Leap Frog Company Market Structure Essay Examples & Outline
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Leap Frog Company Market Structure
The term market can be used to refer to the physical place where the exchange of commodities takes place (Krugman & Wells, 2005). This is usually a location that the actual exchange takes place. However, the economic reference of the term market leans towards the nature of the competition that is found therein. Each industry may have different market structures that are created in to suit the inherent aspect of the industry or by law. Companies and other firms in the market may come up with various ways, both legal and otherwise, of creating control over the products. The market structures may be premeditated by the nature of the product of the possession of a unique set of knowledge pertaining to the production of certain output.
There are four market structures studied in economics. The first class of the market is the perfect competition which is an idealized market, monopoly market structure where one firm has control over the supply of commodities, oligopoly which is made up of few firms, monopolistic competition that combines some aspects of monopoly with perfect competition attributes. The research paper will focus on the market structure used by leap Frog Company.
Market structure of the leapfrog company is oligopolistic. This market structure is usual made up of few producers that provide a unique content to the market. Most of the flagship products of the company are also produced by a few firms. This aspect makes the market and the nature of the competition to be oligopolistic. This means that the companies that have the right of increasing the prices have to work in consortium with the other players in the market. Less than ten companies offer a formidable resistant to the products sold by the firm. This means that in as much as the product being sold in this market are of a similar nature, the ability to sell to the rest of the buyers depends on the ongoing market prices.
Leap pad is a product developed by the company to assist the young children learn literacy skills. This was a product that was launched in 1999. The product has been able to make decent sales return. However, in 2007, the firm sought to discontinue the product to accommodate the market dynamics. This move in 2007 in the USA and 2008 in UK was an indicator that the prices and product specifications have to be made according to the market dynamics and what it dictates. This aspect rules out the possibility that the market structure in which the company operates in is mainly affected by the firm. Therefore, the market cannot be a monopoly.
The second aspect that make the market an oligopoly as opposed to another market is the fact that there are competitors to the products that the firms produce. This means that the products that are under the production domain of the industry have to attain the preference of the consumers such that they will be persuaded into buying the product as opposed to that offered by the competition (Hubbard & O'Brien, 2006). However, the degree of differentiation of the products in the market is more or less the same. The same product made by the firm is not any different from the one that is produced by the other producers in the market. Lack of differentiation and the ease of substitution of the products from one to the other is indicative of the oligopolistic tendencies (Pindyck & Rubinfeld, 2005).
A number of the most significant competitors in the western world is also significantly low to warrant the classification of the market structure into an oligopoly. The competitor is mainly composed of large firms that are a major aspect that qualifies the competition as an oligopoly (Krugman & Wells, 2005). The product differentiation witnessed in the industry is the other indicator of the oligopolistic competition. For instance, Leapfrog removed the leap pad from the market to replace it with mode advanced products. The removal of the product was not a result of the poor sales since it has been a major sale driver.
This removal was to match up with the product that the other producers were making. The differentiation was also a move to ensure that the company would retain the position of the market leader who is has been able to hold due to its first starter aspect. Adoption of this approach by the firms is indicative of the unwilling nature of the firms in the market to work with non-price competition as opposed to other markets. This also means that the firms are unwilling to take direct action that will be termed as an aggressive pricing or marketing campaign. Contrary to the norm, the firms in an oligopolistic market structure adopt salient mean of completions that can be termed as passive, but effective. Research and development are just but one of the many approaches that firms use to make themselves appeal to the perceptions of the people (Pindyck & Rubinfeld, 2005). The above signs are indicators that Leapfrog enterprises operate in an oligopolistic market structure.
The company does not exist and operate in a vacuum since it can interact with the rest of the industry players. Some of the firms in the industries have a mixed approach, and they have to work with the company (Krugman & Wells, 2005). In order for the company to create a vivid image of the products that the firm offers and the interactions that the company have with the rest of the industry players, it is important to look at the main players in the value chain. The value chain is mainly composed of the two sides made up woof the upstream and downstream segments. The upstream segment is made up of the manufacturers of the raw materials and other inputs used in the eventual creation of the final product. The output created from this side of the value chain is used by the company in the creation of value (Pindyck & Rubinfeld, 2005). This side can be termed as the supply side since the members of the supply chain in the upstream part supply parts that are later used in the creation of the final products by the company. This means that the downstream part is the demand part.
