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Competitive Strategies And Government Policies Essay

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Competitive Strategies and Government Policies
Team D
Gabriel Chavez, Angelo Ferrara, James Hocum, Danielle Kent
ECO/365
Carol Szerszen
March 16th, 2014

The electronics industry is in a monopolistic competitive market. This market has few barriers to entry which means there “easy entry for new firms in the long run (Colander, 2010, 361). Further, globalization has expanded this market across the globe with many countries distributing and manufacturing electronic products. Thus, globalization always comes with the threat of new companies entering into the electronics market. This can have a definite effect on pricing and profits. As more firms enter the market, the price for goods will decrease due to the entrance of several substitutes. However, due to this highly elastic market, a change in price will lead to a higher change in quantity demanded (Colander, 2010, p. 155). Therefore, it is important for the marginal cost to be below the price but the price not to be set at an unrealistically high level because of the wide range of substitutes. In the long-run, profits will tend to break even for firms within a monopolistic electronics industry. “As firms enter the industry, the demand curve facing by an individual firm shift down, as buyers shift some demand to new firms until the firm just breaks even. If the demand shifts below the break-even point, some firms will leave the industry in the long run” (Four Market Structures). However, due to the wide range of firms across the globe, firms such as Vizio must differentiate themselves through brand recognition, service, and quality to ensure staying power and a profitable future. Since the market is expanded across the globe, this differentiation must be displayed across the globe. Sony has held a strong brand name for many years now with dedicated consumers. Not every firm within the electronics industry can do this as Sony has done, and therefore, will not gain long-term profit. However, as years pass, Vizio is making a name for themselves in the electronics industry. If it continues along this path to differentiate themselves among the pack, they will succeed in substantial consumer loyalty and profits.

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