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Running Head: HOW A SINGLE FIRM COMES TO DOMINATE SOME MARKETS 2

HOW A SINGLE FIRM COMES TO DOMINATE SOME MARKETS 2

How a Single firm Comes to Dominate Some Markets

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How a Single firm Comes to Dominate Some Markets

One of the reasons a single company may dominate some markets is that if the firm is technologically too advanced. If a firm is technologically too advanced than the competitors, they produce high-quality products and services, making the firm dominate some markets. When a firm delivers high-quality products or services, then it will have more customers than the competitors. Another reason how a firm may come to dominate some market is limiting pricing. A firm may do this to kill off competitors by price reduction below cost price for the meantime, and they end up dominating some market. If the competitor is killed, the company can back the price to the old level and steal all competitors' customers.

Another reason how a firm may become dominant in some markets is patent. This is something that a company may put in an application if it has just developed an original product honestly. If the government grants the license to the firm, it gives it the legal protection for the product production of the firm with no competition over a given period. Patents create an inducement for persons to be innovational. Patent creates a hindrance for those companies who wish to join the new market. Another reason is economies of scale. If the existing companies are large, then they benefit from economies of scale probably. It implies that their mean costs are less by their size virtue. Economies of purchase in bulk is an excellent illustration. Potential companies are possible to start on a scale that is small, and so they find themselves at an immediate cost limitation.

Another reason how a firm may become dominant in some market is marketing and advertisement. Large firms that are established show a tendency to spend prosperity on marketing. Except for the certainty that they are trying to get a customer to purchase the product in the short-term, the long-term objective is to create constancy of the brand (S-cool, 2020). The other reason is the high capital requirements. Some processes of production require a considerable investment in broad research or capital and the cost of development that makes it hard for new firms to enter an industry. Another one is network effects. Product use by other people can increase the product value to a person: one illustration word processing software and Microsoft spreadsheet are still used widely. The reason for this is when a person uses software that is used by many others the person is less likely to run into problems of compatibility in the course of work or other activities, The likelihood to use what other people are using makes it hard for new firms to develop and sell competing software.

References

S-cool. (2020). Barriers to entry and exit. GCSE and A-Level Revision | S-cool, the revision website. https://www.s-cool.co.uk/a-level/economics/market-structure-1/revise-it/barriers-to-entry-and-exit