Introduction
The establishment of a dress shop within the hometown requires analyzing all factors that determine its success to adopt the right strategies to maximize the anticipated profits. After determining the pricing strategy to adopt and the potential start-up expenses, it is essential to identify the market structure in the hometown and countrywide to comprehend the degree of competition. The market structure reveals the number of businesses in the market and how they are differentiated, thus demonstrating the nature of competition (Marginal Revolution University, 2015). The paper identifies the type of market structure related to the sale of dresses in my hometown and the entire industry across the country.
Market Structure for the Line of Business in My Hometown
All businesses in the market follow a specific structure that defines the relationship between firms and buyers. From a critical perspective, businesses that sell formal dresses in the hometown operate in a monopolistic competition that allows them to attain their projected objectives. One of the key reasons that reveal the market structure’s existence in the hometown is the numerous businesses that compete against one another and vend unique formal dresses. Each business in the market tends to offer distinctive dresses to meet the diverse needs of customers and outshine possible competitors. The differentiation of dresses within the hometown is largely based on the physical aspects, location, and marketing. Some businesses use physical product differentiation to offer dresses with unique features, such as quality, design, size, and color. The marketing differentiation permits some firms to use diverse promotional strategies and exceptional packaging to reach out to their customers (Taylor, 2014). Based on the location, some shops choose to sell their dresses online or through brick-and-mortar stores, while others use a combination of the two methods.
The second reason businesses run in this market structure is to make autonomous decisions on the quantity to offer and the price strategy. Each dress shop in the hometown normally chooses the number of dresses to offer to customers and the prices to charge, although the operational costs greatly influence them. As a result, a dress shop can choose to adopt a lower price or a higher price than other businesses in the market. This allows the businesses to determine the key strategies to maximize the profit levels and surpass the competitors (Taylor, 2014). Thirdly, the hometown has a high exit and entry freedom for dress shops. Businesses willing to sell formal dresses can easily enter the market due to few entry barriers and can choose to leave the market at any time. The ability of businesses to realize positive economic profits makes the market highly attractive, compelling more firms to consider operating in it.
Research on Market Structure in the Industry Nationwide
My business idea is to start a dress shop to sell quality, unique, and reasonably priced formal dresses to female customers aged between 20 and 39. Since the business is focused on selling ready-made dresses to women, it will specifically operate within the women’s clothing stores industry. The industry is geared at selling dresses, suits, outerwear, and other apparel to women in the United States. The industry is greatly changing following the increased need for online shopping, which has reduced traffic within the stores across the country. A large fraction of the biggest players in the industry offers high-end products where they sell premium-priced dresses to rich women. Small stores tend to vend inexpensive and eco-friendly formal dresses to middle and low-income female customers (O’Connor, 2020). The industry is highly competitive, and the rate of competition is projected to increase as more businesses will enter the market to capitalize on numerous opportunities.
Most of the stores are located within metropolitan areas to take advantage of the high customer base. Over 33,100 shops across the country offer women clothing, thus revealing the intense competition in the industry. The industry’s large companies account for only 10 percent of the overall revenue implying that the market share concentration is low (O’Connor, 2020). However, the industry is mostly dominated by small stores that play a huge role in boosting employment rates.
Market Structure that Best Describes the Industry Nationwide
From a critical point of view, the women’s clothing store industry can perfectly be defined by an oligopoly market structure. This is because the industry is dominated by few big businesses providing an opportunity for small companies to run their services in the market (O’Connor, 2020). Firms within the market are interdependent, indicating that they closely consider the strategies of other companies when making decisions. This forces some businesses to consider cooperating to maintain their market share and avoid possible exit (Taylor, 2014). Additionally, the industry has some practical obstacles that do not prohibit willing and capable businesses from entering the market, thus increasing competition.
Conclusion
A decision to determine the type of market structure for the intended business helps an individual to understand the level of competition and the possible profit levels. The availability of monopolistic competition in the hometown implies that a business can freely enter the market and make independent choices on pricing and the quantity to offer. The identification of the market structure within the nationwide industry helps a business make the right decisions when expanding to a new market to avoid a possible exit.
References
Marginal Revolution University. (2015).Introduction to the competitive firm. YouTube. Web.
O’Connor, C. (2020). Women’s clothing stores in the US. IBIS World. Web.
Taylor, T. (2014). Principles of microeconomics. OpenStax College. Web.