Differentiating Between Market Structures in Kudler
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Kathy Kudler had a dream; she wanted to open a one stop gourmet food store. She not only has realized that dream, but has opened up three locations now to this date. She has committed to providing her customers with the finest selection of wine and the highest quality meats, cheeses, and other produce on the market. Kathy continues to retain direct control over bulk purchase orders, diligent customer service policies, and hiring of new employees. This has allowed Kudler foods to become a strong and competitive business in the market. Kudler Foods uses a monopolistic competition market structure to compete with their competition. There are few other businesses offering similar products in the area. The biggest competition to Kudler Foods is Cardiff Seaside Market. There are few entry barriers to opening a new business in the area, good long term run potential, and the firms already established are big enough to influence the supply of customers. Food stores in the area have multiple forms of competition with food distributors, advertising, product quality, as well as customers (Collander, 2010). At a profit maximizing output level it is very possible for a monopolistic competition market to produce a good gain on cost. A marketing differentiation strategy is good for Kudler Foods. While advertising for other grocery stores in the area is similar, their advertising is not a “loss leader” style, Kudler foods is one of the only gourmet shopping opportunities in the area. Yet leaving other similar stores in the area unchecked, competing stores could negatively affect Kudler’s customer base. Assessing their strengths and weaknesses is necessary to see the possible challenges ahead.
The Kudler Fine Foods marketing surveys are a concise indication of the strengths and weaknesses of the company. Customers are pleased with the lay-out of the store as well as the displays, customer satisfaction is high, and customers are satisfied with the hours of operation. Customers are also very pleased with the produce and other goods they have purchased, just are not too happy with the value the get in return for their hard earned money. This confronts Kudler with an issue other competitors can capitalize on. Competitors could find a new strategy to sell better products at an equal or lower price and take away Kudler’s market share.
The benefits of a monopolistic competition market structure is the possibility to act independently and adapt to the changing economic, competition, or other market changing factors, while keeping customer tastes and suggestions in mind. Monopolistic competition offers little resistance to those entering the market and those sustaining long term success. There are similar companies to Kudler, but some differentiating products and marketing strategies can give them the competitive advantage. Collusion is not likely to happen in this case either as there are too many firms unlikely to act as one.
The challenges to the monopolistic competition market structure can be the some of the same things that were benefits as well. The few barriers to entering the market can give Kudler Foods new competition at any time. Many different companies can operate in the same market; each one would give less of a relative possible market share of customers. To combat this Kudler Foods has to continue to advertise, possibly more even or smarter, and continue to find new creative marketing strategies to show customers their products are superior to the competition’s. Gourmet food companies increasing their popularity and profitability will draw in more new companies and competition, also possibly draining their long term run profitability in the market. Too many options to consumers could weaken the market supply of customers down so much that it drains the profitability of multiple companies in the market. A