Competition the Reasons the Florida

Competition

The reasons the Florida Department of Citrus advertises as a singular cooperative rather than on the basis of individual farms is because the market is competitive. Competitive markets have a number of traits that make them distinct. The price is set by the market, and this is the case with oranges. The product lacks differentiation, as is the case in most agricultural commodities. For the Florida Department of Citrus, the marketing is an attempt to brand Florida oranges as unique, which is possible given the unique climate and soil conditions of the state. However, the orange market remains largely undifferentiated.

In addition, there are numerous competitors in the market and there is relatively easy market entry and exit. Certainly there are numerous competitors in oranges, not just in Florida but California and other parts of the world as well. As a result, individual farmers would have difficulty distinguishing their products from those of other farmers. Market entry and exit is relatively easy, in that farms can be bought and sold easily.

There are competitors in the market around the world, and aside from tariffs, subsidies and other external constraints on price, the price of oranges is set by the global commodities market. Surpluses in one region can be exported around the world to offset shortages in another. The Florida website is an attempt to build the brand for Florida oranges so that its products are deemed to be sufficiently differentiated that they cannot be substituted with other oranges. The site is geared towards consumers, which raises an interesting point about the nature of this competition. Florida oranges are typically used to make juice. Juicemakers may understand that Florida oranges can be readily substituted with oranges from other parts of the world, but if the consumer can be convinced that other oranges are inferior, then juice makers will be compelled to make their juice from Florida oranges. That the product is not differentiated stems from perfect knowledge on the part of buyers; imperfect knowledge on the part of the end user can be leveraged to overcome that. The Florida marketing effort, therefore, is an attempt to create imperfect market conditions where perfect competition currently exists.

3. Monopolistic competition is a form of competition in which there are many competitors, somewhat difficulty entry or exit, products that are only partially differentiated and there is only some degree of price control on the part of the seller (No author, 2010). The fast food industry has these characteristics, and this shall be considered with respect to McDonald's, Burger King and Wendy's.

There are dozens of fast food chains, in addition to independent fast food outlets, in the United States. Each of these chains is slightly differentiated from one another. Whereas KFC is differentiated significantly by product, the three leading burger chains are only differentiated somewhat. The characteristics of the good in fast food in general is a low-cost filling food product focused on basic attractive flavor elements such as meat, salt, fat and sugar. The burger chains each have a menu focused on hamburgers, fries and soft drinks. The chains attempt to differentiate their products partially through differentiation of the non-core lineups (salads, desserts) but also by differentiation of the burgers themselves, with different sauces, cheeses and other elements. Consumers, however, still understand these differences to be superficial and still view the product as a burger, rather than a new product altogether. This view is consistent with the characteristics of monopolistic competition, in that the products are only partially differentiated. Firms attempt to compete on the basis of this partial differentiation.

With respect to price, fast food is defined by its low prices relative to other restaurant meals. Firms competing in the industry will attempt to use their points of differentiation -- be they special burgers or the company's brands -- to gain higher margins on their products. However, because fast food is in part defined by its price point, the companies have only limited pricing power at the high end. Firms in the industry also tend to adopt either permanent or temporary cost leadership strategies (such as 99 cent menus) in order to attract business. The companies are unable to sustain low prices in this industry because the margins are inherently low and because most other firms are capable of matching those prices, negating any market share gains the low prices offer. Thus, fast food companies only have a small degree of pricing power, another characteristic of monopolistic competition.

The fast food industry exists within a broader "food" industry, which is a more competitive environment. Fast food companies are able to set their own prices in order to compete and fast food companies have simply chosen to follow cost leadership strategies. The segment of the food industry is so large, however, that it takes on its own industry dynamics. It is within those dynamics that the characteristics of monopolistic competition begin to emerge.

4. The Organization of Petroleum Exporting Countries (OPEC) is a cartel comprised of Algeria, Angola, Ecuador, Iraq, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the UAE and Venezuela. The mission of OPEC is to "coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry" (OPEC.org, 2010). The price of oil is dictated by supply and demand. OPEC producers control the price of oil by announcing how much oil they will supply to the world market. This is done on the basis of estimates of supply from non-OPEC producers and on the basis of expected global demand (Ibid).

OPEC member states control approximately XX % of the global oil trade. In doing so, they exert considerable influence over the price of oil on the world market. The presence of OPEC in the world market has created oligopoly conditions. The OPEC members form an oligopoly in that they have grouped together a small number of competitors to leverage their combined market power in order to dictate prices and terms of trade on their core product. While it is relatively easy to exit OPEC, most oil-producing nations are dependent on oil for their economic strength. As these countries must pay the price of oil as dictated by OPEC, they are part of the oligopoly even if they are not part of the OPEC cartel.