Mp3 Player Industry Monopolistic Competition

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Nishant Nagesh Pai | | 06/12/2010 | 1. To what extent is the market for MP3 players an example of monopolistic competition? Show using diagrams the effects on the Apple iPod of increased competition from other firms successfully entering the market. Introduction The first Mp3 player was launched in the market in the late 90’s (Pham-Gia,2009). However it was due to the emergence of the Apple iPod in the Mp3 player industry in October 2001 which changed the niche market into a booming market. Since then it has been a large and fast growing market with new firms entering and introducing innovative products to capitalize on the demand created for this product. In this essay we will analyse the market for Mp3 players. Part 1 of the…show more content…
Another key to the success of Apple’s iPod is it introduced a wide range of products to cater all segments of the buyers. Hence it could be said that increasing competition encouraged Apple to constantly innovate and enhance its product rage through implementation of market segmentation to gain leverage. In order to determine the effect increasing competition has had on the sales of the Apple iPod we will analyze the net sales report from the annual report obtained from the Apple website. Fig 1.2 shows the net sales of Apple iPod from 2002 to 2010. It can be observed that the sales were showing an upward trend from 2002 ($143 million) to 2008 ($ 9,153 million) but due to more firms successfully entering the market and bring in new innovations the sales of the Apple iPod have begun to show a slight decline in 2009 ($8,091 million) and 2010 ($8,274 million). Fig 1.2 Pricing of the product is another factor which is directly impacted by increasing competition. In a monopolistically competitive market when a firm introduces a product in the market it tends to price it high in order to earn maximum profits in the short run. This profit which the firm earns attracts other firms to enter into the market. Now with many firms selling similar products in the market, the firm which initially introduced the product will be forced to reduce its prices in order to compete with the newer firms in the long

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