Market structure (perfect competition, oligopoly)
Sample Solution
Company: Amazon
Industry: Retail
Brief History:
Amazon was founded in 1994 by Jeff Bezos in his garage in Seattle, Washington. It initially started as an online bookstore but quickly expanded to offer a wide variety of products, including electronics, apparel, home goods, and more. Amazon has grown rapidly over the years and is now the world's largest online retailer.
Full Answer Section
Market Structure:
When Amazon first started, the online retail market was relatively new and there were many small, independent competitors. This was close to a perfect competition market structure, characterized by many sellers offering similar products at competitive prices. However, as Amazon grew and became more dominant, the market structure changed to an oligopoly, where a small number of firms control a large share of the market.
Changes Since Formation:
Amazon has changed significantly since its formation. The company has expanded its product offerings, developed new services, and entered new markets. Some of the most notable changes include:
- Expanding Product Offerings: Amazon has expanded its product offerings beyond books to include a wide variety of products, including electronics, apparel, home goods, groceries, and more.
- Developing New Services: Amazon has developed new services, such as Amazon Prime, Amazon Web Services (AWS), and Kindle Direct Publishing.
- Entering New Markets: Amazon has entered new markets, such as cloud computing, digital media, and logistics.
Current Market Structure:
Amazon is now the world's largest online retailer and has a dominant position in the e-commerce market. The company faces competition from other large retailers, such as Walmart and Target, but it remains the leader in online sales.
Products and Services:
Amazon offers a wide variety of products and services, including:
- Retail Products: Amazon sells a wide variety of retail products, including electronics, apparel, home goods, groceries, and more.
- Digital Media: Amazon sells digital media, such as e-books, audiobooks, music, and movies.
- Cloud Computing: Amazon Web Services (AWS) is the world's leading cloud computing platform.
- Logistics: Amazon has its own logistics network, which it uses to fulfill orders and deliver products to customers.
Elasticity of Products:
The elasticity of Amazon's products varies depending on the specific product. However, in general, Amazon's products are considered to be relatively price elastic. This means that a change in the price of a product will lead to a larger change in the quantity of the product that is sold. For example, if Amazon lowers the price of a book, it will likely sell more books.
There are a few reasons why Amazon's products are considered to be price elastic. First, Amazon has a wide variety of products, so customers can easily find substitutes if the price of one product goes up. Second, Amazon is known for its low prices, so customers are price-sensitive. Finally, Amazon is a convenient place to shop, so customers are willing to search for the best prices.
Conclusion:
Amazon has come a long way since its humble beginnings as an online bookstore. The company has transformed the retail industry and is now a leader in e-commerce, cloud computing, and logistics. Amazon's success can be attributed to its focus on innovation, customer satisfaction, and low prices.