Market Model Patterns of Change Essay Example | Topics and Well Written Essays - 1000 words

Market Model Patterns of Change - strain ExampleAccording to International Business (2009), the Coca-Cola Company used to be a monopoly initially when thither were no competitors. This is because it was the solely seller that had a well-defined commodity since there were no substantial substitutes of a similar commodity from other firms into the trade. However, the Coca-Cola Company nates no longer be defined as a monopoly. Its grocery store model (monopoly) has undergone change into oligopoly. International Business (2009) argues that this is due to the presence of the Pepsi and Schweppes Companies among others that have brought chaw of competition in the market for the Coca-Cola Company, with all their products. For the oligopoly market, model, each supplier has a possibility of influencing the market expenditure thus, blend ining to competition among the suppliers. In an oligopoly market model, there are only a few industries that eclipse the market. For instance, the Coca- Cola Company and Pepsi dominate the bottled and canned soft drinks industry, in most countries. They have control over the market prices and supplies and have high barriers to entry. Their products are nearly identical hence, the companies involved compete for the market share, and are autarkical due to the market forces. According to Barlow (2005) there are ill-considered-run and long-run behaviors of oligopoly. Long run can be described as a period in which all factors of production, as well as cost, are variable. In this case, industries are able to adjust to cost. The short run refers to a period where the woodland of some inputs cannot be raised beyond the priced amount that is available hence, short run industries can only be able to influence the prices through adjustments made to production. However, in economics, long run models can stimulate from short run equilibrium where the supply and demand, reacts to price levels with more flexibility. Thus, oligopolistic compani es share a variety of short run and long run behaviors such as interdependence, rigid prices, competition, mergers and collusion (Barlow, 2005). The Bertrand model and the contestable markets theory leads to a long run oligopoly market-equilibrium price and output solution, which is similar to that achieved in a competitive market (International Business, 2009). Bertrand argues that products and production costs are identical or similar the customers are likely to purchase from the lodge selling at the lowest possible price. In addition, the kinked demand wrick model of oligopoly that was developed by Paul Sweezy assumes that a business in an oligopoly may face a dual demand curve for its product based on the reactions of other companies in the market to a change in its variables (Cameron and Green, 2009). Thus, temporary price war between rival companies happens under this model, in which firms are seeking to seize a short term advantage and gain some extra market share. Areas in the company that could lead to transaction costs include the global environment, the competitive environment and the socio-cultural differences. The global environment has become quite sensitive forcing many companies that operate locally to join the global market thus, resulting in globalization. The Coca-Cola Company is in addition sensitive to the strategies of globalization, which has led to high competition, as well as to transactions costs. The competitive environment overly plays a similar role. Coca-Cola Company, which is a