Managerial Decisions in Differing Market Structures

Subject: Strategic Management
Pages: 6
Words: 1771
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6 min
Study level: PhD

There are different managerial decisions made by market structures that depend on firms in the industry, costs and customers’ demand, available information, and how other firms behave. Different firms use different means of advertisement and research and managerial decisions should be optimal and effective. Managers in their decision-making should know how to make a decision concerning the utilization of scarce resources to achieve their goals. They should determine levels of output to be produced, the selling price of finished products, and the labor required in production.

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Managers in different market structures should have a clear understanding of changes in technology so that they can use new improved technology to improve the quality and quantity of products. Competitors who produce similar goods should be identified for the managers to make sure goods and services produced are better than those of competitors. The government affects decisions made through their legal restrictions where goods and services produced should meet safety standards and not be harmful for human consumption. The firms are also supposed to pay taxes to the government at a certain percentage of the profits made failure to which the firm can be penalized. Managers should have the knowledge and experience of managing different market structures and how to handle problems that may arise. (Krugman, 2007 pp25-28)

Comparing Managerial Decisions in a Competitive Market, a Monopolistically Competitive Market and an Oligopoly Market

Managers make decisions on how the products should be priced so that marginal costs do not exceed marginal revenue. This helps the firms not to make losses out of the investments made because the main aim is to maximize profits and minimize the possibility of losses. Better methods of advertisement should be used in order to create awareness about products available in the markets and attract buyers who are willing and able to purchase the product at the market price. Advertisement is done through the media, newspapers, or using the internet to reach as many people as possible for them to know the availability of the products, their use, and how to obtain it within their reach.

Managers in different market structures make decisions about the number of products to be produced depending on the nature of demand of the product. Information about the market is very important to the managers in order to know the rate at which different products are consumed in different markets. Products that are frequently used and demanded in large quantities should be produced more than products that are needed in small quantities. (Fuss, 2005 pp11-14)

Managers make decisions about competitive policy because competition affects different market structures. For a market structure to be competitive, it needs to improve its performance in terms of service delivery and efficiency so that many customers can prefer it compared to other markets structures that offer similar products. The quality of the products is improved so that it can satisfy the needs of potential customers and encourage them to continue using the product. Once decisions about competition are properly made and implemented, economic performance is improved due to an increase in sales made all the time.

Managers make decisions about technical progress and how technology can be improved to enhance innovation. Improved technologies make different market structures grow and achieve their goals of profit maximization and improved market share. Managers make sure that the new technology is put in place before the competitors once they notice there is a change in production technology so that the firm can benefit in the long run and adapt the new technology at a reduced cost.

Managers make decisions about the market where buyers and sellers of goods and services meet for the purpose of exchange. The number of firms in the market should be known and nature of products offered for sale by different firms and how to persuade buyers to purchase the goods. The goods are sold by wholesalers in large quantities or retailers in small quantities depending on the needs of customers. Managers should decide on discounts to be offered according to the quantity bought or cash payment to encourage customers to make prompt payments. (Bayle, 2005 pp13-18)

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Contrasting Managerial Decisions in a Competitive Market, a Monopolistically Competitive Market and an Oligopoly Market

Managerial Decisions in a Competitive Market

In a competitive market, good managerial decisions are made so that managers can have predictable outcomes from activities that are carried out. Consistent quality decisions help customers and shareholders and in case a mistake is made, it does not have an adverse effect on the firm or cause any inadequacy. Managers have been faced with serious global competition and managers make decisions on how to adjust immediately to changes that happen in production so that they can beat their rivals all the time because their rivals try to offer substitute products at reduced prices thereby attracting more customers who prefer to use the substitutes.

