Differentiating Between Market Structures Essay
Differentiating Between Market Structures
There are many TV service providers available in the U. S; however there are only two companies that offer services via satellite. Dish operates within the monopolistic competition market. Dish has been in business since the early 1980’s and has gradually worked its way up to become one of the leading satellite provider and innovator of new technology. In 2013 they offer service to over 14 million subscribers nationwide. This market in which it competes is where all firms have some market power, which controls the market price. They produce the same product as Direct TV and no other provider is in the same market.
They know all competitor prices and services in order to be able to compare services and offer the best value to potential customers. Within the market structure buyers/consumers have the ability to know the prices of both companies so that they can decide which one will be better for them. In this market customers have the ability to leave the service at any point in time. They can choose to cancel services if they are not content with the quality of the product, some may leave with no penalty while others may have to pay a penalty for the cancelation.
Dish is a leader in the TV industry when it comes to equipment, programming and pricing,. They have to maintain a level of competitiveness in order to compete with other providers. Dish like any other company, is looking to maximize profit and will provide service that is appealing to the customer in order to increase customer base in turn increasing profit. Differentiating Between Market Structures In the pay TV industry, Dish has managed to out rank Direct TV in many areas such as customer service, equipment technology and pricing for programming.
Dish is a company that offers promotions to all buyers/consumers in order to make the sign up more enticing. The market structure in which Dish operates would be the monopolistic competition. Within the TV industry that Dish operates there is only one other company that is included, Direct TV. These two companies offer similar products and customers can choose whom they do service with. It is ideal for Dish to compete in this market because there are only two companies within the same industry. This market structure is suitable for Dish because it provides more opportunity to maximize profit due to the competition.
Dish has more availability to customers and the opportunity to be able to increase customer rate in turn increasing the profit due to the fact that there are only two service providers. It cannot be in a monopoly market because there is another company that provides the same service or product. It also does not have extremely high prices or excessive barriers to obtain services. They always provide affordable prices that will also benefit the company to increase profit. (“Monopolistic Competition”, 2013). Dish has many promotions that are being offered to obtain new customers and also retain the existing consumers.
The company offers upfront discounts as a sign up bonus to gain the attention of those prospective consumers. It offers up to $30 credits up front on the programming for the first twelve months of service. With a qualifying promotion the customer will have the activation and the equipment fees waived saving the consumer over $200. When existing customers look for any type of promotion they will have anything from discounts for a few months up to free programming. Even if the customers receive free programming Dish will still be making a profit because of all the other programming, equipment and services they provide.
A company is making profit with any service it provides because it continues to sell its service because it continues to sell its services to consumers. The strategies for Dish to obtain new customers are a good way for the company to increase profit and obtain new customer base. Even though the company is making a profit off all the services they provide there are some changes to the promotions. For example, on the promotions that are offered to new customers I would recommend that they make the qualification process a little easier. They could reduce the credit score criteria and make it less of a hassle to qualify for Dish.
There are some promotions for those customers that do not qualify for the highest promotion but the fees are much higher. They must pay for the activation fee plus the equipment fees. This can get expensive depending on the equipment the customer chooses. With the qualification being so strict many potential customers will be swayed to not obtain services. With the upfront discounts there should be on extension in the time they are offered but reducing the amount being given. For some of the customers that qualify may receive a credit up to $30 other may get credits ranging from $10 to $25 for the first twelve months of service.
If the company reduces the amount given to customers and extends the time allowed for the credit more customers would be content and more likely continue with Dish service. (” Dish Network L. l. c. “, 2013). There are customers that leave the service due to the credits ending and seeing an increase in the statements. Some of the consumers do not take into consideration any penalty for early termination. Customers will keep looking for the best deal that they can possibly obtain. If we provide more options on the discounts Dish would be able to retain more customers in turn increasing customer base.
Another recommendation that would be made to Dish would be that they make upgrade on equipment more feasible and less expensive for consumers. For those customers that want different equipment than the one that was installed. In some cases there would be a fee to upgrade the equipment the customer is deciding to obtain. The fees can range anywhere between $0 up to $300 with a twenty four month commitment. Of those customers some may find the fees excessive and will decide to keep what they have or go with a different provider. This is preventing Dish from obtaining more revenue and increasing profit.
For every company the main focus is to maximize profit. They have many different options in order to do so. Dish operates in a monopolistic competition market where there are only two companies that offer similar services. In this market Dish offers many promotions for potential customers as well as existing customers. The consumers are allowed to leave services at any point during the service period. Some may leave with no penalty and other with a penalty due to breaking a commitment. Dish, even with all the discounts, manages to still increase profit because of all the other services that Dish offers.
They make money off of programming, equipment, internet services, online service, and phone service and with the company blockbuster that was recently purchased by dish. With Dish and Direct TV in the same market and no other satellite competitor they are allowed to place their own market power when it comes to price. They compete with each other for all potential consumers as well as existing customers. Each company wants as much of a customer base as possible in order to increase profitability. They will go to great lengths to obtain those consumers and increase profitability.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 27 September 2016
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