Differentiating Between Market Structures – Kudler Fine Foods
Kudler Fine Foods is committed to providing its customers with the best selection of foods and wines in the retail market. The owner’s vision is to be the top of the line gourmet grocery store for discerning shoppers seeking the best meats, produce, cheeses, and wines. To further her mission and vision, owner Kathy Kudler formed the business within the monopolistic competition market structure, developed a marketing overview, and created market surveys to evaluate the business’s competitiveness in the marketplace.
Overview of Market Structure
The monopolistic competition market structure includes many firms selling slightly differentiated products. There is an easy entry into the market by new firms in the long run, and the firms are large enough to influence the total supply. The marginal cost will be less than price at its profit-maximizing output level. According to the text, a monopolistic competitor cannot make long-run profit (Colander, 2010).
The benefits of the monopolistic competition market structure are the ability to act independently to adapt to changing economic forces and customer tastes to differentiate the company from its competitors. In other words, it exercises monopolistic behavior through product differentiation and marketing strategies to gain competitive advantage. Additionally, collusion is unlikely to occur because of the difficulty of getting a large number of firms to act as one. The challenging characteristics of the monopolistic competition market structure that the company faces are the few barriers to entry so that many firms are competing in the same market. As a result, the company must continually advertise and implement marketing strategies to convince consumers that their products and services are better than the competition. Moreover, as gourmet fine food firms increase their success and profitability more firms will enter the market, thereby exacerbating or eliminating long-run profitability (Colander, 2010).
Review of Kudler’s Strategic Position in the Market
The firm must work toward increasing its market share by increasing its outputs to lower the average costs. The company has several firms competing for customers’ food and beverage dollars: traditional grocery stores, health-conscious food markets, international foodstuff stores, and independently owned specialty food stores and restaurants. the company does not recognize any of these firms as direct competition because of the manner in which Kudler has differentiated her business’s customer service and product line. the company strives to attract a discriminating gourmet customer base that seeks excellent and organic food products, knowledgeable customer service, and an array of specialty food preparation utensils.
Kudler also differentiates her business from others by exercising socially responsible activities such as, purchasing locally grown organic produce, using unbleached flours in baked goods, eliminating unnecessary preservatives in products, and continually rotating the food inventory. Kudler donates products still in “good” condition to local food kitchens and homeless shelters. Kudler’s commitment to contributing to the communities in which she operates her businesses builds her reputation as a socially conscious business operator and sets her apart from some of the competition.
Advertising how their products and services are superior to the competition motivates monopolistic competitive firms. Firms operating within this market structure rely on advertising to sell more products and to allow them to charge a higher price. To achieve this, the advertising must inform consumers convincingly about the superior quality and value of the products and services offered. However, advertising is relatively expensive so the firms must…