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Vídeo clase unidad 4 Estructura de mercado (Economía) — Transcript

by Brandon Foster · 2,584 words · 432 segments · language en · Watch on YouTube

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0:01Hello, how are you? I would like to
0:03extend a warm welcome to our fourth
0:05unit titled Market Structure, as part
0:06of our economics course for the second
0:08semester of Industrial Engineering at
0:10the National Technological Institute of
0:12Mexico. What topics will we cover in
0:17this brief lecture? They are as follows
0:21: perfect competition versus imperfect
0:23competition, monopoly, oligopoly,
0:26cartels or trusts, and holding
0:28companies. These are the topics I will
0:31be discussing and commenting on for you
0:33in this video lecture. My name is
0:35Brandon Vázquez Valencia, and without
0:38further ado, let's begin. Competition,
0:44corporate competition, is what drives
0:47capital flows in economic terms. In our
0:52previous session, in unit three, we
0:55spoke briefly about the production
0:57function, which is performed by
1:00companies, and we made it clear that
1:02these companies must make a profit.
1:07Well, since there are many companies
1:09participating in the markets, this
1:10creates two competitive situations.
1:13Perfect competition on one hand, and
1:16imperfect competition on the other.
1:20Regarding perfect competition, the
1:22characteristics of firms in this
1:24situation are as follows. The first
1:28characteristic of perfect competition
1:30is that the firms participating in the
1:32market structure cannot influence
1:34prices. These are firms that, in any
1:38case, simply await how these prices
1:41fluctuate within the markets. As a
1:45second characteristic, firms in perfect
1:47competition are numerous. Yes, there
1:50can be many. Each one sells a small
1:52fraction of the market total. Each of
1:56them can carry out their commercial
1:58activities without any issues in
2:00perfect competition. The products
2:03offered to consumers are therefore
2:05identical, meaning they are homogeneous
2:06. There is no differentiation between
2:11one and the other, since here
2:13competition is, as we insist again, a
2:16mechanism where all participants are on
2:18equal footing. Therefore, the next
2:22characteristic is that there are no
2:24barriers to entry, meaning any company
2:26can enter or exit these markets. And
2:30this leads us to the particular way
2:33information is handled among the
2:35participating firms. Information
2:38therefore flows freely to all
2:40participants. All of them know what
2:43products are being sold and the prices
2:46currently occurring in a given market
2:48at that moment. Well, this situation
2:52forces companies to seek the most
2:54effective mechanisms to keep their
2:56costs as low as possible. Therefore,
3:00firms in perfect competition would
3:02reach a state of efficiency. And we
3:06highlight it here, this word that is
3:08key to being able to appreciate the
3:10characteristics of perfect competition
3:12or what we call firms in perfect
3:14competition. On the other hand, versus,
3:17we have imperfect competition. What is
3:20imperfect competition? Well, it is a
3:23phenomenon, let's say, in some way also
3:26natural, because consumers choose
3:28certain brands; with their preferences,
3:31they determine which brands are more
3:33important or solid within markets. And
3:38this, of course, unbalances what would
3:40be a perfect condition and turns it
3:41into an imperfect one. Here, companies
3:44take advantage of this situation to
3:46influence prices. You and I know that
3:49the more the price of Coca-Cola
3:50increases, we will continue consuming
3:52it if we are regular consumers of soft
3:54drinks. On the other hand, although
3:58there are fewer companies in this soft
4:01drink market, to take this analogy,
4:03only a few have the greatest capacity
4:05and market share. This word "monopolize
4:09" is key, because, ultimately,
4:10companies achieve that situation. And
4:13here we are talking about the fact that
4:15it is just a few that have the highest
4:17sales in the market. Companies seek to
4:21differentiate their products; that is,
4:24all those participating in this market,
4:26each of them offers the differentiator
4:29they can and have within reach, to
4:31generate higher sales, distinguish
4:33their product from the rest, and create
4:36competition that, while imperfect,
4:38helps them stand out or remain in that
4:41market. Michael Porter, a great
4:43strategist, says that there are
4:45barriers to entry and exit in markets.
