MGMA01H3 Lecture Notes - Lecture 3: Monopolistic Competition, Oligopoly, Competitive Intelligence
Document Summary
Thinking outside the box: the blue oceans. A small number of firms produce either identical products and sell at comparable price or differentiated products, and charge a premium. Many competitors produce differentiated products, go after different segments, and charge a premium. Many competitors offer the same product, no basis of differentiation, charge. Many competitors, offering undifferentiated products and services, will reduce market attractiveness: the threat of substitution. Where close substitute products exist in a market, it increases the likelihood of customers switching to alternatives in response to price increases. This reduces both the power of suppliers and the attractiveness of the market: the threat of new entry. Profitable markets attract new entrants, which erodes profitability. Unless incumbents have strong and durable barriers to entry, for example, patents, economies of scale, capital requirements or government policies, then profitability will decline to a competitive rate.
