Microeconomics the Servicemaster Company Is Concerned With

Microeconomics The ServiceMaster Company is concerned with the provision of a wide range of services to not only residential but commercial customers as well. Mainly, its services include but are not limited to facility management services, commercial cleaning as well as restoration services. In this text, I describe the type of market ServiceMaster operates in as well as the competition the company faces; if any. I also make submissions on how I think the company can increase its market power.

The Type of Market in Which ServiceMaster Operates ServiceMaster operates in a monopolistically competitive marketplace based on a careful examination of the specific characteristics of the company as well as the marketplace it operates in. Rittenberg & Tregarthen (2009) define monopolistic competition as a situation where we have a large number of firms producing products which are similar but which are in one way or the other differentiated. Further, they note that in a monopolistic competition, there is ease of exit from the market or entry into the market.

This is in contrast to imperfect competition where we have the existence of quite a number of entry barriers (Hasek & Dodd, 2000). My assertion in this case is supported by the fact that quite a number of companies compete with ServiceMaster but the services offered by each company are highly differentiated. Hence in that regard, ServiceMaster can still set its own prices as some people will continue to seek its services based on the fact that these services are differentiated.

In this market, there are also no barriers of entry and companies can exit the market with relative ease. Further, unlike in a monopoly, there is no restricted raw materials ownership in the case of ServiceMaster. In a monopoly it is the ownership of inputs as well as raw materials that gives firms monopoly power (Rittenberg & Tregarthen, 2009). Further analysis of the market ServiceMaster operates in reveals that there is a significant ease of decision making in this case and each firm does not act in fear of increased competition.

This is unlike an oligopoly. We can hence say that in this case, the various firms (which I name elsewhere in this text) individually possess a certain level of market power. The Type of Competition ServiceMaster Faces As already stated elsewhere in this text, ServiceMaster is in a monopolistic competition. Other firms in a monopolistic competition include Wal-Mart ad Google. Some of the competitors of ServiceMaster include but of course are not limited to The Brickman Group, Ltd., Orkin, LLC and Ecolab Inc.

It is important to note that firms I highlight in this case are the main competitors of ServiceMaster and hence there are still a number of other smaller companies in the market (especially in the residential market) which I do not include in this case. How ServiceMaster Can Increase its Market Power There are a variety of ways in which service master can increase its market power. One, the company could seek to enhance its economies of scale.

Amadeo (2011) simply defines economies of scale as the ability of businesses to lower the cost of goods produced per unit as a result of an increase in the quantity of output. Hence in this regard, ServiceMaster will be able to sell its products at reduced prices and hence over time enhance its market power. The firm could also seek privileges from the government and hence seek to benefit from government restrictions. Lastly, the company could also seek to enhance the utility of its.