Managers make decisions on how to keep the business going through innovative techniques and timing when to begin new investments before other firms so that they can make huge sales at a higher profit. Strategic decisions are made on how to apply competitive intelligence so that the products produced are of the right quality and attract a large number of customers who purchase them in large quantities. Consumers’ demand in the market is identified by managers so that predictions are made on the products that are highly demanded and at what time. (Farrell, 2004 pp46-50)

Decision-making is made centrally where there is a chief executive with overall command and control of all the decisions made by managers. The set principles are followed by managers to do the right thing at the required time and collective decisions made are for the benefit of the firm as a whole. Managers know whether the firm is capable of being competitive by ensuring a valuable business is carried out, the business should be rare for it to attract many customers; it should be difficult for the business to be imitated by other firms, and products offered should be non-substitutable. This enables the firm to attain a competitive advantage, enjoy its operations in the long run and make higher profits than its competitors. (Scherer, 2007 pp37-42)

Managerial decisions involve the risks and uncertainties that may affect the business because it is not guaranteed that any decision made leads to overall better results. Decisions made should predict the risk accurately and managers are ready to face reality in diversifying the risks to reduce their occurrence in the future. The specialized staff is employed to examine the nature of risk and the outcome of uncertainties so that actionable recommendations can be formulated. (Gorman, 2006 pp24-28)

Managerial Decisions in monopolistically competitive market

Managerial decisions consider the existence of market structure with many firms dealing with differentiated products and few barriers are encountered in entering the market. Managers ensure that each of the firms is in a position to influence the selling price of products by changing the type of products to be sold. This makes sellers be capable of making more sales by attracting more customers through offering price that is affordable to all the customers and offering the products that satisfy their needs. Managers ensure that products offered do not have perfect substitutes so that customers can know that the specific product they require can only be obtained from monopolistically competitive market. (Julian, 2005 pp13-19)

Managers have the knowledge that the preferences of consumers are properly defined and the products offered are differentiated from the ones offered by other people making their goods to be heterogeneous. For the firms to increase economic profit, it ensures that greater return is obtained than required to compensate the debts incurred from the investment risks. Managers decide on how to improve brand loyalty so that even if prices of products are raised, many customers are retained because of the confidence they have in the product.

When making managerial decisions, managers are aware that economic profits, in the long run, would be zero because of the application of price discrimination to maximize revenue which would, in turn, be known by competing firms and once it is applied by competing firms, the price would decline. Structural barriers such as levels of technology, approval by the government, and capital requirements are considered so that the market structure can improve its operations and follow legal procedures that do not violate the law. (Gregory, 2003 pp24-27)

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Managerial Decisions in an Oligopoly market

There are many decisions made by managers so that they can maximize the profits of the firm. This requires the use of knowledge and experience for informed decisions to be made. Managers use economic theory as an essential tool to make decisions that help the firm to carry on with the business without difficulty. The managers know the quantity of output to produce and the cost to be incurred in production through the application of decision-making rules using statistics. (Webster, 2003 pp14-17

Managers have to decide either to make-or-buy that is influenced by competitive pressure between whether to produce a component or purchase from suppliers. In making operation decisions, strategic considerations are being made and the cost involved so that, the decisions made profit the firm and reduce the chances of incurring losses. Strategic methodologies are developed to examine how product differentiation affects the market and how decisions made affect the performance of the oligopoly market.

Managerial decisions ensure that the market is dominated by large firms in limited numbers so that impact of each firm is important to others and recognizes strategic interdependence existing between the firms. If the number of firms increases, weak interdependence develops, this requires managers to make proper decisions on how to limit the number of firms in the market and allow few firms to dominate the market and have a large market share. Favorable reputations are established for managers to decide whether to risk entering a new firm in the market due to high expected profits. (Sowell, 2004 pp67-74)


Gregory N. (2003): Principles of economics: South-Western college, pp. 24-27.

Sowell T. (2004): Basic Economics: Basic Books, pp. 67-74.

Gorman T. (2006): Global issues on Economics: Alpha Books, pp. 24-28.

Bayle M. (2005): Business strategy and managerial economics: McGraw-Hill, pp. 13-18.

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Krugman P. (2007): Theory and policy on international economics: Addison Wesley, pp. 25-28.

Webster T. (2003): Theory and practice in managerial economics: Electronic books, pp. 14-17.

Julian T. (2005): Applied managerial economics: Harvard University Press, pp. 13-19.

Farrell J. (2004): The economics of information technology: High technology industries, pp. 46-50.

Scherer F. (2007): Economic performance and industrial market structure: Snippet view, pp. 37-42.

Fuss M. (2005): Production economics; Applications and Theory: Berkeley education, pp. 11-14.