Power Market is the ability of a firm to influence the level of supply, demand, or both in the marketplace to change the price of an item.
A corporation with significant market power has the power to control its profit margin by manipulating the market price. It may also be able to raise barriers for potential new entries into the market. Because they may set or change the retail price of an item without giving up market share, companies with market power are frequently referred to as “price makers.”
Market power is the ability of a firm to influence supply, demand, or both in order to change the price of a product in the marketplace.
Producers have little control over pricing in markets with perfect or almost perfect competition, forcing them to act as price takers.
Market power is significantly greater for producers in oligopolistic or monopolistic marketplaces.
It can be defined as the degree of control a corporation has over setting market prices, either specifically for a given product or generally across its sector. In the smartphone market, Apple Inc. is an illustration of market strength. Apple’s iPhone product has a sizable amount of market share and customer devotion, therefore even though it cannot entirely control the industry, it has the power to influence overall pricing in the smartphone market.
When there are several firms manufacturing rival goods and no firm has a sizable amount of market power, the market is said to be in a state of perfect competition, which is the ideal situation. Producers have little control over pricing in markets with perfect or almost perfect competition, forcing them to act as price takers.
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That is, of course, only an ideal that is rarely realised in reality. Antitrust laws and other similar laws are in place in many nations in an effort to restrict the market dominance of individual companies. Market power is frequently taken into account when governments approve mergers. If it is thought that the combined business would establish a monopoly or would have excessive market power, a merger is unlikely to be permitted.
Even more so than the existence of competing suppliers of a product, the scarcity of a resource or raw material can have a substantial impact on pricing power. For instance, even though there are competing providers and competition in the market, certain threats, such as disasters that put the supply of oil at risk, result in increased rates from petroleum businesses. Because of the limited supply of oil and the extensive reliance on the resource across many industries, oil corporations still have a large amount of pricing power.
Syrdarya Power Plant
Surhan Gas Chemical
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An Example of Market Power
For instance, when Apple first released the iPhone, the corporation possessed significant since, for a brief time, it held the monopoly and effectively defined the smartphone and app markets.
Due to the dearth of competing products at the time, purchasing an iPhone was expensive and could continue to be so. As a result, Apple, rather than the open market, initially set the pricing of the iPhone. The iPhone remained to represent the top end of the market in terms of pricing and expected quality even after the first rival smartphones appeared. Apple’s market dominance dwindled as the competition caught up in terms of service, app quality, and accessibility.
As new competitors entered the market, the iPhone did not disappear. Apple started releasing new iPhone models in a variety of configurations, including more affordable models aimed at users with tighter budgets.