Question

Over the past ten years you have been the manager of a medium-sized enterprise operating in a highly competitive software industry. Using the principles learnt from managerial economics what critical decisions you were faced with and what informed your ultimate decisions to achieve your fundamental objective. The industry subsequently became oligopolistic. What considerations, on the principles of managerial economics, you now have to consider as a medium-sized enterprise operating in this distinctly new market structure.

Note:

1. where necessary and appropriate you should make use of graphs and tables to illustrate your points.

Answer 1

In perfect competitive structure managers usually face dilemma of reducing costs and delivery superior value which are on Opposite ends of spectrum.

Thus managers highly face problems of cost reduction, profit maximization, debt reduction as well as strategic turnaround..

As managers it is must to achieve above objectives using principles of Economies of scale, Total quality management which brings down costs and increases revenue thus giving twin advantage of profit maximization and debt reduction and yes lastly the most important being customer satisfaction. In perfect competition firms look for mergers between competition to better fight market share and have sufficient balance sheets.

When market structure changes to Oligopolistic the strategy of operations changes to being more quality and prduct focussed rather than cost focussed. Since margins are decent unlike perfectly competitive market where margins are wafer thin. Here managers have to rely on continous innovation and fast mover advantages by imitating competition albeit at low cost and faster rollouts. The industry in software in specific thus focusses more on innovation and patents, higher customer satisfaction and reliability . In Oligopolistic market firms focus more on vertical integration to acquire software suppliers in vakue chain.