4:48We can appreciate these barriers in
4:51terms of how they are influencing
4:53imperfect competition. The barriers I
4:56am mentioning are the following. Legal
4:58restrictions. On one hand, there are
5:01countries that generate benefits for
5:03some companies and countries that
5:05prohibit other companies from entering
5:07their markets due to protectionism,
5:09internal policies, etc., but it is
5:10already a barrier that limits or
5:12prevents free competition.
5:15Differentiation is another key element.
5:18For example, there are companies that
5:20boast a lot and specialize, excuse me,
5:23true specialization in their products
5:25that are ecologically notable compared
5:27to others that are not. This situation
5:32allows companies to generate, in
5:34addition to economies of scale, other
5:36types of segments that can serve or
5:38influence the lifestyle of consumers.
5:42For that reason, this is a barrier to
5:44entry or exit for these markets. And
5:47generally, high costs for those
5:48companies that are starting in the
5:50market are also a barrier. And Michael
5:54Porter, in a study on, uh, elements for
5:57generating market strategies, calls
5:59these, well, key points for developing
6:01competitive advantages, and we could
6:03also call them comparative advantages
6:05in the markets. Information is
6:09imperfect, the next and final
6:10characteristic of imperfect competition
6:13. Well, competitors are not all equally
6:17able to identify or know what products
6:20and prices are being handled in the
6:22market. This means that information
6:26does not flow freely, that there is
6:28control over the information. And
6:31remember that in business, information
6:33is power, and ultimately, whoever is
6:35better informed, or whoever gets the
6:37information through connections,
6:39through acquaintances in key government
6:41positions, because the information
6:43arrived first, or well, a series of
6:45factors, means that some are privileged
6:48or benefited. This then causes a
6:51phenomenon of inefficiency in the
6:53markets, which is therefore reflected
6:56in imperfect competition. An example of
6:59perfect competition, so we can
7:01appreciate it better, is what happens
7:03within the stock market. For example,
7:07the Mexican Stock Exchange issues
7:09newsletters where the investors
7:11themselves, all investors, have the
7:13same opportunities to obtain
7:15information and make decisions in that
7:18market. Which is not the case, well, in
7:22consumer markets generally, where
7:24brands are in constant struggle to
7:26generate their best or largest market
7:28share and engage in practices that
7:30prevent the market from having a
7:31perfect structure. That does not mean
7:35this is bad. However, imperfect
7:37competition could sometimes generate
7:40unfair practices among companies toward
7:42consumers. Moving on, we can see in
7:47this next slide, in this next
7:49illustration, what these market types
7:51are according to competition, how these
7:53market types are generated, or what
7:55characterizes them. First, we have the
7:59monopoly. A monopoly is mainly
8:02characterized by the fact that there is
8:05only a single seller, and this single
8:06seller corners the entire market. Here,
8:11consumers are waiting for this single
8:13seller to release their products,
8:15create strategies if they wish to, set
8:18prices, and determine distribution
8:20channels. That is to say, this single
8:24seller and sometimes sole producer is
8:26the one cornering the entire market,
8:28and therefore puts anyone else who
8:30might want to enter this market at a
8:32clear disadvantage. Why? Because they
8:35have already developed economies of
8:37scale, already developed savings, and
8:39already generated a learning curve in
8:40the market. While entrepreneurs or
8:44emerging startups might want to belong
8:46to or enter this market, the great
8:48barrier imposed by the monopoly
8:50ultimately keeps them out of
8:51competition. And here we have a clear
8:55example regarding software. For
8:58instance, Microsoft is the undisputed
9:00leader when it comes to monopolies of
9:02this nature. We have free software,
9:05such as Linux. However, the majority of
