Forms of Industrial Organizations
Introduction
Purchasing decisions essentially revolve around price. Price is affected through market competition. Therefore, manufacturers control pricing on products as well as the amount of production produced to meet market demands. These decisions are influenced by the type of industry in which these organizations operate. Economists divide the market into four distinct market structures: pure competition, monopoly, oligopoly and monopolistic competition. This paper will differentiate among the various market structures, while identifying pricing and non-pricing strategies within each market structure.
Pure Competition
According to McConnell & Brue, “pure competition involves a very large number of firms producing a standardized product” (McConnell & Brue, 2004). Within a pure competition, new firms may very easily enter and exit the industry. Pure competition is considered rare and its market model is highly pertinent. The markets for “agricultural goods, fish products, foreign exchange, basic metals and stock shares” are among the few industries which closely identify pure competition market structures (McConnell & Brue, 2004).
The fast food industry is a direct example of pure competition. Organizations such as Burger King, McDonalds, Jack in the Box and Carl’s JR. etc., all produce u ...