The Research question that was investigated is exactly what market framework characterizes the offering of fruits & vegetables in the Al Seeb Souq?
The exploration was undertaken by first collecting supplementary research that was posted by magazines, internet sites and government laws and regulations to determine information about the Souq.
Primary research was undertaken by interviewing four people, questionnaires that were handed to thirty arbitrary test and observation was conducted to gain more information about the Souq if the principal research will back the supplementary data obtained.
Most of the results obtained came with similar conclusions that the Souq resembles a monopolistic competition with top features of a perfect competition market structure.
Therefore predicated on the info obtained, I came up with conclusion that the market composition that characterizes the advertising of fruits & vegetables in the Al Seeb Souq would be a monopolistic competition market framework.
Word Count up: 145
The fruits and veg souq is positioned in the administrative centre city of Oman, Muscat, has been operating for over a century. A Souq is market where clients and sellers come to collectively to transport an economic transition. The market is filled with consumers from different nationalities from different parts of the city. The marketplace is known for its fruits, and the wide range in both fruits & vegetables. There remain 200 shops on the market offering almost homogenous products.
In IB Economics, we researched theory of the organization and how businesses operate in everyday living, which was a specific connect to the berry and vegetable market. The outlets are market buildings, but the true market framework if these shops are unknown. The IB Economics course induces students to believe and link the relevant ideas to real-life situations and what goes on real life.
After visiting the marketplace several times, I had been astonished at the fact that the outlets are able to sell homogenous products are able to survive and compete. Not merely do they compete with each other, they are simply forced to compete keenly against the starting of department stores that also markets fruits & vegetables at a competitive price. The fact that many retailers have the ability to endure in extremely competitive conditions offering similar products, can be an interesting sensation, which encourages you to definitely think about how why these organizations have the ability to survive, and making it worthy of inspection.
The questions below encouraged me to come up with my research question "What market form characterizes the fruits and veg market in Muscat?"
How do these firms survive although providing almost homogenous products?
What competitive edge do some shops have over others?
Is there some kind of collusion between retailers?
In this essay, I will undergo an in-depth knowledge of the characteristics of the shops, and the way the firms have the ability to compete, the method of competing whether it is price competition or non-price competition, as well as the partnership to consumers, to answer my research question.
My hypothesis is the fact because there are many firms, that can survive, the marketplace will have some type of collusion in order to maximize earnings between these businesses. Another alternative is that the outlets may operate in monopolistic competition, meaning there products are differentiated therefore creating brand commitment between consumers, therefore allowing the companies to make it through.
Observation by Observing the similarity and dissimilarities of the types of product to ascertain when there is product differentiation and observing the price of the product to find out when there is price rigidity. Observing will be 5 different retailers because the marketplace is too large. Interviews will be conducted with shop owners to determine the market mechanisms, doing at least five interviews. Questionnaires will be handed as performing a survey requesting consumers about what decides what they buy, or the knowledge they have about the marketplace.
Newspapers and Their portrayal of the marketplace and prices. Internet Personal blogs by the people who go the market and their ideas. Economic theory, Economic theory about how precisely each market framework operates and relating the market to the financial theory. Country laws and regulations regarding competition whether the government regulations allow collusion, because if collusion is allowed it might provide incentive for retailers to collude.
Secondary Research - Economic theory
According to the financial theory, there are four clear market structures. These are : Perfect competition, monopolistic competition, oligopoly and a monopoly.
The industry is constructed of a large amount of firms
Each organization is relatively small set alongside the size of the industry.
Firms are price takers, not price designers, they don't established prices but choose the costs of the market
There are no barriers to entry, organizations are completely free to go into and leave the market
They sell homogenous goods, signifying they sell the same product. It is impossible to distinguish between goods
There is no brand loyalty as a result of homogenous products.
All providers and consumers have perfect understanding of the market. Consumers are fully aware of prices on the market, and each producer knows the cost of creation for other organizations.
The industry comprises of a fairly large numbers of firms
The businesses are small, relative to how big is the industry.
The goods are just a bit differentiated; it is therefore possible to distinguish goods.
There is little brand commitment because of the differentiation factor.
Firms are free to enter and leave the industry
Few companies dominate the industry.
