Good Essay On Market Structure And Strategic Behavior

Market structure and strategic behavior

There are different market structures in which firms operate including monopoly, monopolistic, perfect competition and oligopolies. The structures play a fundamental role in determining whether a firm is a price taker or a price maker in the industry. In oligopoly market structures, a small number of large firms dominate the industry thus has the power to control factors like price, quality and supply of products. The companies in an oligopoly market sell differentiated or identical products. It is difficult for firms willing to enter into the oligopoly market to succeed due to the various barriers to entry such as accessibility of raw materials, patents and high cost of advertising. Due to the nature of oligopoly market structure, the firms are interdependent on decisions such as pricing. The firms use non-price competition as opposed to price competition.
Microsoft and Apple operate in an oligopoly market structure. When Microsoft Company was faced with tough scrutiny from antitrust experts, it took a strategic measure of providing financial support to Apple so as to ensure that competitiveness in the industry remained (AFP, 1997). This was out of fear that in the event that Apple Company, which was not doing well by then, failed other companies would enter the industry and overtake Microsoft.
The partnership made Microsoft even more successful since it was able to sell more products since Apple supplemented its market for goods. In the recent past, Apple has been performing better that Microsoft. This can be said to have been brought about by the fact that Apple used the partnership with Microsoft as a way of marketing itself, and eventually it beat Microsoft.

References

AFP. (1997, August 8). Microsoft-Apple partnership stuns computing industry. New Straits Times, p. 34.