A firm operates in complex environment, which has social, political, cultural, legal and economic facets. The decision making process of the firm is influenced by identifying opportunities and threats from these factors. Further internal capability factors in terms of strengths and weaknesses decide the extent of sustainable competitive advantage. The externalities influence the pricing strategy and competition level.
The entry and exit of any firm is being decided on the basis of its external environment. Market forces tend to follow competition and they determine firm’s potential buyers. Market competition tends to be different for different firms. When a market has large number of buyers and sellers, the competition level at that situation will be distinct. The external forces also affect the firm in terms of its production, sales, pricing etc.
First the classification of market structure is discussed. Subsequently, the description of each type of market structure along with issues of competition, sustainable competitive advantage, entry/exit policy etc. is dealt with. In the end, these issues are discussed at macro level so that competitive position of various market structures and network externalities may be related to each other for effective strategic decision.