Business Economics

 Business Economics
Introduction:
After globalisation the level of competition has significantly increased among the business units
in each and every industry. In present economic scenario there has been stiff competition that is
seen in each and every sector in the market. After globalisation, various business units have to
compete with not only the local competitors but the global competitors as well. Thus it is very
important that the business units establish competitive advantage in the market and they also
achieve their core competencies for attracting the consumers and attaining higher market share in
the industry. There are several factors that can significantly affect the business units in every
industry. The business units have to take into consideration all these factors for implementing
effective strategy in the market. These factors can include the market position, the trend in the
market, the demand structure for the product, the tastes and preferences of the consumers, the
market structure, and the competitors in the market. These are the microeconomic factors that
can affect the business. On the other hand the macroeconomic factors like the economic, social
and political condition of a nation can also affect the business as it is the external environment
where the business operates (Krugman and Wells, 2013). It is argued that the recent price wars in
the supermarket and mobile phone industry can significantly benefit both the consumers and the
respective industries. So the main aim of the assignment to critically analyse the statement using
the relevant theoretical models.
Market Structure and the Equilibrium:
At present the supermarkets and the mobile phone markets follow monopolistic competitive
market structure. It is known that the market structure can also affect the strategies imposed by
business units. Thus the market structure of supermarkets and the phone industry can be
discussed here (Pindyck and Rubinfeld, 2013). It is known that the competition among the
supermarkets and in the mobile phone markets have increased significantly and thus the features
of monopolistic market structure can be presented here.
It is known that in the monopolistic competitive market there are many buyers and many sellers,
selling partly homogenous but differentiated products to the consumers. The products are not 
perfect substitutes of one another and each product has their unique features or qualities. It is an
intermediary market position and thus it resembles perfect competition as well as monopoly. In
the monopolistic competition no single buyer or seller can impact the changes in the price in the
market and thus no one has complete control over the market (Pindyck and Rubinfeld, 2013).
There is a certain limit of control or power that is enjoyed by the producers in the market. NonPrice competition is one of the major features of a monopolistically competitive market. The
producers apply various non-prices competitive techniques like brand value increase, advertising
and promotion for competing in the market. There are a few barriers to entry and exit. The
market equilibrium usually occurs where the marginal revenue (MR) of the firm equals the
marginal cost (MC). The firm sets the price in terms of the average revenue curve and the firms
maximises the profit at that point. The supply and the demand for the product are also taken into
consideration. The producer produces and supplies the products on the basis of the market
demand (Sloman and Jones, 2011).
Source: (Economicsonline.co.uk, 2014)
Mobile Phone and Supermarket industry and Price War:
In present economic scenario, there has been extreme price war that is seen in supermarket as
well as mobile phone industry. Here it can be said that the level of competition has significantly
increased in these industries, especially after globalisation. Various organisations has extended
and established their operations at worldwide scale and thus they have been involved in price
war as well along with non-price competition (Pindyck and Rubinfeld, 2013). They are offering
high quality products to the customers at lower price for acquiring large market share in the
industry (Sloman and Jones, 2011). It is very important to create a brand perception among the
consumers and implement effective marketing strategies for attracting the consumers.
Price discrimination can be referred as one of the pricing strategies that are implemented by
business units or extracting maximum consumer surplus. By price discrimination the producer’s
implements different pricing strategies for similar products and that can influence the buyer’s
behaviour. The supermarkets and the mobile phone industries also implement such strategies for
achieving higher market share. The opportunity cost on the other hand refers to the cost of best
forgone alternative for an organisation (Krugman and Wells, 2013). When there is a limited
resourc