I need help with describing a pattern of change in the market for IBM (Monopoly, oligopoly), and hypothesize short run/long run behaviors for the market model. I also would like to break down the major factors that impact the degree of competitiveness using data. Upon those findings, research two competitors that are the closest and determine the pricing strategies to help identify how this information will influence pricing decisons for IBM. The end result will lead to recommending a pricing policy for IBM that maximizes profits.
The change in IBM is pivotal. By the year 2015, IBM plans that half of the segment profit will be software. This is a big transformation. A company that was known for computer hardware, particularly mainframe computers, has transformed itself to a service provider. The market structure for mainframes was an oligopoly, but the market for the products in which IBM is competing now is monopolistic competition.
The current market structure IBM is competing in is marked by the following factors: the competitiveness is impacted by a large number of sellers. Another factor is that there are many producers that sell products that are differentiated from one another. The products are not perfect substitutes. In the short run, IBM can behave similar to a monopoly and earn unusual profits. But in the long run, other firms will enter the market and the benefits of differentiation decrease.
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The answer to this problem explains change of business strategy of IBM and change in market structure. The references related to the answer are also included.