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Market Competition – Timing and Risks while entering or exiting a market - Essay Example
Author : efriesen
Pages 3 (753 words)
The paper tells that a firm needs to monitor the market’s latest trends as when to enter or exit the market. Timing is one of the major reasons for the new products success or a failure in a way that a firm can have a first mover advantage and can benefit the revenues before any competitor enters into the market…
The researcher states that for example, Amazon.com started its business as an online bookshop but as gradually the demand for the grocery items had increased, Amazon.com adhering to that demand and started its first online grocery shop. As we see in the case of Monopoly where there are no competitors and therefore firms set a price to maximize profit and gain the first mover advantage. Whereas in a perfect competition there are no entry and exit barriers so the role of time in deciding the entrance or exit from the market is minimal and perfectly competitive firms are free to enter and exit an Industry and so in the case of Monopolistic competition in which there is a relative freedom of entry and exit out of industry but a difference between those two terms is that in Monopolistic competition the firms are not ‘perfectly’ mobile but they remain unrestricted by any government rules and regulations, start-up costs or any substantial barrier to entry which is the total opposite of Oligopoly in which there are significant barriers to entry where time plays a major role in determining the entry and exit from the market. A firm has to evaluate several factors in order to determine the risks of new entrants and the reasons to exit a market which include “economies of scale, product differentiation, capital requirements, access to distribution channels, cost disadvantages independent of scale and government policies” ...