Monopolistic Competition in the Gadgets Industry

Monopolistic Competition in the Gadgets Industry is not just the current issue that countries face nowadays, but it is an economical issue that is faced all year long by the retailers in the market. The gadget industry is comprised of thousands of different brands and companies. However each is defined by its quality of make and materials used. Apple, Blackberry, and Android are all well-known and respected brand names. However if prices were to exceed what people are willing to pay, then the consumers would alter their preferences and buy from another brand. Therefore we are dealing with a monopolistic competition.

Monopolistic competition is often defined as a common form of industry structure characterized by a large number of firms, none of which can influence market price by virtue of size alone, as some degree of market power is achieved by firms producing differentiated products. New firms can enter and established firms can exit with ease.

In monopolistic competition, the industry consists of a large number of firms. The presence of a large number of firms has three implications for the firms in the industry. First, it’s the small market share. Each firm supplies a small part of the total industry in monopolistic competition. Therefore, each firm has only limited power to influence the price of its product. Each firm’s price can deviate from the average price of other firms by only a relatively small amount. This implication is described as small market share.

An example for this is when the Blackberry Company attacked Apple indirectly in their television commercial where a blackberry went straight through an apple. Apple later on came up with a comeback via a television commercial as well, indirectly attacking them where the blackberry fell apart upon hitting the apple. A competitive competition such as so, leads many retailers to desperation for survival in the industry.

Apart from that, a firm might also alter the prices of their products according to the desirability of them based on the season and so on. This is determined by the elastic of the products that may be elastic, or inelastic.

Diagram 1 shows that as price increases, the percentage change in demand is lesser than the percentage change in price. This shows that during a peak season where people demand more for the firm’s product, a change in the price will not affect the demand for the product abruptly. 

Diagram 2 shows that as price increase, the percentage change in demand is greater than the percentage change in price. This shows that during a normal season, a change in price will affect the demand of the product greatly as compared to Diagram 1, during the peak season. A retail firm might increase the fare during the peak season because the elasticity of demand is inelastic and elastic when it is during the normal season.

Monopolistic Competition is a market structure where a large number of firms compete, each producing differentiated products based on the quality of the product, price, and marketing strategies. Firms are also free to enter and exit the industry. In this competitive market, firms compete with other using various ways and strategies, such as giving out free ‘goodies’, increasing discounts, also attacking each other indirectly or directly via commercials and advertisements. These are the ways for the firms to survive in the industry with the pressure from the competitive competition, but are only efficient to a certain extent.

To conclude, in Monopolistic Competition, retailers need a compelling offer in order to justify their existence in the retail industry. This pushes the retailers to come up with different, brilliant ideas and strategies to tackle the consumers and make the sale. Even though the competition is tough in the retail industry, this competitiveness pushes many retailers to go beyond their comfort zone, and over the consumers’ expectations to stand out in this industry. Some of the major brands we have today once started small, and then worked their way up to where they are today.