9:08applications, even those we are
9:10currently using on our systems, are
9:13based on some platform made by
9:15Microsoft. This makes it, then, the
9:18queen of monopolies. Yes, in Mexico we
9:21also have our own brand; for example,
9:23the well-known Telmex, which is a
9:25monopolistic company that, in many ways
9:28, has been an example of a monopolistic
9:30nature. And this doesn't mean that
9:34these companies are breaking the law;
9:36they simply have market preponderance
9:39or a natural consumer choice that makes
9:41them what we consider a natural
9:43monopoly by being the chosen ones, the
9:46favorites, or in a more serious context
9:48, when they are the only ones we find
9:50in those markets. The oligopoly
9:54phenomenon occurs when we have few
9:56sellers and many buyers, or the same
9:59number of buyers as in the previous
10:01situation, but here they only have a
10:03few sellers to choose from to decide
10:05which brand to consume. And so, the
10:10oligopoly situation makes us think that
10:12there could be two or three brands that
10:14have great dominance over an entire
10:16market, and these companies also have a
10:19very dramatic influence on prices; and
10:21the consumer, even though they have few
10:23options, is ultimately forced or
10:25compelled to consume what these
10:27predominant brands in the market are
10:29offering. Well, here we finally have
10:34monopsony, which is the opposite
10:37situation where we have too many
10:39sellers and only one style, one segment
10:42, one single stratum of demand or buyer
10:44. Here there can be a great selectivity
10:48of brands, but all of them are
10:50specialized in wanting or intending to
10:52satisfy a single segment. And in this
10:55segment, brands that are luxury are
10:58generally classified. We could think
11:01that even though there are several
11:03luxury brands, they are ultimately
11:05serving a single stratum, a single
11:07social class, a single lifestyle, a
11:09single style of consumption. For
11:12example, we could look at the
11:14automobile market. We have very
11:16powerful brands like Ferrari,
11:19Lamborghini, and so on. And all these
11:22brands try to satisfy the tastes, needs
11:25, or whims of a single segment, which
11:27is the one that buys luxury cars. And
11:31this would be the predominant demand
11:33factor. Here, the situation is then
11:35called the creation of a monopsony.
11:39Finally, in perfect competition we
11:41could find a situation of many sellers
11:44and many buyers, and this would mean
11:46there is an equilibrium, which does not
11:48happen in the previous aspects. You see
11:52, here perfect competition implies that
11:54there is indeed an equilibrium between
11:57supply and demand, an ideal market
11:58situation, which does not happen due to
12:01consumers 'natural selection of brands,
12:03their tastes, and preferences. Now we
12:08move on to three other important
12:10figures within market structures: the
12:11cartel, the trust, and the holding
12:13company. A company in a cartel
12:16situation is one that dominates the
12:19market geographically, even if it
12:21offers some product varieties.
12:23Ultimately, its strength lies in the
12:25infrastructure under which it
12:27distributes the product in geographical
12:29terms. This means it could involve an
12:33illegal or unfair practice. Finally,
12:37when you and I think of or hear the
12:39word cartel, we focus directly on
12:41illicit types of business. Well,
12:46ultimately, cartel-type markets are
12:48also important elements that influence
12:51and control prices and satisfy the
12:54demand for their products. And well,
12:58there is also a supply, and from there
13:01come some associations and some aspects
13:03of these types of businesses handled in
13:05the economy. The other ones are trusts.
13:09Trusts are considered a type of
13:11business formed by a merger. When
13:15several strategic business units are no
13:17longer functioning, or some of them,
13:19due to top management decisions, have
13:21to focus on specialized markets, a
13:23merger phenomenon is generated. So it
13:27is the union of several companies, and
13:29this union of companies tends to
13:30constitute what we call a monopoly.
