also a market challenger, with the second-largest market share, which can attempt to increase its market share by attacking either the leader or some market followers.
Market followers often concentrate on profitable niche products that are in some way differentiated from the products of largecompanies. Third summary: The first company in a particular market nearly always becomes the market leader a followers. Most followers can either concentrate on small market segments or niches, or follow the safer strategy of imitating the leader’s products. The second summary is the best. Because it contains all the content of the passage, including the market leader, the distinct market challenger and market followers.
1d Vocabulary
Find words in the text which mean the following. 1 a company’s sales expressed as a percentage of the total market 2 short-term tactics designed to simulate stronger sales of a product 3 the situation in which there is only one seller of a product 4 companies offering similar goods or services to the same set of customers 5 a short and easily memorized phrase used in advertising 6 the division of a market into submarkets according to the needs or buying habits of different groups of potential customers 7 a small and specific market segment
8 a factor which makes you superior to competitors in a certain respect 9 a business’s total sales revenue 10 a period during which an economy is working below its potential
Key: 1 market share 2 intensity of promotions 3 monopoly 4 usage 5 slogan 6 market segmentation 7 niche 8 specific competencies 9 turnover 10 recession
2 Competition 2a Vocabulary
Match up these words with the definitions below barriers to entry cartel economics of scale monopolistic competition natural monopoly oligopoly dominant-firm oligopoly monopoly monopsony
perfect competition
Thinking
1 …………….exists when products are homogeneous, and there are a great many firms too small to have any influence on the market price, and firms can easily enter and exit the industry. 2 A………….is a market in a particular product in which a single producer can fix an artificial price. 3 ……….is the situation in which there is only one buyer. 4 A…….is an industry in which the efficient existence of more than one producer is impossible; examples include public utilities such as water, gas, and electricity, where it would be inefficient to have several competing companies laying their own networks of prices or cables.
5 ……….exists when many products of slightly differentiated products are able to sell them at well above their marginal cost. 6 An………..is a concentrated market dominated by a few large suppliers. This Is very frequent in manufacturing because of economics of scale and the cost barriers of entering an industry. 7 ………are factors which cause the average cost of producing something to fall as output increases. 8 ………are economic or technical factors that make it difficult or impossible for firms to enter a market or compete with existing suppliers. 9 A……..is one in which a market leader can indicate its
preferred price to smaller competitors. 10A …………..is a group of produces or sellers who fix prices and quantities in order to avoid competition and increase profits. This is illegal in many countries, most notably the USA. Key: 1 perfect competition competition 4 natural monopoly 6 dominant-firm oligopoly 8 barriers to entry 10 oligopoly 2 monopolistic 3 monopsony 5 cartel 7 economics of scale 9 monopoly
2b Comprehension
Classify the following markets according to whether you think they are examples of the following. a dominant-firm oligopoly a monopolistic competition a monopoly a monopsony a oligopoly perfect competition
Thinking
Arms and weapons systems a monopsony
Cars (automobiles) a oligopoly
Confectionery (chocolate bars) perfect competition
Wheat a monopolistic competition
Rail transport a monopoly
Mainframe computers a dominant-firm oligopoly
2c Reading
Rearrange the following sentences and part-sentences to make up a short text about market concentration kike this: Begin with a paragraph containing arguments both against and in favor of monopoly. Continue with a paragraph defending or justifying market concentration. End with a paragraph arguing that monopolies are always short-lived, and so not a problem.
A According to this position, the government only needs to ensure that there is no monopoly over important inputs, because there will never be a monopoly of scientific or artistic genius or business ideas. B According to this view, market concentration arises naturally from a few successful firms growing larger as a result of increased efficiency, innovation, and economies of scale in production, distribution, R&D, capital financing, and so on. C a counter-argument is that erecting barriers - or example, by process innovation, product differentiation, persuasive advertising, or pricing policy ? in order to be successful and
to make competitors less successful, is a normal part of rivalry and competition. D Although some people argue that any barrier to competition will inevitably lead to inefficiency, E An example here would be telecommunications. F and businesses facing no competition have no incentive to find ways to reduce costs. G Even the profits made by a natural monopoly will be temporary, because they are an incentive for entrepreneurs to discover and implement new low-cost technologies.
H For example, although entrepreneurs introduce new products and techniques and open up new markets, their profits are soon competed away by rivals. I it is right that inventors should be granted a temporary monopoly as a reward for innovation or discovery. J monopolists are always able to make excessive profits, K Some people even argue that monopolies are always temporary and consequently not a problem. L The arguments against market concentration, or at least against monopoly, are obvious: M The only common argument in favour of monopoly concerns patents:
1 2 3
Key:
L D K
F C J
E B G
M I
H A
The arguments against market concentration, or at least against monopoly, are obvious: and businesses facing no competition have no incentive to find ways to reduce costs. An example here would be telecommunications. The only common argument in favour of monopoly concerns patents:
For example, although entrepreneurs introduce new products and techniques and open up new markets, their profits are soon competed away by rivals. Although some people argue that any barrier to competition will inevitably lead to inefficiency, a counter-argument is that erecting barriers - or example, by process innovation, product differentiation, persuasive advertising, or pricing policy ? in order to be successful and to make competitors less successful, is a normal part of rivalry and competition. According to this view, market concentration arises naturally from a few successful firms growing larger as a result of increased efficiency, innovation, and economies of
scale in production, distribution, R&D, capital financing, and so on. Some people even argue that monopolies are always temporary and consequently not a problem. monopolists are made by a natural monopoly will be temporary, because they are an incentive for entrepreneurs to discover and implement new low-cost technologies. it is right that inventors should be granted a temporary monopoly as a reward for innovation or discovery. According to this position, the government only needs to ensure that there is no monopoly over important inputs, because there will never be a monopoly of scientific or artistic genius or business ideas.
2 d Discussion
Which of these arguments ( or sets of arguments) do you find the most persuasive? Key: in my opinion, the argument of “against monopoly” is the most persuasive.
~The end
 

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