There are not many amounts of firms.
A large percentage of the market share is shared between few organizations.
There are significant barriers to accessibility.
There is strong brand loyalty
There are two types of oligopolies. Collusive and non-collusive. Collusive oligopolies is when companies collude to impose the same prices for the merchandise they sell, to be able to maximize income for both companies. Non-collusive oligopolies are when businesses do compete and there is absolutely no collusion that takes place.
There is only one firm on the market and produces that specific product.
High barriers to entrance.
Abnormal profits are able to be sustained the long term, abnormal income are income that is more than what's needed to stay in the industry.
Secondary Research- Published Information
To investigate competition legislation, an article printed on the Oman Observer 15th of April 2012, mentioned that "The Board of Directors of the Public Specialist for Consumer Security has approved the Competition and Non-Monopoly Regulation and stressed the need to complete steps to concern the law. The new law seeks to establish a competitive environment, achieve a healthy market and fight negative phenomena leading to monopoly of products or control of their prices". This law continues to be not implemented, the fact that in the past and currently that there is no competition or anti-monopoly laws creates perfect conditions of the businesses in the souq to collude and bill higher prices.
According to the Oman tribune Newspapers, " Al Seeb Souq is famous for the variety of vegetables, berries and Omani schedules on offer plus a many local and foreign goods" shows that the souq draws in its customers using a variety of products, the variety suggests that there is certainly competition between the shops suggesting highly unlikely to be always a monopoly. In addition, it declares the souq " getting together with the wishes and interests of varied people" recommending brand commitment among consumers which are most noticeable in oligopolistic and monopolistic competition.
An internet blog explained " this includes local schedules and halwa, which you are able to get for a tenth of the price tag on the supermarket" throughout the blog the blogger constantly emphasis is the reduced prices within the souq. The reduced prices shows that there are competition within businesses, hence, also, resulting it in highly improbable being a monopoly and even more of a competitive market composition. It also shows that through low prices, the souq is able to compete against supermarkets.
The results extracted from secondly research developed similar ideas, that there surely is highly unlikely evidence of monopolies. Although your competition law does not band monopolies, the low prices and the variety of goods information from the newspaper publishers and the internet blog suggests there is slightly competition between these retailers, to help expand investigate which market framework, key research was conducted.
Primary Research - Questionnaires
57% of the respondents explained that they go to the same shop, this suggests that there may be strong brand devotion. Which suits the statements from the publication and the internet blog. Brand loyalty often is an oligopolistic or a monopolistic competition feature, hence, it seems unlikely that the souq is in perfect competition. In case the souq was a monopoly, a more substantial number would have been obtained such as 80% and above would be appropriate.
Around 50% of the consumers recommended the price of goods in the souq was low. The low prices are not ordinarily a feature of oligopolistic and monopolies, because consumers would've placed the costs as high. This shows that in conditions of charges, the Souq resembles a fairly monopolistic and perfect competition market composition.
Around 23% acquired excellent knowledge of the shops businesses while 34% had very good knowledge recommending that there appears to be a lot of understanding of the shops procedures. A stunning 0% confirmed that no person knew absolutely nothing the shops functions. The results indicate there seems to be good knowledge, but not perfect knowledge which heavily indicates monopolistic competition in terms of knowledge of consumers.
50% of the respondents unveiled that they understood which exact shop to go to in order to find the same product for a cheaper value. While 30% knew sometimes, and 20% did not know where you might get. The majority acquired knowledge of the market industry however, not perfect, once more, a feature of monopolistic competition.
The majority went with price with a higher 71%. Quality of goods also mattered with 20%. This indicates firms remain competitive on price-competition. Fighting on prices generally suggests the market constructions that will be the less dominant ones such as monopolistic and perfectly competitive market set ups.
Throughout the complete questionnaire, results obtained were constant with all of the questions creating a common market structure: Monopolistic competition. The mixture of brand commitment, price competition and having knowledge but not perfect indicate this there were no dominant markets such as Monopolies and Oligopolies as the results would have differed. Strong proof continue to suggest monopolistic competition.
Primary Research - Observation
An observation was conducted to start to see the prices of goods in the Souq, the occurrence of certain goods in the Souq, and the amount of shops.
