1.0Introduction A product market is the market in which various commodities are sold. An industry is made up of a group of firms producing similar products; it may be made up of only one firm or several (Lawrence & McDaniel 2008). This means that firms in different industries operate in different market conditions for their products (Lawrence & McDaniel 2008). The number of firms operating in a particular market will determine the degree of competition that will exist in a given industry. In some markets there are many sellers meaning that the degree of competition is very high, whereas in other markets there is no competition because only one firm exists.
There are four main market structures, namely; perfect competition, monopoly, monopolistic competition and oligopoly (Lawrence & McDaniel 2008). This report will focus on Toyota Motor Corporation and demonstrate that the market for its product represent monopolistic competitive market. 1.1Company’s backgroundToyota Motor Corporation is the largest car company in Japan and the largest in the world after overtaking General Motors in 2008. By the late 1990’s, the company was producing five million units per annum and controlled 9.8% of the total global markets of auto mobiles (Toyoland. com 2011).
Today, Toyota is manufacturing a diversified line of vehicles ranging from subcompacts to SUV, to trucks to luxury, sports vehicles, minivans and buses. Toyota, as an innovative leader, is well known to be the first mass-market hybrid in the whole world as well as for its management philosophy (Toyoland. com 2011). Their vehicles are manufactured with either a hybrid or combustion engine as with Prius. The subsidiaries of Toyota also produce vehicle; Hino motors produces buses and trucks while Dalhatsu Motor manufactures mini vehicles.
In addition Toyota manufactures automotive parts for their own use for selling to the others. Toyota popular models include Corolla, Land Cruiser, Camry, Tundra truck and luxury Lexus line. Toyota Company is one good representation of a true success story in the history of the manufacturing industries (Toyoland. com 2011). 2.0Monopolistic competition Monopolistic competition falls within the range of imperfect competition. It s not possible to have a market structure where there are many buyers and many sellers who produce a homogenous product (perfectly competitive).
In the same way, it is not possible to have a market structure with only one firm producing a commodity which has no close substitute (pure monopoly). All the market structure in the real world lies between perfectly competitive markets and pure monopolies (Brakman & Heijdra 2004). These markets are referred as imperfect markets. In a monopolistic market there are many sellers of a similar product which is made to look different and this is referred to as product differentiation. In this market, the companies produce similar products but they differentiate it through packaging, designing, colour, etc.
for example, we have many makes of cars from different manufactures e. g. Toyota, Hyundai, Chevrolet and Peugeot, but in essence they are all just the same. (Brakman & Heijdra 2004) The following assumptions are made for a monopolistic competitive market: A large number of sellers in the market who operate independently The sellers in the market offer differentiated products where the differentiation may be real in that different materials are used to make the product. The differentiation may also be imaginary, in that it has been created through advertising, branding, etc There are no barriers to entry or exist from the industryFirms set their own prices which depends on the cot incurred in production and the demand in the marketNo company has control over the factors of production.
The companies acquire the factors at the prevailing market prices (Brakman & Heijdra 2004).