For many of us, the word "market" is associated with a place where you can buy or sell something, where you can bargain with the seller, knocking down the price, where there are always a lot of people, why there is noise, din, crowding, and besides, where there is enough the choice of goods both in value and in quality. Such was the simplest market structure at the dawn of the economic development of society. Now this concept has expanded significantly to include dozens of species and categories. Among them there are those where they do not make noise and do not jostle, and they do not have a specific place, since they cover a certain spatial financial and economic aspect of the world economy. But the main pillars of the market, on which he began his existence, remained the same. This is supply and demand. Whatever the structure of the market, no matter how it changes, it is the degree of balance of these two unshakable pillars that determines the further development of the economy in the world, the relationship between the seller and the buyer is determined, prices, salaries and costs are adjusted, incomes that affect the development of enterprises are planned, industries and the life of society as a whole.
Determining the market structure
The word "structure" in Latin means "structure", that is, the internal structure of something, as well as the interaction of individual parts of a single whole. A “market” is a combination of such economic ties and relations that are based on exchange operations between producers and consumers. Based on these two definitions, we can conclude that the market structure is the configuration (structure, types of activity, specifics, and so on) of sectors of the national economy that produce certain goods and perform a number of aggregate financial and economic interactions. In simple human terms, the structure of any type of market is its component parts in the person of producers and owners of a certain product (and they can be not only food or consumer goods, but also finance, labor, services, anything, even ideas), their interactions with each other and with customers.
Market structure factors
The reasons, driving forces, that is, factors of the market structure that determine its economic situation, can be identified as follows:
- vertical integration;
- diversification of production;
- differentiation of goods;
- minimum effective volume;
- import competition;
- demand elasticity;
- advertising.
Vertical Integration and Diversification
Integration implies the merger in one company of different, but related to the same business and subsequent industries. For example, oil tycoons own gas stations or the one who owns a metallurgical plant acquires machine-building. The economic structure of the market, under the influence of vertical integration, takes on monopolization, as this process strengthens individual companies simultaneously in several markets and weakens competition.
Diversification can be called a relative of integration, only in this case the company, without going beyond its segment (for example, a machine-building plant), begins to produce various general goods. In our example, the owner of a machine-building plant does not even acquire steel, but begins to produce not only cars, but also buses, trucks, and other similar equipment, and thus gaining a place in the sun in other markets.This factor also significantly strengthens the company's position and helps it survive (for example, in the event of bankruptcy in the bus market, it will thrive at the expense of the truck and passenger car markets).
Product differentiation
Each of us encounters this phenomenon almost daily, when we are faced with a choice: which brand to purchase this or that product. For example, on the shelves of shops there are many types of white wheat bread, which, in principle, are identical or very close to each other, but are called differently, packaged differently, and so on. The structure of the goods market largely depends on differentiation, which consists in the specialization of the company in the production of similar products under different brands. They may vary in price, design, quality, terms of purchase (for example, for stocks) and after-service (for example, for household appliances), points of sale.
Differentiation always strengthens the firm's position in the industry on the market, because a certain part of consumers is developing a commitment to their favorite brand of product. So, in the example with bread, most often people choose the brand that they already know well, although perhaps another one will lie next to the priority loaf, no worse. This feature contributes to increased competition between companies producing such products, encourages the search for new incentives for the buyer to purchase their products.
Minimum effective output
How does the market structure change depending on this factor? The main thing that it affects is the number of companies that the industry can admit to its market. The output of the minimum cost-effective volume of production corresponds to the minimum average value of production costs in each industry. The number of effective companies is calculated by the ratio of the demand for goods in the industry to this lowest effective output. If it accounts for half of the market, only 2 companies will be effective, and if the minimum volume of goods satisfies only 2% of demand, 50 companies will be effective. That is, the higher the minimum release of any goods, the smaller the number of companies involved in their production, the industry will allow to enter the market. The amount of costs can be the sum of the costs of advertising, the administrative apparatus, and the production of many brands within identical products.
Import competition
It is no secret that the presence on the market of any goods of foreign manufacturers undermines the position of domestic manufacturers. This is especially noticeable when their manufacturers supply little to the domestic market, which can affect the market structure quite significantly. If a domestic producer exports most of his products, he cannot dictate his conditions on the domestic market (he is losing ground).
Demand elasticity
This concept means the ratio in percent of the change in the price of a product to the change in demand for it. The elasticity of demand does not allow a continuous increase in prices, since such measures do not lead to an increase in sales volumes, as a whole, do not offset costs and do not increase income. The development of the market structure depends to a large extent on the elasticity of demand, since the growth in demand enables more companies to enter the market and occupy their niche there. At the same time, the power of any one company is weakening, competition is growing, forcing to resort to the use of other mechanisms of the market structure, such as product differentiation or diversification of production and, of course, to maximize the use of advertising. On the one hand, expenses on it increase the costs of the company, and on the other, strengthen its position in the market. Ultimately, advertising strengthens the market power of the company and reduces price competition.