The amount of outlets is 86, this is quite large, which really is a attribute of monopolistic and perfect competition.
Each shop was small relative to how big is the industry, and each shop experienced the similar amount of area within the Souq. This resembles a properly competitive market.
Price / Riyal
The prices appear to almost the same in every shops which implies they are contending on price. The actual fact that the prices are almost a similar is a flawlessly competitive market structure phenomena.
All shops in perfect competition will be selling their goods at the exact same price because they are "Price Takers" signifying the take the market price and don't placed their own price. A perfect competition industry resource curve looks like this
Since flawlessly competitive market buildings are price takers, their resource at a cost determined by the industry. The source curve is said to be perfectly inelastic, this means any change in variety supplied does not affect the purchase price at which it supplied at. The key reason why prices of goods will be the same in perfect competition, is that when a shop decides to lessen a price, other shop owners can do a similar thing, since there is perfect knowledge. In case a shop owner decides to increase the price, it'll immediately be out of business as the other goods will be cheaper. This happening explains the small versions in prices, the retailers would have probably went and used other shops.
However, not all shops had the same products throughout, some retailers had certain products which other shops didn't, leading to product differentiation.
The table unveils that some products are sold in certain outlets and not every one of the products have the very same product. This means you can find product differentiation that could be the reason behind the brand commitment from the consumers. Product differentiation is mainly a feature seen in oligopolistic and monopolistic market structures. But when observing, no shop or certain retailers seem to be to be dominating the Souq, and consumers and each shop got similar range of customers in each shop, recommending the product differentiation leads is what distinguishes the Souq from being a correctly competitive market.
The results extracted from observation have a tendency to resemble perfect competition since there were the amount of shops were big, and their sizes was small, but the product differentiation shifted to become a monopolistic competition market.
Primary Research - Interviews
Overall, four interviews were conducted. two interviews were with the shop owners, one interview with a regular customer for over a decade, and one interview with an attorney.
Both interview of shop owners exhibited similar responses, recommending it was reliable. When asked are customers regular. They both disclosed that most the clients are returning customers, matching the data obtained from the questionnaires and the secondary research. Brand devotion has been consistently, a major factor in determination of revenue in the souq.
Both shop owners say that they mainly remain competitive on brand loyalty and by product differentiation. Mr Ahmed said "By advertising certain goods that only our shop has, we therefore attract more customers". Product differentiation is once again, obvious in monopolistic and oligopolistic market constructions.
Both outlets said that their gains cover their cost, suggesting they make abnormal profits. Abnormal income is any earnings it made by a firm over and above the normal revenue to stay in the business. One of the shop owners responded "Our earnings are unreliable, we would be making profit for some time, then if another competition lowers prices or even more competition enters the marketplace we lose our profits". This suggest that abnormal revenue can be produced in the brief run, but are difficult to get the long run. This is a style of monopolistic competition and perfect competition. Inside the short run, monopolistic competition equilibrium is shown:http://upload. wikimedia. org/wikipedia/commons/b/b5/Short-run_equilibrium_of_the_firm_under_monopolistic_competition. JPG
More shops will enter the market before average revenue equates to the average cost, this is called normal income. Normal earnings is the minimal amount of earnings that a organization must receive such that it keeps the business running, also thought as the part that features monetary costs. Therefore in monopolistic competition it is possible to achieve abnormal income in the brief run, but in the long-run it can't be sustained which complements the affirmation made the shop owner. Monopolistic competition and perfect competition are the only market buildings which can only make gains in the brief run and only economic profit over time. In Both monopolies and oligopolies, both in the brief run and long haul abnormal profits can be suffered.
When asked about marriage with other shop owners, Mr Said responded" We are actually good friends, we laugh jointly, we joke alongside one another, we even eat jointly!". This complements the observation made that was clear that lots of shop owners went to shops owners outlets and were having a conversation. The close relationship between the shop owners is actually a consequence of an oligopoly, and the discussions apparent may to be ways of dominate the industry. Since competition rules does not forbid oligopolies and colluding shops, the condition's allow this to happen.
