Business Environment - First Assignment Guidance
Identify and explain the most important sources of product differentiation and market entry barriers, within your chosen industry. It is recommended that you choose an imperfectly competitive market structure (for example, monopolistic competition, oligopoly, or monopoly) to consider within your assignment. The characteristics of each market structure, in terms of the extent of product differentiation and market entry barriers, are presented below:-
• No product differentiation. Tendency toward normal profits in the short-term, although in the short-term both super-normal and loss making situations can ...view middle of the document...
Use real world data to consider whether academic theory relating to your market structure provides insight into the bases for the structuring of your chosen industry in the real world. Do not consider that the following list provides an exhaustive list of sources of product differentiation, and market entry barrier. Are there any other factors within your chosen industry structure that provide important sources of product differentiation, or market entry barrier?
Do not seek to apply all the following factors to explain market structure. Instead, be selective in identifying the most important determinants of industry structure in your chosen market. Then ascertain the impact of structure on firm performance within an industry, using market share data, firm profitability data, or company return on capital employed (or any alternative performance indicators that you consider appropriate).
Potential Sources of Product Differentiation
Potential sources of product differentiation that enable the firm to provide superior customer satisfaction relative to other firms may include:-
Perceived customer value may be due to tangible factors, for example:-
1. New customer benefits. Value proposition satisfies an entirely new set of customer requirements, which customers previously did not perceive to exist, and were not previously satisfied by companies.
2. Higher quality. Quality is determined from the customer’s perspective, in terms of more effectively fulfilling customer requirements. Factors that can enhance perceived product quality could include:-
➢ Superior performance. For example, top speed or acceleration can provide an important basis for consumer choice within the sports car market. Accuracy of time keeping is one factor consumers consider within the luxury watch market.
➢ Additional distinctive product features. Product may have additional functions, distinctive shape, smell, taste, and colour. For example, use of precious metals and stones are other factors considered important within the luxury watch market.
➢ Superior content (for example, superior range of games for a specific games console, or IPhone apps).
o Distinctive (superior) product bundling. Product bundling refers to a business bundling a number of separate elements into a package, in order to provide customers with a family of related and compatible products. For example, Microsoft gained an advantage within the Office Software market by bundling a word processing package, with a database, presentation software and e-mail client.
➢ Superior reliability
➢ Superior durability
➢ Usability. Ease of use, and intuitive controls. For example, the Apple i-phone.
➢ Compatibility with other products a consumer uses.
3. Superior availability and accessibility. For example, Apple’s creation of the I-POD and i-tunes service provided customers with greater convenience in searching,...