Market structure and types
As noted above, now there are dozens of types of different markets, each of which has its own specific structure. It is convenient to group them according to the following principles:
1. Geographically:
- local market (district, rural);
- regional;
- world.
2. For subjects of market relations:
- consumer markets;
- manufacturers;
- government agencies.
3. According to the categories (industries) of objects of exchange, the markets are divided:
- goods;
- services;
- finance;
- means of production;
- intellectual property.
4. By assortment:
- closed;
- mixed;
- saturated.
5. In relation to the laws:
- official;
- black (shadow).
6. By saturation:
- in short supply;
- equilibrium;
- excess.
7. On economic freedoms:
- adjustable;
- free.
8. By type of sales:
- retail;
- wholesale.
Some economists also share market structures based on this classification. The difficulty of this division is that each specific market, as a rule, combines several criteria at once. So, for example, the market for goods can be regional, mixed, official (legal), equilibrium, free, wholesale and retail.
Market functions
As one of the types of commodity economy, which is based on exchange operations between producer and consumer, the market performs the following functions:
- informational (provides knowledge about goods);
- intermediary (exchange operations between sellers and buyers);
- pricing;
- regulatory (leads to a balance in the economy between supply and demand);
- stimulating (encourages manufacturers to introduce new technologies, expand the range of goods);
- coordinating (forcing manufacturers to produce goods at the lowest cost and highest profit);
- Healing (helps eliminate inefficient production).
Types of Market Structures
Based on the types of competition, the following main market structures are distinguished:
- WITH monopolistic competition (a market with a large number of firms with a small share and low differentiation of their products).
- Oligopoly (on the contrary, a small number of firms in the market that have concentrated market power in their hands).
- Duopoly (two forms divided power in the market).
- Monopoly (market power in the hands of one firm). There is a subspecies of this structure - natural monopoly at which the higher the efficiency achieved by the monopoly firm, the greater its influence and scale.
- Oligopsony (“psonizo” in Greek “buy”) In this case, there are few buyers and many sellers on the market.
- Monopsony (there is only one buyer).
- Perfect competition is an almost ideal, but elusive market structure, in which there is unlimited competition, many manufacturers, buyers and perfect elasticity of demand.
Principles of Market Analysis
It is invaluable to analyze the state of the market in any industry for the development of the economy, both for new manufacturing enterprises entering it and those already established there. This helps to identify the strengths and weaknesses of competitors, determine effective volumes of products, prices, development criteria, possible costs, and so on.
An analysis of the market structure must necessarily take into account the criteria on the basis of which each specific market is built, because each criterion makes its priorities in the formation of the structure and the use of development factors. Based on the analysis of the market structure of the enterprise, they develop projects for a market relations management system, the use of advertising, marketing, and other strategic actions in order to effectively sell their products and achieve maximum profit.
Finance market
This is one type of market that has little in common with the concept of “bazaar” and means a system of relations between seller and buyer, for which money is a commodity.The structure of the financial market is the configuration, relationships and financial and economic activities of its individual parts, of which it consists. These parts are the following markets:
- Stock. His goods are securities that give the right to profit.
- Urgent. It concludes urgent financial transactions, can be exchange and over-the-counter.
- Monetary. His product is money. May consist of credit markets, securities and Eurocurrencies.
- Capital market. Here the goods are the so-called long money, that is, such financial relationships that have a long circulation period - bank loans, bonds, financial derivatives (liabilities), mortgages.
- Currency market. His product is foreign currency.
The essence and meaning of the financial market is to determine the most effective areas of investment to achieve the most profitable economic development, to redistribute funds, and also to determine the situation with the economy as a whole.
World market
This term means a huge segment of the world economy, which is based on all the same supply and demand, based on commodity-money relations, only on a national scale. Started world market with the commodity, but at the moment it has repeatedly and comprehensively expanded. Now the structure of the world market includes such components or, one might say, consists of such separate international markets:
- capital;
- goods;
- services;
- work force;
- information;
- currencies.
Such a structure provides mobility in the circulation of services and goods, allows for world prices to develop, to develop the international division of labor, and to exert a political influence on the state of commodity exchange processes. In addition, the modern structure of the global market contributes to globalization and integration.
Russian market
Russia is a huge country with almost all the resources available in the world economy (raw materials, energy, labor, etc.), which occupies a leading position in the world in the development of new technologies, and has inexhaustible intellectual potential. Therefore, the structure of the Russian market consists of all types of markets noted above (except international).
A distinctive feature of our economy is that market relations in the country began to develop quite recently, from the 90s of the last century, and have not yet gained the necessary experience and power. Plus, the Russian mentality, which grew up on the laws of socialist (public) property, does not allow the market economy to develop at the proper pace, which causes a special attitude of foreign investors. So, stock Russian market they are rated as promising high returns and high risks. Strengthening the Russian market is possible by strengthening the position of private property, developing small and medium-sized businesses, developing the national economy, and modernizing all production structures.
