P3考试：Influences on Pricing Strategy（二）

ACCA P3考试：Influences on Pricing Strategy（二）

Competition and Market Types

There are four main types of markets, each giving rise to a particular type of competition.

1 Perfect Competition

This form of market consists of many small suppliers and customers, none of which can influence the market.

There is free entry and exit from the market.

All suppliers supply identical products.

Suppliers must charge the market price. They cannot charge more because the products are identical and every customer would move to cheaper suppliers; reducing their prices would be counterproductive because all output can be sold at the market price.

The Internet has tended to make price and competition much more transparent. Sites exist which specialise in comparing suppliers' prices.

2 Oligopoly

This special type of market consists of a small number of suppliers supplying identical products. An example is found in petrol companies.

If a supplier increases prices, other suppliers simply have to maintain their prices to gain market share. If a supplier reduces prices, the others must follow suit to maintain their market share. There is, therefore, little incentive to reduce prices, as competitors will follow.

3 Monopoly

In a monopoly market, there is only one supplier of a product.

The supplier has the freedom to set the price so that profits can be maximised, although demand is likely to vary as a result. Being a monopolist, however, does not guarantee that a profit is made; demand must exist for the product or service.

4 Monopolistic Competition

This form of competition means there are a number of suppliers supplying similar but not identical goods.

Products are differentiated in some way and, therefore, can command different prices. Suppliers compete but with different product features.

Competition and Motivations

1 Price Competition

Consumers are motivated primarily by price and usually suppliers will have to offer low prices to succeed.

Organisations which use a cost leadership strategy typically adopt price competition. Their products are ordinary, but because their costs are very low (if not actually the lowest) their prices can be kept down.

Many computer/printer producers use price competition because, for most, their products have been commoditised: They all do the same things, with the same operating systems, they run the same application software and have similar reliabilities.

2 Non-price Competition

Consumers pay attention not only to the price of the goods but also are influenced by other marketing-mix variables such as:

quality, brand and features of the goods;

promotion activities; and place (where the goods or services are obtained).

Essentially, organisations which follow a differentiation or focus strategy will be making use of non-price competition. They seek to make their products different so they are particularly attractive to consumers, who in turn are willing to pay premium prices.