Organization Competition And Environment

Organization, Competition and Environment

Introduction:

The case study is about the imperial transport which has over 300 trucks that provide transport services, the firm has grown from a simple firm to a complex firm, and it has grown from an individual firm to one which has merged with another firm which is from Germany. The firm has its own strategies which it uses so that it gains competitive advantage.

(a)  Market structure in the transport industry:

The transport sector according to the imperial transport is a perfect competitive industry, this is to say that the market is faced with free entry and exit of firms the firms also are price takers in that the price is determined by the supply and demand. In other type of markets which are not perfect competitive and these markets include monopoly, oligopoly, duopoly and competitive monopoly.

Organization, Competition and Environment

In a monopoly market we have only one firm in an industry, the firm is a price maker and there are restriction to entry in the industry, the monopoly market the product produced by the firm has no close substitute and therefore the product is unique in nature. [1]

In a duopoly there exist two firms that produce the same product, there are still barriers to entry in this market, and both firms in the industry take into consideration the reaction of the other firm when making decisions about production and prices. [2]

In an oligopoly market the number of firms is few and the firm is faced with a kinked demand curve because any decision made by the firm will take into consideration the decision by other firms, if a firm raises its prices other will not follow and therefore the demand curve is kinked. [3]

Therefore in the transport industry the type of market that exists is competitive, firms in the industry are price takers and there is free entry and exit by firms. This means that the price of transport is determined by the demand and supply in this competitive market, in this market still the buyers and sellers have perfect information about products and services.

Organization, Competition and Environment

(b) Market forces and organization response:

The competitive market will respond to market forces, the first example we will illustrate is an increase in the supply of services, according to our case study about imperial transport shifts from transporting cars when the automobile industry expands to transporting materials for the construction industry, the reason why the organization responds by exiting the transportation of cars is because there was an in increase in the supply of lorries as the automobile industry expands, this resulted into higher supply than the demand for transport which resulted to lower prices therefore the firm did not experience optimal profits, this led to the firm to exit this industry to the transportation of building materials.

Therefore a firm will exit an industry if it has zero profits due to the low prices set by the market forces when the supply for its products increases, the firm will exit and enter another industry which has less supply of the products produced.

Another example of the response of the firm due to market forces is if there is an increase in the cost of production due to an increase in the price of inputs, in the case of the imperial transport the price level of diesel rose leading to an increase in the cost of transport, this forced the firms to increase the transportation cost, therefore the increase in diesel cost led to an increase in production or transportation, the firms were not in a position to accept lower profits due to high production cost and therefore they increased their transport charges to maintain high profits.

An increase in the demand for transportation of certain goods makes the price of transporting those goods to be higher, therefore more firms will enter the industry, this is evident in our case where the imperial transport exited the beer transporting industry in order to gain more profits from transportation of more expensive goods such as cigarettes and electronics. Therefore

Organization, Competition and Environment

when a firm in a competitive market if a firm experiences better business opportunities that yield higher profits then the firm will exit the current activities and enter the industry preferred.

(c) Strategies used by organizations to gain competitive advantages:

The first strategy that these firm uses is the growth strategy, these strategy is used by imperial transport where it merges with another firm in order to gain competitive advantage against other competing firms, this strategy ensures that the firm grows at a higher rate than the other firms, this firm according to the case study merged with an urban firm so that it could be in a position to involve itself in more costly goods transportation. [4]

The firm also has grown in that it has expanded from one transporter vehicle to 300 vehicles, this ensures that the firm maximizes its revenue due to its large expansion; the firm therefore has competitive advantage over the other firms in that it has more transporters which it uses to provide its services.

The firm also uses the porter generic strategy which involves differentiation of products, this firm ensures that the firm involves itself in provision of transport services in areas where there is less service providers, this firm has involved in many different service provisions and it always shifts to those areas where there is less competition. [5]

Organization, Competition and Environment

Conclusion:

We can therefore conclude that the firm operates in a competitive market where it has the option of entry and exit where there are no restrictions to entry, the firm also uses marketing strategies that ensures that it has comparative advantage over the other firms in our case the firm uses the growth and the porter generic strategy. However the firm should also use other marketing strategies which will make it experience advantages over the other firms, one strategy would be advertising, from the case we do not have any quote that the firms spends on advertising which is a very important tool to business success.

References:

Assignment 3, the imperial transport, the case study on the transport industry

Robert Ernest H. (2005) Microeconomics: Principles and Applications, Marc Lieberman Publishers, Thomson South West.

Stephen C. R. (2002) Markets: Types of Markets and Marketing Strategies, Heinemann publisher, US

Organization, Competition and Environment

George P. Moschis (1994) Marketing Strategies for the Mature Market, Greenwood publisher, U K

[1] Stephen C. R. (2002)

[2] Stephen C. R. (2002)

[3] Stephen C. R. (2002)

[4] Moschis (1994)

[5] Moschis (1994)