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Advantages And Disadvantages Of Monopolistic Market Structure

789 Words4 Pages

From the firm’s viewpoint, the company actually faces several advantages and disadvantages under the monopolistic competition market structure. First and foremost, we would discuss on the disadvantages of firms under monopolistic competition market structure. One of the characteristics of monopolistic competition is there are many competitors to the firm which is a disadvantage to the firm. Large variety of product choices, gives consumers a chance to switch products immediately if they find the product not up to their expectation. Therefore, a company should always check on their product to maintain the quality. For example, Sunlight (product of Unilever (M) Holdings) is a very established competitor of Axion. The market leader maintains the quality of their products by constantly conducting research and development and product improvement through the support of their revenue. Conversely Axion has a relative small market share, and they try to maximize their revenue by finding a way to reduce the cost of their input. They might forego continuous research and development (Euromonitor, 2016). This may lead the changes in the quality of the products. Consumers will experience the differences in quality, and change their choice of products. Secondly, there is competition on marketing among competitors. Marketing is an extra incurred cost to firm’s operating cost. Not all companies can afford extravagant marketing cost. Axion does not have a lot of budget in advertising. This

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