It is the market that is the basic term in the economy. Here companies, enterprises, entrepreneurs, consumers interact. Market equilibrium is also important for world states. Market opportunities at all times have been of great interest to investors and owners.
Today there are a lot of definitions, evaluation criteria, market varieties. We will focus on the concept of "industry market." Consider its varieties, functions. And also provide specific examples of such markets.
Key Terms
Industry market - what is it? There are two fundamental concepts that you need to get acquainted with in the first place:
- Market - a complex of diverse economic relations arising from the purchase and sale of products at prices established on the basis of the interaction of supply and demand arising from this background of competition.
- Industry - a set of enterprises that produce products, which is a sub-institute in production. That is, goods manufactured using similar technologies, using fairly homogeneous materials and raw materials.
Differences between concepts
The difficulty is also that the industry market is a term that consists, if not of the opposite, then of quite different in essence concepts.
Markets are united among themselves by the satisfied needs of customers. That is, goods that are subinstitutes for consumers are combined here. Industries are interconnected by another - the use of similar technologies in production.
It is important to note that the concept of the industry is somewhat broader than the concept of the market. Let us cite the chemical industry as an example. This industry can supply products for several essentially diverse markets.
What it is?
So where does the term "industry market" come from? This refers to the market and any sub-industry, allocated within the industry upon the production of similar goods with similar characteristics.
Only in this case, these concepts are connected in such a phrase. Such a simplification is permissible only in the case of the narrow specialization of the sub-sector.
Highlighting features
The characteristics of industry markets primarily depend on their boundaries. It is important to know when this market originated, to what extent it can expand when activity in it fades.
Important characteristics to determine the characteristics of all their varieties:
- Borders.
- The number of sellers and buyers.
- The height, the effectiveness of the application of barriers to move and enter such a market.
To highlight the characteristics of a particular industry market, the researcher must answer the following questions in his analysis:
- Who is the real, potential competitor in this market?
- Who is the buyer, the consumer of the product?
- Is there any restriction on competition in this market?
- Will this market be affected by others? Is there a tendency to merge them?
Borders
As for practical application, it is rather difficult to distinguish the boundaries of the industry market. For researchers, the following types of boundaries are important:
- Grocery. They reflect the ability of different types of products sold to mutually replace each other.
- Temporary. These boundaries allow a comparative analysis of industry market methods over time.
- Geographic (or local). This is the physical limitation of the market in any territory.
The breadth / narrowness of the boundaries of industry markets depends on the following factors:
- Features of the presented goods.
- The objectives of the analysis produced by the economist.
For example, for durable products, the temporal boundaries of the market are wider and less defined than for goods for current consumption.
In relation to consumer products, the market has a greater number of product names than in relation to goods of the production and technical vector of another market.
And the definition of local (territorial) borders of markets depends on the actual severity of competition of distributors in the national, global industry markets. And also from the possibility of penetration into the local markets of "external" sellers. That is, the height of the barriers to entry.
Main criteria
The problems of industry markets are exposed only when they are carefully analyzed. They are based on certain criteria:
- Price elasticity of demand.
- Geographic boundaries.
Consider these criteria separately.
Price elasticity of demand
This is called the indicator of changes in the seller’s revenue when the value of the products offered by him changes. Markets, in fact, are a large chain of goods and their substitutes. But how replaceable are these or other products?
We give an example. If the cost of production A has increased, then the revenue of its seller has also changed in a certain way. If revenue (in this case, additional profit) has increased, then the market becomes limited only to product A. If revenue decreased (that is, additional profit went negative), then a close substitute A, product B, is brought to the market.
In this case, talking only about the market for goods A is wrong. As well as stopping the study on the study of B.'s products. The correct option: A + B research in their interaction.
It should be noted that with a prolonged increase in prices, the dynamics of profits and manufacturers' revenues will also indicate the boundaries of this market.
Geographic limitations
We know that, for example, the industry markets of Russia stand out. The criteria here are:
- The presence of customs barriers.
- The relationship of demand.
- The presence of national and personal preferences.
- Significant or, conversely, non-significant differences in prices.
- Substitutionality of the proposal.
- The relevance of transport costs.
The conditions for determining the geographical boundaries of markets are the following:
- The vast majority (more than 75%) of the consumed products is located in a certain territory.
- A large proportion (over 75%) of products is consumed in the same area where it is manufactured.
- The value of transportation costs is significant both in general and for each unit of transported goods.
- Prices for the same product in different regions vary significantly.
- Stability of market shares is achieved by the participation of leading companies in a certain region.
- Any region is recognized by the market by its significant leading agents. They are both manufacturers and major buyers.
- Administrative restrictions are introduced for both import and export of products from the region.
Classifications
The division of industry markets into types is of great importance in the following:
- The allocation of various types of market structures.
- Organization of production activities by companies.
- Conducting regulatory measures by government bodies.
Consider the basic classification of industry markets.
By openness, they are divided into two types:
- Open. With free entry of sellers into the market space.
- Closed (closed). Entrance of new sellers to the market is regulated by special mechanisms.
According to the degree of organization, there are also two types:
- Organized. These are those markets where there is a mechanism for regulating the level of supply and demand. For example, exchange trading or holding auctions.
- Natural (or unorganized). Supply and demand here are balanced spontaneously in the absence of special forms of organization of interactions between sellers and buyers.
On a territorial basis, industry markets are divided into the following:
- Global.
- Regional
- Local (or local).
According to the maturity stage of the organization, markets are graded into the following groups:
- Pioneer.
- Growing.
- Developed.
- Shrinking (or fading).
Market space
Each industry market is a complete system with its own internal structure of the hierarchy of elements and the relationship between them.
The market space here is represented as follows:
- Labor market. It begins with the acquisition of labor through any investment resources.
- The market of means of production. The second necessary component to start. With the help of capital, it combines with production power. This ensures the functioning of production.
- The consumer market of consumer goods, on which the security of the population depends, the general level of consumption, the stability of money circulation.
- Financial market. Another name is the market for loan capital. It is he who ensures the mobility of capital, the movement of funds in more profitable areas of production. The most comprehensive of all presented.
- Service market.
- Technology market. The object of sale is technology.
- Market of spiritual goods. The object of sale is spiritual ideas.
Functions
We list the main functions of the industry market:
- Intermediary.
- Pricing.
- Informational.
- Regulatory.
- Sanitizing.
- Distribution.
Examples
Common examples of industry markets:
- Metallurgical industry. Industry markets are distinguished by type of rental - for shipbuilding, engineering, construction, etc.
- Pharmaceutical industry. Industrial markets specialize in the spectrum of therapeutic effects of medicines - gastric, neurological, cardiovascular and others.
- Chemical industry. There are industry markets for household chemicals, substances for industrial use, and so on.
So, what have we learned from the information provided? The industry market is a complex concept. After all, these two concepts are not related terms. One industry can provide products to a host of different markets. Similarly, products from several industries can be concentrated on one market. Therefore, the industry market considers the space on which the products of one narrow sub-sector are concentrated.