3.

1 Explain how market structures determine the pricing and output decisions of
businesses
Market

Market

Types

Structures

Explanation of graphs

Graph of pricing and

output decision in
various market
structures

Monopoly Exist one

In case of a competitive firm, price

supplier of a

is given and fixed. Demand or

product or

Average Revenue curve is perfectly

services in

flexible and is a horizontal straight

the market.

line. A monopolist has the freedom

to charge a higher or lower price.
With a change in the price, the
quantity demanded also alters.
Again a monopolist is a single
seller. He himself is a firm as well
as an industry. Hence market
demand curve is in itself the
demand curve of the monopolist.
As a result of this the demand curve
of a monopolist is downward

Perfect
competition

Many

sloping
As shown in Figure-1, when price

people in

is OP, the quantity demanded is

the market

OQ. On the other hand, when price

and other

increases to OP1, the quantity

conditions

demanded reduces to OQ1.

are such,

Therefore, under perfect

that no-one

competition, the demand curve

can

(DD) slopes downward.

influence

the price,
all other
Oligopoly

are equal.
Few large

The kinked demand curve makes

suppliers,

certain assumptions

whose
business
decisions

affect each
others.

Firms are profit maximisers.

If one firm increases price,
other firms wont follow suit.
Therefore, for a price increase
demand is price elastic.

If one firm cuts price, other

firms will follow suit because they
dont want to lose market share.
Therefore, for a price cut, demand
is price inelastic.

This is how we get the

kinked demand curve

Monopoli
stic

A large

if the price of one producers good

number of

rises high enough, consumers will

firm sell

switch to a cheaper alternative

closely

because of the substitution effect

related, but

and the income effect. As a result,

not

the demand curve is downward

homogenou

sloping. P > MR, because in order

s product.

to sell additional units, firm owners

Instead, the

must lower the prices of every

product are

single unit they sell. If MR = MC

said to be

and P > MR at the profit-

differentiat

maximizing level, then P > MC

ed and not
seen as
perfect
substitutes
by
consumers.

3.2 Illustrate the way in which market forces shape organisational responses using a
range of examples
Market Forces
1. Bargaining

Explain Forces
The bargaining power of

Response of Dyson LTD

Dyson company can adjust

Power Of

customers is also described as

the bargaining power of

Customer

the market of outputs: the

customer become high

ability of customers to put

because they own some

the firm under pressure, which

conditions such as : variety of

also affects the customer's

prices and product, brand

sensitivity to price changes.

indentify , substitutes

Firms can take measures to

products, In Dyson, there

reduce buyer power, such as

are various products such as :

implementing a loyalty

vacuum cleaner, tools ,hand

program. The buyer power is

dryer, lighting, air treatment,

high if the buyer has many

with price from 100$ to

alternatives. The buyer power is

999$ leading buyer can easily

low if they act independently

to choose product. Besides,

other and ask to make prices

Dyson has official in 70

low the company will have no

countries therefore if the

other choice because of large

product is error, they change

number of customers pressure.

fix or change easily. In

websites of Dyson, they
guides reader very details so
that customer can understand
clearly about product. (Dyson

2. Bargaining

When suppliers have bargaining

, 2016)
Suppliers have low

power of

power, they can apply pressure

bargaining power because

Supplier

on a company by charging

Dyson is the industry leader

higher prices, adjusting the

and they are selling the

quality of the product or

maximum number of units so

controlling availability and

they have all rights to impose

delivery timelines. Within the

power on its suppliers(

five forces framework, there is

an understanding that when
suppliers have this bargaining
power, they can affect the
competitive environment and
directly influence profitability
3. Threat of New
Entry

for the company.

threat of new entrants refers to

To reduce the threat from new

the threat new competitors pose

entry, Dyson should care

to existing competitors in an

good to available customer

industry. A profitable industry

combine with invest more

will attract more competitors

money for advertising

looking to achieve profits. If it

campaigns to customer know

is easy for these new entrants to

clearly about product as well

enter the market if entry

as make highlight brand of

barriers are low this poses a

company. Moreover, threat of

threat to the firms already

new entry is low because the

competing in that market. More

product of Dyson is

competition or increased

differentiated with the market

production capacity without

and the price of goods is low

concurrent increase in consumer

therefore the opportunity for

demand means less profit to

competitor grasp the market

go around ( Jim Wilkinson ,

of Dyson is low. ( Jackie ,

2013)

2015)

https://www.cleverism.com/bargaining-power-of-suppliers-porters-five-forces/
https://strategiccfo.com/threat-of-new-entrants-one-of-porters-five-forces/

3.3 Judge how the business and cultural environments shape the behaviour of a
selected organization
Business and Culture
environment in UK
1. Political

Elements
Government
policies

Shape of Behavior of Dyson

LTD
Government set up policies
such as: competition and
consumer protection leading to
Dyson have to manufacture
good product for customer. If
they produce goods low quality
that have bad effect on healthy
of customer, Dyson will be fire

from government.
2. Economical
3. Social &
Cultural

Social Factor :

Social Factor : With a high

Population

population more than 62

million people and GDP about
60,000 $/person each year.
People is ability about finance
to shopping. Therefore, Dyson
focus to manufacture new
product such as : vacuum , air
treatment, hair care,

4. Technological

e-commerce

The development of ecommerce in the world

recently leading to Dyson
create website to introduce and
sell their product online. This
is effectively channel to
company can interactive with
customer closely.

5. Legal

Employment
Law

This element guarantee Dyson

have to responsibility with their
employees. They have to pay
minimum salaries assigned from
government to ensure the life of
employees. Besides, company
also have to ensure the safety for
employees in processing
manufacturing.

6. Ecological

Global warming

Global warming is hurting

problem of human. To reduce
the development of them,
Dyson is creating new product

that friendly with environment,

consume less energy and when
product expired, they can be
recycled.