Page 90 - Foundations of Marketing

The Marketing Environment, Social Responsibility, and Ethics | Chapter 3 57

Table 3.1 Selected Characteristics of Competitive Structures

Type of Number of Ease of Entry
Structure Competitors into Market Product Example

Monopoly One Many barriers Almost no substitutes Water utilities
Oligopoly Few Some barriers Homogeneous or UPS, FedEx,
differentiated (with Postal Service
real or perceived (package delivery)
differences)

Monopolistic Many Few barriers Product differentiation, Wrangler, Levi
competition with many substitutes Strauss (jeans)
Pure Unlimited No barriers Homogeneous Vegetable farm
competition products (sweet corn)
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When just one or a few firms control supply, competitive factors exert a different form
of influence on marketing activities than when many competitors exist. Table 3.1 presents
four general types of competitive structures: monopoly, oligopoly, monopolistic compe-
tition, and pure competition. A monopoly exists when an organization offers a product
that has no close substitutes, making that organization the sole source of supply. Because
the organization has no competitors, it controls supply of the product completely and,
as a single seller, can erect barriers to potential competitors. In reality, most monopolies
surviving today are local utilities, which are heavily regulated by local, state, or federal
agencies. An oligopoly exists when a few sellers control the supply of a large proportion
of a product. In this case, each seller considers the reactions of other sellers to changes
in marketing activities. Products facing oligopolistic competition may be homogeneous,
such as aluminum, or differentiated, such as package delivery services. The cruise ship
industry is an example of an oligopoly. However, even an industry dominated by a few
companies must still compete and release promotional materials. The Princess Cruises
advertisement promotes the exciting travel experiences posted on its blog by its employ-
monopoly A competitive
ees. By sharing 50 travel stories from the past year, the company hopes to demonstrate structure in which an organiza-
to viewers that they too can have an amazing travel experience with Princess Cruises. tion offers a product that has no
Monopolistic competition exists when a firm with many potential competitors attempts close substitutes, making that
to develop a marketing strategy to differentiate its product. For example, Wrangler and organization the sole source of
Seven 4 All Mankind have established an advantage for their blue jeans through well- supply
known trademarks, design, advertising, and a reputation for quality. Wrangler is asso- oligopoly A competitive
ciated with a cowboy image, while Seven 4 All Mankind tries to maintain a premium structure in which a few sellers
designer image. Although many competing brands of blue jeans are available, these firms control the supply of a large
proportion of a product
have carved out market niches by emphasizing differences in their products, especially
style and image. Pure competition , if it existed at all, would entail a large number of monopolistic competition
sellers, none of which could significantly influence price or supply. The closest thing to A competitive structure in
which a firm has many potential
an example of pure competition is an unregulated farmers’ market, where local growers
competitors and tries to
gather to sell their produce. Pure competition is an ideal at one end of the continuum;
develop a marketing strategy to
monopoly is at the other end. Most marketers function in a competitive environment
differentiate its product
somewhere between these two extremes.
pure competition A market
Marketers need to monitor the actions of major competitors to determine what spe-
structure characterized by an
cific strategies competitors are using and how those strategies affect their own. Price is
extremely large number of
one of the marketing strategy variables that most competitors monitor. When Delta or sellers, none strong enough
Southwest Airlines lowers the fare on a route, most major airlines attempt to match to significantly influence price
the price. Monitoring guides marketers in developing competitive advantages and aids or supply

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