Industry market: concept, types, functions, features and examples

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

It is the market that is the basic term in the economy. Companies, enterprises, entrepreneurs, consumers interact here. Market equilibrium is also important for world states. Market opportunities have always been of great interest to investors and owners.

There are a lot of definitions, evaluation criteria, varieties of the market today. We will focus on the concept of "branch market". Consider its varieties, functions. We will also present concrete examples of such markets.

Key terms

Industry market - what is it? There are two fundamental concepts that you need to get acquainted with first of all:

1. The market is a complex of various economic relations arising from the purchase and sale of products at prices set on the basis of the interaction of supply and demand arising against this background of competition.
2. Industry - sets of enterprises that produce products that are a sub-institution in production. That is, goods madeusing similar technologies, using fairly homogeneous materials and raw materials.

Differences between concepts

The difficulty also lies in the fact that the industry market is a term consisting, if not of opposite, then of quite different concepts.

Markets are interconnected by satisfying the needs of buyers. That is, goods that are sub-institutions for consumers are combined here. Industries, on the other hand, are interconnected in a different way - the use of similar technologies in production.

It is important to note that the concept of an industry is somewhat broader than the concept of a market. Let's take the chemical industry as an example. This branch of production can supply products for several inherently diverse markets at once.

What is this?

So where does the term "branch market" come from? This refers to the market and any sub-sector of production that is distinguished within the industry by the fact of the production of similar goods, homogeneous in their characteristics.

Only in this case, these concepts are linked into such a phrase. Such a simplification is permissible only if the sub-sector is highly specialized.

Highlight features

Features of industry markets primarily depend on their boundaries. It is important to know when this market was born, to what extent it can expand when the activity on it fades.

Important characteristics for determining the characteristics of all their varieties:

1. Borders.
2. Number of sellers andbuyers.
3. Height, efficiency of barriers to move and enter such a market.

To highlight the features of a particular industry market, the researcher must answer the following questions in his analysis:

1. Who is the real, potential competitor in this market?
2. Who is the buyer, consumer of the product?
3. Does this market restrict competition?
4. Is this market affected by others? Is there a tendency for them to merge?

Borders

As for the application in practice, it is rather difficult to distinguish the boundaries of the industry market. The following types of such boundaries are important for researchers:

1. Grocery. They reflect the ability of different types of products sold to mutually replace each other.
2. Temporary. These boundaries allow a comparative analysis of the methods of industry markets over time.
3. Geographic (or local). This is the physical limitation of the market in any territory.

The breadth/narrowness of industry markets depends on the following factors:

1. Features of the presented goods.
2. Objectives of an economist's analysis.

For example, for consumer durables, the time limits of the market are wider and less defined than for goods for current consumption.

There are more products in the market for consumer products than forgoods of production-technical vector of another market.

And the definition of local (territorial) boundaries of the markets depends on the actual severity of the competition of distributors in the national, global industry markets. And also from the possibility of "external" sellers penetrating local markets. That is the height of barriers to entry.

Main criteria

Problems of industry markets are exposed only when they are carefully analyzed. They are based on certain criteria:

1. Price elasticity of demand.
2. Geographical boundaries.

Let's consider these criteria separately.

Price elasticity of demand

This is the name of the indicator of the change in the seller's revenue when the cost of the products offered by him changes. Markets, in fact, act as a large chain of goods and their substitutes. But how replaceable are certain goods?

Let's take an example. If the cost of product A has increased, then the revenue of its seller has changed in a certain way. If revenue (in this case, additional profit) has increased, then the market becomes limited only by product A. If revenue has decreased (that is, additional profit has gone negative), then a close substitute for A, product B, is introduced to the market.

In this case, it is wrong to talk only about the market for product A. As well as stopping the study on the study of production B. The correct option: the study of A + B in their interaction.

It should be noted that with a long-term price increase, the dynamics of profit, revenuemanufacturers will point to the boundaries of this market.

Geographically limited

We know that, for example, industry markets in Russia stand out. The criteria here are the following:

• Presence of customs barriers.
• Demand relationship.
• Having national and personal preferences.
• Significant or, conversely, insignificant differences in prices.
• Offer substitution.
• Relevance of transport costs.

The conditions for determining the geographical boundaries of markets are as follows:

1. The vast majority (more than 75%) of the products consumed is located in a certain area.
2. A large share (over 75%) of the product produced is consumed in the same locality where it is made.
3. The amount of transportation costs is significant both in general and for each unit of goods transported.
4. Prices for the same product in different regions vary significantly.
5. Stability of market shares is achieved by the participation of the leading companies of a certain region on it.
6. Any region is recognized by the market by its significant leading agents. They are both manufacturers and major buyers.
7. Administrative restrictions are introduced both on the import and export of products from the region.

Classifications

The division of industry markets into types is of great importance in the following:

1. Distinguishing different types of market structures.
2. Organization of production activities by companies.
3. Regulatory activities carried out by government agencies.

Let's consider the main classifications of industry markets.

By openness, they are divided into two types:

1. Open. With free entry of sellers into the market space.
2. Closed (closed). The entry of new sellers into the market is regulated by special mechanisms.

There are also two types according to the degree of organization:

1. Organized. These are the markets where there is a mechanism for regulating the level of supply and demand. For example, stock trading or auctions.
2. Spontaneous (or unorganized). Supply and demand here are balanced spontaneously in the absence of special forms of organizing interactions between sellers and buyers.

On a territorial basis, industry markets are divided into the following:

1. Global.
2. Regional.
3. Local (or local).

According to the stage of maturity of the organization, markets are graded into the following groups:

1. Pioneer.
2. Growing.
3. Developed.
4. Shrinking (or fading).

Market Space

Each industry market is a complete system that has its own internal structure of the hierarchy of elements and the relationship between them.

The market space here is represented as follows:

1. Labor market. It begins with the acquisition of labor force at the expense of any investment resources.
2. Market of means of production. The second necessary component to start. With the help of capital, it is connected with the productive force. This keeps production running.
3. Consumer market of consumer goods, which determines the security of the population, the general level of consumption, the stability of money circulation.
4. Financial market. Another name is the loan capital market. It is he who ensures the mobility of capital, the movement of funds to more profitable areas of production. The most complex of all presented.
5. Service market.
6. Technology market. The object of sale is technology.
7. The market for spiritual goods. The object of sale and purchase is spiritual ideas.

Functions

Let's list the main functions of the industry market:

1. Intermediary.
2. Pricing.
3. Informational.
4. Regulating.
5. Restoring.
6. Distribution.

Examples

Common industry market examples:

1. Metal industry. Sectoral markets are distinguished by types of rolled products - for shipbuilding, engineering, construction, etc.
2. Pharmaceutical industry. Industry markets specialize in the spectrum of therapeutic effects of drugs - gastric, neurological, cardiovascular and others.
3. Chemical industry. There are industrymarkets for household chemicals, substances for industrial use and so on.

So what do we take away from the information provided? The industry market is a complex concept. After all, these two concepts are not closely related terms. One industry can provide products to many different markets. Similarly, products from several industries can be concentrated in one market. Therefore, the sectoral market considers the space on which the products of one narrow sub-sector is concentrated.