The market structures of other players in the industry is not the same since some of them may be acting in their capacity to create the value while other may be acting in consortium. The network inter-linkages found in the value chain indicate that the firm has the power to determine the people that it will deal with, therefore, allowing the selected vendors and distributors to work with some degree of power over their competitors. Absolute distributors and vendors makeup the market linkages (Krugman & Wells, 2005). The models that the subsectors in the industry use are different from the one used by the company hence there are linkages in the market structures used.
The main sectors in the industry are the upstream and won stream sections. The sections may vary according to the firm selected and the location that it occupies in the value chain. Therefore, the description of the sectors as the upstream or downstream sectors will give rise to a different connotation from a different viewpoint (Hubbard & O'Brien, 2006). The sectors involved in the industry can be termed as supply side and the demand side. Products made by the company are both unique and effective. The creation process of the products calls for the suppliers to find and distribute the products in time such that the volumes produced will be in accordance with the market demand (Pindyck & Rubinfeld, 2005).
The human effort is concentrated in the middle section of the value chain whereby the research and development official design the products. Sourcing of the products is carried out on the need to basis with the majority of the products sold in the market having undergone a just in time production system (Hubbard & O'Brien, 2006). Suppliers and distributors employee different market structures since the inputs and components used in the production of the final products are also sourced from different market.
For instance, the suppliers of the plastics used to make the casings may be operating in an imperfect competition market. Therefore, they may have to use the prices determined by their respective market when supplying the raw material (Krugman & Wells, 2005). The resistors and other electronic components used in the creation of products such as the Leaped are available in the market. This means that the suppliers of these prices are price takers, and they will go with the price set by the market.
In the distribution sector, the products are received from the factory or plant to the wholesalers and finally to the outlets where the consumer can purchase the commodities. The market structure of the distributor models is also varied with the majority of the players in the industry operating on their own. In some case, the distributors are organized leading to the oligopolistic market structure. However, the rest of the market structures are also well represented in the downstream part of the market.
Profit maximization in the industry will depend on the ability of the form to produce products that are relevant to all the users. The company has been able to do this over the time with is the product providing the children with both the fun needed in the education process as well as the learning experience. The strategy that has informed the success of the organization in its previous engagement has been the ability of the firm to produce high quality products. Therefore, the company will be able to retain the relevance that it has held over the years.
The second strategy that the firm can adopt that will ensure that the company has a market leadership status is the ability of the management to invest significantly in the research and development. The investments in this department will ensure that the company has the right innovations that will be useful when it comes to the attainment of the market leadership position. Innovations will be potential sources of market leadership (Pindyck & Rubinfeld, 2005). For instance, the creation of the touch learning devices for children is an innovation that has been fronted by the company to replace the old Leaped. Improvements on the new devices bring the children learning sector into the same realm with the other technological advancements.
Old and obsolete technology is removed leading to the creation of the right approach towards the market demands. Children can associate the devices that they use to learn with the ones that are used by the adults such as smartphones and tablets. The final competitive strategy that the company can employ is to derive the maximum value from the value chain by ensuring that the demands and specifications set by the customers are attained in the effective and efficient manner. This means that the company may use the information flow in the value chain by to create products that have the power to cater for the needs of specific people.
Therefore, effective management and use of value chain information flows will ensure that the customers have the right specifications. Customization of the orders will ensure that there is a high rate of customer satisfaction leading to the creation of value and customer loyalty. The above approaches are both effective and efficient. The main selling point for the proposed technology is that it will be effective in the creation of value to all the people (Hubbard & O'Brien, 2006). The other selling point for the competitive strategies is the fact that the competition will eventually culminate in market differentiation that is in agreement with the characteristics of the oligopolistic competition. Hence, the company will be able to attain high sales volumes while adhering to the tenets of oligopoly.
Hubbard, R., & O'Brien, A. (2006). Microeconomics (1st ed.). Upper Saddle River, N.J.: Pearson Prentice Hall.
Krugman, P., & Wells, R. (2005). Microeconomics (1st ed.). New York: Worth.
Pindyck, R., & Rubinfeld, D. (2005). Microeconomics (1st ed.). Upper Saddle River, N.J.: Pearson Prentice Hall.