Differentiating Between Market Structures

Differentiating Between Market Structures

This market analysis will cover Bimbo Bakeries, USA. The market structure in which Bimbo Bakeries, USA is most closely identified with is monopolistic competition. A decisive explanation for categorizing Bimbo Bakeries, USA in this market structure will be offered as well as how this market structure differentiates from the other alternatives. Strategies that may be used by the organization to maximize its profits over the long run will be summarized and an evaluation of the efficacy of these strategies in the monopolistic competition will be offered. Finally recommendations related to the strategies the organization may consider maximizing its profits will be made.

Market Structure

Bimbo Bakeries, USA is most closely identified with the market structure monopolistic competition because of the shear nature of the industry. Although it is the leading maker of baked goods in the industry it has many competitors. The top four companies are composed of only 11.7% of the market in total. The bakery industry includes many smaller bakeries, but recent trends lean toward consolidation and economies of scale. These businesses compete in the arenas of price, quality, differentiation, and relationships with key suppliers (Roe, 2013).

Differentiating Between Market Structures

Monopolistic competition differs from the other market structures in varying ways. When compared, monopolistic competition appears to be the easiest market structure to enter. Monopolistic competition is comprised of independent firms who are not dependent on other firms in the system for decisions about production and profit making endeavors. On the other hand oligopolistic firms, for instance, are mutually interdependent. Oligopolies take into account

the reactions of other firms; monopolistic competitors do not (Colander, 2010). Monopolistic competition differs from monopoly as well in that monopolies exist because of the barriers to entry preventing competition. There are few barriers to entry in the monopolistic competition model. With the monopoly model these barriers can be legal barriers (take, for example, a firm that has a patent preventing new firms from entering), sociological barriers where entry is prevented by customs or traditions, natural barriers where the firm is the only one with the ability to manufacture what other firms cannot reinvent, or technological barriers where the size of the market will support only one firm. Last, when comparing monopolistic competition with perfect competition, one will find that monopolistic competition is much more realistic. Consequently, "although perfect competition has a high level of restrictive assumptions, it