Differentiating Between Market Structures

Differentiating Between Market Structures

Samsung is one of the largest technology corporations in the world. Samsung’s innovative, yet affordable mobile telephones are instrumental in propelling Samsung to the top of mobile telephone industry. The boom in mobile phones, specifically smart phones has caused an explosion of technology companies specializing in these state-of-the-art mobile telephones. Although Samsung is a clear leader in the production and distribution of the smart phone, there are several other corporations that specialize in this technology. Apple, HTC, and Blackberry also compete in the smart phone arena, but according to (TechCrunch 2013), Samsung was leading the smart phone war with more than $52.4 billion in revenue at the end of 2012.

Upon closer observation, it appears Samsung uses the oligopoly form of market structure, where there are a few producers, yet no one clearly monopolizes the smart phone market. The oligopoly market is dominated by a few large producers. Although there is freedom of entry, there are great barriers to the entry of new producers because of the high investment cost. New producers require time to establish its product, or encounter problems with technology patents. Existing firms may have advantages new producers do not have, such as inputs in place or cost advantage, exclusive arrangements to get inputs at a lower cost. The government may also pose a potential barrier, such as limiting the number of licenses its issues.

Producers in an oligopoly compete on the basis of product differentiation. Products sold by the competing producers may be substitutes. This market structure was chosen because of the few large producers who produce similar smart phones. There is no one company considered a monopoly in the smart phones industry, although Samsung and Apple are considered the premier producers. Each device is recognized by its shape, screen size, and logo.

The producers of smart phones are large firms, but are few in number, and this

disqualifies Samsung’s smart phone industry from the “perfect competition” market structure. The perfect competition market structure has many small firms with no entry or exit barriers, buyers can switch easily from one seller to another, and products are homogenous. The “monopoly competition” structure does not apply because no single firm controls the smart phone market. The “monopolistic competition” structure has many sellers who product similar, but slightly different products. The producer can set the price and quantity and not affect the marketplace. Although similar in structure, the oligopoly structure varies greatly from the “perfect competition” market.

Competitive Strategies

The continued success of Samsung’s smart phones depends on several factors, one of them is its competitive