13:33What do they achieve with this? Well,
13:35increasing their profits, reducing
13:37supply—that is, having fewer market
13:39entrants, fewer competitors, a better
13:41technical structure, and the lowest
13:43possible costs. At some point, Nokia
13:48had to resort to practically merging or
13:51selling itself to what was Microsoft
13:54and generate a new segment or serve a
13:57new market there. And well, finally we
14:03have the holding company as a society
14:05based on the control of the portfolios
14:07of some companies in order to even make
14:10strategic decisions. Banks, for example
14:14, HSBC, have a holding structure
14:16because there is great portfolio
14:18control, and this also gives them a
14:20powerful market position. Multinational
14:24corporations. When we hear the concept
14:27of a multinational company, we should
14:30think of those with significant
14:32economic power, but which also have a
14:35predominant geographical presence in
14:38other countries. For example, the
14:42Mexican company Bimbo, which has a
14:44major presence in Europe, especially in
14:47the Iberian Peninsula and mainly in
14:49Portugal; now with its association with
14:51Pan Rico, Bimbo has managed to
14:53transcend, as has La Costeña. These
14:57are Mexican companies of great
14:59prominence and world class that we can
15:01consider multinationals, or with that
15:03particular characteristic of being
15:05multinationals—that is, companies
15:07that have crossed borders and managed
15:09to conquer or dominate other
15:10territories with their excellence and
15:12world-class status. Now we move on to
15:18look at this slide, where perfect
15:19competition can be seen from the supply
15:21side. We are talking about supply and
15:24demand as well, as part of the market
15:26structure. From the supply perspective,
15:31imperfect competition appears in three
15:33forms so we can wrap up our topic.
15:37First is the monopoly. We already said
15:41there is one company or brand that
15:43becomes the only one, the predominant
15:45one, the one that calls the shots in
15:47the market or the one that specializes
15:49in the market and, therefore, the one
15:51that has made large investments, but it
15:53is the one that controls prices
15:54entirely. When there is a duopoly, we
15:58have the particularity that two
16:00companies dominate that market. In soft
16:04drinks, we have the eternal example of
16:06Coca-Cola and Pepsi. And well, we would
16:09also have, for example, Sky and Dish as
16:12other examples of companies in a
16:13duopoly situation. And an oligopoly is
16:18constituted by those companies that,
16:20although there are several, generally,
16:23there are not many. What do we call "
16:26many"? Well, many would be when every
16:29consumer could have between 10 or 20
16:31brand options, or many brands to which
16:34they could migrate without any problem.
16:37But when that is not the case, then we
16:40have an oligopolistic situation. Few
16:43companies, so the consumer does not
16:45have great options, does not have great
16:47opportunities to choose, and therefore,
16:49these are the ones that dominate the
16:51market. On the demand side, when things
16:56change—that is, when the consumer
16:58calls the shots and determines which is
17:01their favorite brand—the following
17:03natural situations arise. Monopsony and
17:07oligopsony. A monopsony is a single
17:10buyer and there are so many brands that
17:13want to satisfy their needs. It is a
17:15unique stratum. These are strata of
17:18great economic power, which specialized
17:21brands also want to satisfy, but it
17:23turns out to be the natural choice of
17:26one brand over all those others. And
17:29here we generally find luxury goods or
17:31items. An oligopsony is a club of
17:36buyers, a few very selective buyers,
17:39and this also causes the buyer to be
17:42the one who determines how prices
17:44should behave in that market and which
17:47brands will have preference or
17:49dominance in the market in question.
17:55With these two approaches, we conclude
17:57our topic on what market structure is.
18:00We have analyzed a monopoly situation
18:02and an oligopoly situation. What
18:05characteristics does perfect
18:07competition provide for it to happen,
18:09and how does imperfect competition
18:10present itself? In addition to some
18:13systems of well, of special markets
18:18such as the trust, the cartel, the
18:21holding, and multinationals. For you
18:25and me to learn more about this, here
18:27are some references, for example,
18:28Economipedia, which you can consult
18:30online, and Econosublime for more
18:32information regarding market structures
18:34. Thank you very much for your
18:37attention, and we will see each other
18:39in our next topic and the last unit of
18:40our course.

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