Economics and Patent Protection in the US: Case Study Notes

The following case study is in regards of economic market structure. In the world of economics all businesses or companies rather, are categorized in certain market structures such as monopoly, oligopoly, or perfect competition, for instance, the market structure for restaurants. Most restaurants are considered monopolistic competition. Being that they all sell and serve food. They have to have instances that vary such as price, logos, servers, locations, décor, types of food, and hospitality.

Thompson, Peteraf, Gamble, and Strickland (2012) found that competitive strategy depend on whether a company’s target market is narrow or broad, and whether a company is seeking competitive advantage through low-cost or product differentiation. These two factors reveal five generic competitive strategies. The five strategies are Overall Low-Cost Provider Strategy, Focused Low-Cost Strategy, Broad Differentiation Strategy, Focused Differentiation Strategy, and Best Cost

Oligopolies have been around ever since there is trade. However, it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries.

When pursing a differentiation strategy, the focus of competition is to add unique features in order to

The majority of products offered by industry members are commodities and are weakly differentiated which increases rivalry.

see that many brands are competing for shelf space and market share. Even though the

Competition is a good thing for many reasons, it guarantees the best products at the

The U.S. has one of the best patent law systems in the world, but there are still those who take advantage and control it. Patent laws are made to protect innovators with there products from others attempting to steal their unique ideas. However, some people try to abuse these laws by creating companies that buy multiple patents and these companies are called patent trolls. Non-Practicing Entities (NPEs), widely known as Patent Trolls, never make the products that they buy patents for and instead wait till someone else uses the same concept no matter how small and then they swoop in and sue the real innovators. Patent trolls create distrust in the innovation atmosphere and put fear into inventors. They disrupt the innovation industries that

•Monopolistic competition- When an industry contains many rival firms, each of which has a comparable but at least slightly different product. Restaurants, are an example, all serve food but of different types of food and in different sites. Manufacture costs are above what could be attained if firms sold equal products, but consumers have an advantage from the variety.

Similarly, both companies had a product differentiation strategy, with the aim of being distinctly set apart from their competitors by the viewing market. However, different elements of this strategy were focused on by the firms. For instance,

The industry in which the company operates can be characterized as monopolistic competition. This is because, since there are no barriers to entry in this industry, threats of entry by potential entrants has made the industry some-what competitive. But the brand loyalty gained by the firms through massive advertising has rendered the firms within

Company should focus on key advantages or distinctions that can separate their brand from those of competitors.

Barriers to entry and exit are also likely to exist. In oligopoly markets there is product differentiation, the extent of which depends on the type of product produced. This leads to interdependency, as the actions of one large firm will directly affect another large firm. Therefore, firms are said to be operating under conditions of

Another generic competitive strategy is broad differentiation strategies. According to Thompson, Strickland, and Gamble, in “Crafting and Executing Strategy”, broad differentiation strategy is seeking to differentiate the company’s product offering from rivals in ways that will appear to a brad spectrum of buyers. A company attempting to succeed through differentiation must study buyers’ needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for. Then the company has to incorporate buyer-desired attributes into its product or service offering

The first factor is economies of scale which forces entrants to come in with large scale or sustain a cost disadvantage and deter entrants. The giants in consumer goods market including Unilever, P & G, and Kraft have already achieved mass production. For instance, Unilever possesses more than 400 brands including Dove and Lux which are worth billions of dollars. And its turnover in 2014 summed up to €48.4 billion (Unilever, 2014), which indicates its high production level. The second factor is product differentiation which forces entrants to spend large money and time in accumulating its own consumer loyalties. P&G, Unilever, Kraft and other giants of consumer goods producers have already researched and developed their unique product under various brands. And some of them are greatly valuable which include Dove ($5314 million), L’Oréal Paris ($23376 million), Gillette ($19737 million) (Statista, 2015), Nestle ($12.2 billion) and Kraft ($9.2 billion) (Forbes, 2015), which immobilizes the market share distribution powerfully. In conclusion, the entrant’s threat is weak due to high level of economies of scale and production