There are three basic types of business in the market, depending on which competent managers should choose their activity methods. Competition is divided into perfectly competitive, monopoly, and oligopoly. In the first case, all goods in the industry are perfect substitutes, so managers need to build a policy without raising prices, which could decrease demand.
A monopoly holds the market in its absolute power, so the highest possible market power allows the manager to control sales volumes and thus influence market prices. In doing so, special attention will be paid to the ability of consumers to pay (Blokdyk, 2021). Moreover, the conditions for profit maximization under perfect competition and under monopoly are different, which is also reflected in management policy. For a competitive firm, the marginal revenue is always determined by the market price, whereas for a monopolist, the marginal revenue is less than the selling price.
In oligopoly, unlike perfect competition or pure monopoly, the activities of any one firm cause an obligatory backlash from competitors. Therefore, the manager’s task is often reduced to building a profitable and effective interaction with competitors and knowledge of the characteristics and policies (Lundqvist & Gal, 2019). The small number of firms in an oligopolistic market forces these firms to use price competition and non-price competition.
References
Blokdyk, G. (2021c). Social economy a complete guide – 2020 Edition. 5STARCooks.
Lundqvist, B., & Gal, M. S. (2019). Competition law for the digital economy (ASCOLA competition law series). Edward Elgar Publishing.