Market Power

Market role allows firms to growth stinting profit through strategic tactics such as construct barriers to entry, reducing rivalry, limiting substitutes, and reducing the tycoon of buyers and suppliers (Brickley, Smith, & Zimmerman, 2009). Furthermore, merchandise power is define as a companys ability to manipulate footing by influencing an positions supply, accept or both. A company with market power would be competent to affect expense to its benefit. Firms with market power are said to be expenditure makers as they are able to set the price for an item while maintaining market share (Investopedia, 2013).Essentially, companies must control all of the aspects of market power in order to be able to discharge prices without losing customers. If a market is easy to enter (lack of entry barriers), then a price increase will allow another firm to erode pay by introducing a lower-cost product. Similarly, if rivalry is not reduced, each price increase will allow for a rival t o keep prices the same and plus market share. In addition, substitutes at lower prices will hinder efforts to sneak prices. Finally, if a company has few buyers, the buyers have the power. Therefore, price increases will be met with a potential loss of major profit centers.In the NBC Video news Report How to Raise Prices Without Losing Customers, Bob Prosen alludes to several practices that allow companies to raise customers without losing demand. Essentially, Prosen provides computer address on how to create inelastic demand, where a change in price does not result in a significant change of demand. For example, increase the value proposition reduces the likelihood of substitute products (substitutes must copy change magnitude value) and decreases rivalry (steps above rivals), resulting in the greater market power aim to raise prices.Prosen states that increasing value makes the customer appreciate the company more, resulting in the ability to raise price (Ramberg, 2012). As another example, Prosen stresses the importance of growing relationships, people like to do business with people they like (Ramberg, 2012). Essentially, Prosen is suggesting raise barriers to entry by creating friendships and alliances, again resulting in increased market power needed to raise prices. As a capstone example of the need for market power, Research byMark McCabe of the Georgia Institute of Technology demonstrates the market power of academic journal vendors. Essentially, McCabe found that the consolidation of academic journal vendors (libraries) has light-emitting diode to an oligopoly, and therefore the price structure of academic journals is highly inelastic (McCabe, 2000). Beca character juvenile mergers had resulted in few suppliers, vendors of academic journals were able to control the market and raise prices through the use of supplier power. The demand for quality research for use in education cannot change it is required.Therefore, a change in price will not result in a drop in demand. References Brickley, J. A. , Smith, C. W. , & Zimmerman, J. L. (2009). Managerial Economics and Organizational Architecture. New York The McGraw-Hill Companies, Inc. Investopedia. (2013, March 20). Market cause. Retrieved from Investopedia http//www. investopedia. com/ legal injury/m/market-power. asp McCabe, M. J. (2000). Academic Journal Pricing and Market Power. THE AMERICAN ECONOMIC REVIEW, 259-269. JJ Ramberg (Author). MSNBC (Publisher). (07/20/2008). How to Raise Prices Without Losing