Forms of Industrial Organization
To understand Microeconomics it is imperative to understand the respective industries in which businesses operate. Classified into four distinct market structures, industrial organizations lack any kind of homogeny or consistency that would group them together. The four models are pure monopoly, oligopoly, monopolistic competition, and perfect competition. To begin, these market structures vary according to the number of firms in the structure, product type (similar or different), ease of entry, control over price, and marketing strategy (McConnell, Brue, & Flynn, 2009). For this reason, this discussion will focus on four contemporary firms that ...view middle of the document...
What concerns Microsoft is the pirating of their software by consumers or purchases at a cheaper rate through their competition. Microsoft succeeds with this type of price strategy because they dominate the market.
In regard to non-pricing strategy, Microsoft’s innovative approach on software development puts them well ahead of the competition. Competitors such as the Linux and Macintosh systems are only substitutes. The service and high performance of Microsoft’s Windows programs far exceed the competition.
The airlines industry has long been known as an oligopoly. In recent years even more mergers have taken place to narrow down the competition and create more viable organizations. Delta and Northwest combined, as did United and Continental just to name a few. However, from a pricing and non-pricing strategy, Southwest Airlines stands out above many others. Southwest made its name as the low-price airline and the most of the traveling public would name Southwest’s low-price strategy as their main competitive edge. More businesses make sure to include Southwest Airlines in their travel options to keep costs down. Other airlines had to lower their prices to compete with Southwest and they counted on other non-price strategies to help them compete, such as meal service and seat assignments.
Southwest was not to be outdone. Although they still do not offer meal services (and most other airlines do not either without paying for them), they presently offer early check-in and group seat assignments that the traveling public received well. Southwest has used other non-pricing strategies to remain an industry leader. Only one type of plane is flown, the Boeing 737. A typical plane is flown 11.5 hours per day versus other airlines that usually fly a plane 8.6 hours per day (Murtagh, 2001.) Food serving spaces are smaller, thus providing more seats. “Its average turnaround time is half the industry average and has the best on-time performance in airline history,” (Murtagh, 2001, p. 4.) Along with these strong plusses, Southwest offers exceptional customer service both on-board and off. Their flight attendants sing, play games, and hold babies if needed. Southwest Airlines strategies are simple and successful. They provide an outstanding business model for many industries, not just airlines.
Monopolistic Competition Structure
Monopolistic competition has many sellers (25-70), produces differentiated products, and does not have obstacles (barriers) to entry (McConnell et al., 2009). The term “monopolistic” refers to the differentiated products, whereas many sellers and ease of entry characterize “competition” (McConnell et al., 2009, p. 460). Markedly, Starbucks Corporation is a perfect example of a monopolistically competitive company. In fact, the primary reason that Starbucks dominates the coffeehouse market is due its unwavering focus on continual reinvention (Schultz, 2009). This unerring...