To investigate obstacles to entry, I asked the shop owners that if a new shop enters the market, how will the shop deal? Both responded that it's not difficult for just about any new outlets to enter the marketplace, and the government encourages new outlets to available to increase competition. This indicates these are no significant barriers to entry and companies are relatively free to get into or leave the market, a feature common to monopolistic and perfect competition market structures.
When asked if consumers know where the shops obtain their products from and the costs of getting the products, the shop owners said that most consumers have pretty good idea, but more of the old customers and repeated know precisely what happen. This suggests there is certainly knowledge but not perfect knowledge which suits the results obtained from the questionnaire. In perfect competition, consumers have perfect knowledge while in oligopolistic and monopolistic buildings, consumers haven't any knowledge. So the idea that customers have some knowledge signifies more of an monopolistic competition market framework.
Shop owners stated that they do not set the price themselves, each goes on the marketplace price and what other retailers price their products on. This implies they are simply price-takers, indicating they take the purchase price set by the marketplace. That is feature of monopolistic and properly competitive marketplaces.
The interview with both shop owners were very useful in figuring out important aspects of the Souq, what can be summarized is the fact that most of the data obtained from both interviews would be that the Souq directly remembers monopolistic competition with a opportunity of a collusion.
Although the questionnaire was helpful in examining the Souq device of operations, a brief interview was necessary for a person why shops his vegetables & fruits from the souq for over ten years to obtain additional detail and observe how the market improved over a decade.
Mr. Said, a long-customer for the Souq, said that if there is an oligopoly it would be obvious and he would have seen it. But being truly a repeated customer, he says that most of the shops are competitive and sell similar products. He also expresses that a lot of customers know the shop owners, and are repeated customers. He said the marketplace has changed over ten years insurance firms more products, more retailers and much more customers and has upgraded significantly. The interview with Mr. Said, once more, supports all the data extracted from the interview with other shop owners and questionnaires, that consumers have perfect knowledge and brand commitment is an essential aspect in advertising goods.
Mr. Mundhir, a skilled commercial lawyer in Oman was also quickly interviewed to determine competition laws and regulations. He exposed that there was no competition regulation appropriately regarding oligopolies and monopolies. But also mentioned that a souq, is highly improbable to collude because of the number of companies in the market. The lack of competition laws, could maybe provide freeway for outlets to collude, although this is improbable.
Overall, the four interviews was very essential as well as perhaps the most readily useful method of major research in conditions of getting the info, the interviews generally alluded to monopolistic competition, although there is absolutely no anti-monopoly laws, it seems very unlikely these outlets have colluded.
The whole research both key and secondary developed virtually identical results, which is the fact that the market framework that characterizes the offering of fruits of fruit and vegetables is monopolistic competition. The actual fact that consumers acquired knowledge but not perfect, the presence of brand loyalty, profits can't be sustained over time and many other factors constantly referred to the final outcome that the Souq was working on monopolistic competition grounds with few top features of perfect competition market framework, since there have been a whole lot of amount of firms and costs was almost the same on all products.
Although there was no laws regarding collusions this means collusion and oligopolies are allowed and the shop owners acquired a friendly romantic relationship with other shop owners, this does not necessarily mean that shops will collude, since no significant part research from research advised this, and the tiny dynamics of the companies makes it difficult to collude particularly when advertising extremely similar products.
However an unresolved issue is that just how do companies change their prices in response to other firms prices, since data was compiled about the same day, and prices assorted somewhat between certain goods. What would happen after having a day? Will be an unresolved question. Would the shop owners lower their prices after knowing another shop owner have? This would be a feature of perfect competition.
Based on the consistent results extracted from the questionnaires, interviews, and observation I have produce the conclusion that monopolistic competition is the market structure that characterizes the Fruits and Vegetables Souq in Al Seeb.
Although data obtained was reliable since most of the results came up with similar conclusions, there were limitations and advancements that could have been manufactured in the research.
Although there have been a range of folks who had been interviewed, only two shop owners were interviewed which is not enough to determine the market mechanism. More retailers owners need to be interviewed.
The thirty people who needed the review were random. It would have been better if given number of folks from different nationalities and record took the questionnaire, to observe how people from other backgrounds reply.
It could have been better If I have checked the prices the following days to see if businesses will certainly reduce their prices to other retailers, and to decide if prices change on a regular basis.
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