Comparison of market structures of US retail and housing industry



Where there are four types of market structure which are monopoly, oligopoly, pure competition and monopolistic competition. there are number of factors which determine the market structure which are number and size of firms in the particular market, degree of similarity with competitor’s product, firm’s control over its product’s prices, barriers to entry and exit in the market, and the amount of competition based on non price factor. USA housing industry is classified sector wise in mining, construction, manufacturing, retail, wholesale, real-state, professional, administrative and other. These sectors are interdependent on each other in terms of performance and growth. The effect of US crises on housing industry was devastating as demand for land development turn down largely, now the circumstances are far better and recovering. Whereas US retail industry vends specialized and customized products and offers wide variety of products to the consumers. The change in consumer preference and taste has brought up many new opportunities and challenges for retail industry. Recent recession in US economy has shrank the purchasing power resulting in low sales and ultimately low revenue. The selected US retail industry for analysis is tobacco industry. it retails cigarettes, loose tobacco, cigars and cigarillos, and chewing tobacco. Cigarettes have the highest market share of more than 90% in tobacco industry, whereas others have very low market share with very growth rate. Whereas construction is the selected sector from housing industries, which is the second largest revenue generating industry among others US housing industries. US tobacco retail industry is dominant by few large players namely Philip Morris, Reynolds American and Lorillard which jointly holds 90% of the total market value which is actually very huge percentage and hindrance for the growth of small companies (Zitzewitz, 2003). Cigarettes segment is the dominant segment therefore market structure of this industry depends on its market size, market growth, competition and number of companies operating. Product differentiation is very low in this market whereas barriers to entry are significantly high, and associated companies face non-price competition. This shows that this industry possess oligopoly market structure. The selected US housing industry is construction and engineering, is the second largest in terms of revenue contribution to housing industry whereas it has the highest employment ratio as this sector is highly dependent on human resource. This industry decline by 13.9% in 2010 with a market value of $563.1 billion where as it is forecasted that this industry will show an increase from 2010 to 2015 by 26.2 % with an increased market value of $712.9 billion (Datamonitor, Aug 2011). This US industry contributes 24.7% in the global construction and engineering industry. Players in the market are dependent upon suppliers and buyers, whereas the largest segment of US construction and engineering industry is non-residential building (Datamonitor, Aug 2011). The market structure of the US construction and engineering industry is determined by five key drivers, which are supplier power, buying power, degree of rivalry, new entrants and number of substitutes available. Barriers to entry are there in the market but industrial growth, accessibility of suppliers and weak brands in the market largely appreciates new entrants. There are various factors which determine the supplier power in US construction and engineering industry which are, the degree to which input is differentiated, forward integration, importance of quality/cost, number of substit