Businesses and Markets of Operation

There exist different business markets in various industries. These markets tend to have different characteristics that are unique to each market. They can generally be categorized into perfect and imperfect competition markets. Among the characteristics of a perfect competition market is that there exists perfect information. This means that the information is freely available to all the participants, which means that the aspects of risk taking are minimal. The market also experiences a large number of buyers and sellers meaning that monopoly cannot suffice. There are also no barriers to entry or exit, there is existence of rational buyers, zero transaction costs and no externalities. Imperfect markets on the other hand, incorporate monopoly, oligopoly, monopolistic competition and monopsony. The major characteristic of the monopoly market is that there is one organization involved with the supply of a certain product or service. A monopoly market also involves profit maximization, high barriers to entry and price discrimination. Under price discrimination, people in different markets tend to pay different prices for a similar product. Monopolistic competition markets on the other hand, are characterized by the presence of many firms selling differentiated products. The market also does not have entry or exit costs in the long-run, the information available is imperfect, and the firms have a similar degree of market power. Oligopoly market on its part is dominated by a small number of large sellers, firms involved sell identical or differentiated products, and there is the existence of significant barriers to entry.

The nature of interactions between businesses is dependent on the market involved. For a perfect competition market, businesses tend to operate as competitors. Most of the products being offered are similar in various ways. What this means is that there are many consumers who tend to buy standardized products from many small businesses. For the businesses involved, none of them has the ability to set the prices. The prices are usually set by the forces of demand and supply. Any business offering higher prices tends to attract a low number of consumers since they are usually price sensitive. When it comes to monopolies, all the consumers purchase products or services from one business. This business can set the price levels due to lack of competitors. The aspect gives the business the ability to exercise price discrimination in order to maximize on profits.  An oligopoly on the other hand, is dominated by a few large businesses. These businesses interact by way of collusion. They tend to collude while setting prices in order to ensure that they are in the same range and can get the maximum price possible. However, there are instances where businesses tend to go against some agreements since they are not legally binding.

An organization’s goals can be shaped by the market in which it operates. For example, an organization operating in a perfect competition market has both primary and additional organizational goals. The primary goals include profitability, sales (value and volume), service level and customer satisfaction. Attaining these goals is important since it dictates whether the organization will remain in operation for as long as possible. This is due to the competition available in this type of market. Additional organizational goals include achieving a state of imperfect competition and growth. A state of imperfect competition is attained by way of influencing consumer choice, increasing market share and expanding product range. Organizations operating in imperfect competition markets also have both primary and other additional goals. The primary goals include profit maximization, internationalization, attainment of market power, satisfaction of stakeholders, corporate responsibility, increasing market share, enhancement of ethical issues and welfare. These primary goals are meant to ensure that the organization remains at the forefront on all issues taking place in the industry. Failure to actualize a favorable position might result in diminishing economic activities. Organizational goals under this market are mostly inclined towards attaining a state of monopoly and joining oligopolies.

A business tends to have a variety of legal obligations towards various stakeholders associated with its operations. Among the obligations that a business has is consumer protection. Under this respect, a business has an obligation to protect consumers’ credit and debit cards. The information provided should remain confidential at all times. The business also has the obligation of ensuring that consumers are not served with faulty or counterfeit goods. This works in ensuring that consumers’ health is protected at all times. A business also has an obligation of acquiring insurance services. This makes sure that the stakeholders within the organization are taken care incase an unforeseen detrimental event occurs. This also works to protect the business itself. There is also an obligation towards the enhancement of employment laws. This encompasses aspects such as ensuring that national minimum wage has been adhered to, maternity/paternity leave have been enhanced, issues to do with dismissals, disciplinary among others. These are aspects that relate to employees working in the organization. The obligations have been put in place to ensure that employees’ needs have been taken care of. A business also has an obligation to report financial performance about various activities. However, this is not mandatory for all business. It is more of a requirement to businesses operating as public limited companies.

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