Market definition - Theory and case study

Résumé du document

The market is referred as the group of organizations or consumers that have an interest in certain product either from supply or demand side of it. "The definition of the relevant market is an important initial step in establishing whether a particular firm qualifies as dominant" (Neuhoff: 2006:P 108) Thus the main aim of relevant market definition when firms wants to merge is to have a merger control by trying to identify and prevent to have transactions that will create market power or dominance. The relevant market definition is regarded as a tool that assists in identifying and defining the parameters of competition between firms. "The objective of defining a market in both its product and geographic dimension is to identify those actual competitors of the undertakings involved that are capable of constraining their behavior and preventing them from behaving independently of an effective competitive pressure".

Extraits

[...] Which was not the case with these two companies vis-à-vis the Tribunal. According to engineering news (2006) the companies argued that the barriers to entry in the market were low, but the tribunal said that that type of entry was not likely to constrain the merged companies' market power The reasons why the merger would lead to substantial lessening or prevention of competition Economic theory predicts that in perfectly competitive markets prices are set by the market forces, and individual firms are price takers. [...]

[...] The tribunal viewed the competition between the two parties as having benefited the consumers. They that the consumer would have very few credible national retailers to whom they could turn to. Though the two parties argued that Massmart stores and Moresport were catering entry-level customers and mid-level to premium customers respectively. The tribunal referred to the minutes of their previous meeting, where the considered each other as competitors and it did not accept that the market could be segmented that way. [...]

[...] Accessed on 2008/02/08 Competition body blocks Massmart and Moresport merger.2006 [Online]. Available: http://www.engineeringnews.co.za/article.php?a_id=86135 Accessed on 2008/02/08 Neuhoff, M., Govender, M., Versfeld, M. & Dingley, D. 2006,Practical Guide to the South African Competition. Durban: LexisNexis Butterworths. [...]

[...] If the price is really raised with a large percentage, say for instance people may travel to find the product cheaper at an alternate place Supply and demand When the merged company enters the market with the new products, the demand curve of the industry as a whole will increase because of loyal consumers to the initial products on the market plus consumers trying out the new product. The demand curve for the established products will decrease a little bit because of some less loyal consumers trying out the new product. This might lead to a movement along the demand curve because of price cutting to keep individual markets. Because of the substitutability of the products, this can lead to a increase in demand. [...]

[...] Moreover, as a marketing view, the two companies can increase their promotion to grow sales. “Advertising often provides consumers information about the existence or quality of a product, which in turn induces more consumers to buy the product” (Baye (2006: 40). In this case, the target is to increase demand. This corresponds to a “shift of the entire demand curve” Baye (2006: as we see below: 2 The supply side Merging the two companies will affect also both of the producers of sports and outdoor goods. [...]