Fully Explain How Advertising Can Affect Profits in Competitive and Non-Competitive Markets

An oligopolistic market is one that has several dominant firms with the power to influence the market they are in; an example of this could be the supermarket industry which is dominated by several firms such as Tesco, Sainsbury’s, and Waitrose etc... Furthermore an oligopolistic market can be defined in terms of its structure and its conduct, which involve various different aspects of economics.

A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly), suppliers (monopsony) and

By definition a Monopoly is exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices (Monopoly 2012). Individuals are often time fearful of a company or industry becoming a monopoly because it would control too much of a market share, and do whatever wants; this includes raising prices, to using excess capital to branch into even more areas (Rise of monopolies 1996). The market structure of a monopoly is characterized by; a single seller; a unique product; and impossible entry into the market (Tucker 2011). A monopoly can be a difficult thing to accomplish being that a single seller faces an entire industry demand curve due to the fact it makes up the industry as a

An Oligopoly refers to a market structure where-by the suppliers have formed some form of cartel and are acting in unison. In such a case the suppliers have the power to determine the price of the commodity and may set any price.

The monopolistically competitive industry advertises to differentiate their product from their competitor. They want to communicate with their consumer to inform about the product and educate them. They also influence the consumer to convince about the product.

There are four types of market structures: Monopolistic Competition, Monopoly, Oligopoly, and Perfect Competition. Monopolistic Competition is also known as competitive market. In this market structure, there are a large number of firms that produce similar but somewhat differentiated products for the same target customers. The market share is also divided among large number of firms making it difficult for one firm to become the market leader. On the other hand, Monopoly is a type of market structure in which only one firm controls the whole industry. There are strict barriers to entry for new firms due to governmental restrictions or the monopolistic power of the firm itself. In Oligopoly, the whole industry is dominated by a few large scale firms that set prices, introduce innovative products, and use heavy campaigns to attract buyers. All other small scale firms follow the changing market patterns set by these oligopolistic firms. Lastly, perfect competition is a market structure in which there are a larger number of firms that produce similar as well as differentiated products for

The entrance of a new competitor into a market can cause a business to change its marketing strategy. For example, a small electronics store that was the only game in town might have to change its image in the marketplace when a large chain store opens nearby. While the smaller store might not be able to compete in price, it can use advertising to position itself as the friendly, service-oriented local alternative.

In his essay, Williams summarizes that advertisements shared a beginning with capitalism (422). According to Williams advertising started out as a simple way for merchants to offer their products for business (421). An observation of capitalism is that there must be buyers willing to obtain a product from a consumer. Advertising makes it possible for consumers to be aware of these goods that are being sold (Williams 421). It can therefore be concluded

There is a high alternative of competitors that the consumer can switch to, the companies have similar consumer groups with similar characteristics in every single segment of the market, spending on advertising is key to keep our customers.

A monopoly is defined as “a firm that is the sole seller of a product without close substitutes”

What is a monopoly? According to Webster's dictionary, a monopoly is "the exclusive control of a commodity or service in a given market.” Such power in the hands of a few is harmful to the public and individuals because it minimizes, if not eliminates normal competition in a given market and creates undesirable price controls. This, in turn, undermines individual enterprise and causes markets to crumble. In this paper, we will present several aspects of monopolies, including unfair competition, price control, and horizontal, vertical, and conglomerate mergers.

However, advertising can be very expensive and deciding on the right methods of advertising may be very difficult. Furthermore, the success of the advert depends on the action of the other firms. If the other firms also decide to increase their advertising expenditure, then the firms may not be able to catch the attention of as many consumers as they intended. This would mean that the advertising was unsuccessful hence not promoting competition.

Oligopoly is a market structure in which only a few sellers offer similar or identical products. It is an intermediate form of imperfect competition. OPEC is an epitome of Oligopoly.

An oligopoly, is when there are only a few number of companies that control a specific market. The barriers to entry can be both legal/political (ie. number of licenses awarded to cell phone operators) to the fact that the companies themselves create a "cartel like" attitude effectively brushing of the market new entrants through aggressive measures like undercutting pricing on new smaller entrants, controlling inputs for production, etc.

The aim of this literary review is to look over the knowledge and ideas that have been established on the topic of what makes advertising effective, and to discuss their strengths and weaknesses, using a critical approach of it.