A- Industry fragmentation is a strategic feature common in a perfectly competitive market that indicates there are no dominant players in the market.
Industry fragmentation – competitive market
Application Question 3, page 194
A- Industry fragmentation is a strategic feature common in a perfectly competitive market that indicates there are no dominant players in the market. The essence for fragmentation of the furniture industry ensures production companies are render powerless in regard to price setting hence becoming price takers (Fine, 2016). Also, the fragmented industry offers an opportunity for product differentiation.
B- In this case, the 1,000 firms which did not surpass the annual sales of $1 billion held 80 percent market share. This implies that a large number of firms took a majority market share hence there is an easy entry into the perfect competitive furniture industry
C- According to the information proffered it is evident that the labor-intensive production technique is widely used by firms across the board only but the two mentioned firms (Nomidis, 2016). For the furniture industry, it is proof of undifferentiated products.
D- Based on this scenario, firms in a perfectly competitive industry strive to employ an extensive number of options to guarantee customer satisfaction.
For this, firms go above and also beyond to achieve customer loyalty and retention.
E- Essentially in a perfectly competitive market, the difference between the price and average product cost is positive. Thus, this offers an opportunity to enter the perfectly competitive market freely and easily.
F- The availability of complete information to consumers is a major characterizes of the perfectly competitive market. Therefore, the initiative for the campaigns in this industry is to provide transparency to customers on the products offered.
G- The anti-dumping regulations proposed by the 28 U.S based furniture manufacturer prevent foreign countries from selling products at lower prices in the U.S market.
H- The main goal of subcontracting to China has access to services and goods at lower prices than they would cost in the United States. However, this action will harm domestic firms as it leads to a shortage of products and profit reduction.
Application Question 4, page 229
a- Discuss the role of consumer demand in influencing Parker Pen’s strategies. It is a fact that consumer demand has a significant role in a firm’s strategies for a given product. Consumer demand for luxury and fine items in China has been on increase with the increased income and also wealth among individuals. Wealthy individuals are always on the lookout to flaunt their affluence. In recognition of this Parker Pen company enhanced its brand image and also placed a high value on its pen to attract the preference of wealthy individuals who able to spend a premium on a pen (Lordkipanidze, 2018). The Parker Pen company resulted in manufacturing a high-priced luxurious pen to take advantage of the demand by wealthy individuals in China.
b – Do you think Parker will be able to maintain its market power in China? Explain.
Following the parker pen strategy, it is no doubt that it will be able to maintain its market in China. This has been occasioned by the fact that the company has wisely attracted the consumers. This was by incorporating native language and also special characters that relative to China’s people. This had a positive impact on sales as it increased from 30 to 50 percent. This simply implies that the company strategy has quite successful in targeting the preference of the consumers. Therefore, product differentiation in this market is a sure bet on product acceptance.
References
Fine, B. (2016). Microeconomics. University of Chicago Press Economics Books.
Lordkipanidze, R. (2018). Objective Equilibrium Realism in Economy for Perfect Competition.
Nomidis, D. (2016). A Revision of the Theory of Perfect Competition and Value. Available at SSRN 2875582.
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