in 1996, ?30-year-oM Efityciofjaedia Britannia dismissed its entire Home safes force after the arrivai of its S5-pgr-iaontti subscrip1-(in Internet site made (tie idea of owning a 32-velume set el books for S 1.250 less appealing to parents. Britannica decided te create an online site after realizing that computer-sawy kids most often goutfhl triiçrmatiûn online or un CD-ROMs sut h as Microsoft Encarta, wheh sold fer SûG.Whal really smarts is that Britannica fiatl the opportunity to partner With NlicTOSOft m pudding content 1er Encarta but refused. Britannica now sells print sets and offers ortline access to premium subscribers on its Wet) ate& ■ We can ermine competition from both an industry and a marketing poml of view.'
What exactly is an Industry? An Industry is a group of firms that offer a product or class of products that are close Substitutes for one another Industries are classified according to number of sellers; degree of product differentiation; presence or absence of entry, mobility, and exit barriers; cost structure: degree of vertical integration; and degree of globalization.
number of sellers and degree of differentiation Thc> siartin-pnint l"er describing an industry is to specify the number of sellers and whether the product Is homogeneous Qï highly differentiated, Thesd characteristics give ïi-se to lour industry structure types:
I, Pit it-r monopoly - Only One fit m provides a certain product or service m a certain country Or area (a Jo tat water or cable company}. AO unregulated monopolist might charge a h i gh p ri CC| do little or no advç n i s.» 1 ig, and o f ft initt ù na I service, ) T parti al su bsti t tites a re uvniiable and there is some danger Of competition. the monopolist miglil invest in 11m service and technology. A regulated monopolist is required to charge a fo^ver price and prdVidc more service as a matter of public intérêt.
Oligopoly - A smEill number of (usually) lEtrs;t firms produce products thai range from highly differentiated to standardized. Pure tuiigopoiy consists of a few companies producing essentially the same commodity foil, 5 ted J, Such companies would find ¡1 hard 10 chatte anything more than the going price. If compelitors match on price and services, the only way to gain a competitive advantage is through )pwer costs. Dljfctvnltoiedoligopoly consists of a friv companies producing products (autos, cameras) partially different inted along lines of quality, feu furies, styling, or services. Each competitor may sect leadership in one of these major <it tributes, attract the customers favori tig that attribute, and chargea price premium for that attribute.
3. MonopolisticCtytnijetltlon - .Many competitors are able 10 differentiate (heir offers in whole or in part (restaurants, beauty shops}, Competitors focus on market segments where they can meet customer needs in a superior way and command a price premium.
4, Pttiv competition - Many cnmpetiiorg offer tlie same product and service market, commodity market). Because there is no basis for differentiation, competitors' prices will be the same. No competitor will advertise unless advertising can creaic psychological differentiation (cigarettes, beer}, in which cast1 It would be mote pro perm describe the industry us monopoll$tically competitive.
An industry's compel ¡live Structure can change over time. For instancy the media industry has continued to consolidate, turning from monopolistic into a differentiated oligopoly;
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