8.1 Introduction
In order to maximize profits or shareholder wealth, managers must use the
information that they have relating to demand and costs in order to determine
strategy regarding price and output, and other variables. However, managers
must also be aware of the type of market structure in which they operate, since
this has important implications for strategy; this applies both to short-run
decision-making and to long-run decisions on changing capacity or entering
new markets.
It is useful to start by explaining the characteristics of markets and different
types of market structure, with a general examination of the relationships
between structure, conduct and performance. The four main types of market
structure are then discussed and analysed in terms of their strategic implications.