Workshop on Contestable Markets & Barriers to Entry for Year 12 & 13 Students, Schemes and Mind Maps of Business

Download Workshop on Contestable Markets & Barriers to Entry for Year 12 & 13 Students and more Schemes and Mind Maps Business in PDF only on Docsity! ihe aie ECONOMICS WEBINAR Teaching Contestable Mela (aia A Level Economics Hosted by Jon Clark and Ruth Tarrant Coming soon…Student Workshops Strong Foundations – for Year 13s in November and December 2016 , at Vue Cinemas in Portsmouth, London, Cambridge, Birmingham, Bristol, Manchester, Leeds, and Gateshead – limited tickets left! Also Flying Start for Year 12s and Grade Booster for Year 13s, March to May Contestable Markets is a market structure where there is freedom of entry and exit. A contestable market …… The behaviour of firms is determined by the potential for competition. Contestable Markets Perfectly contestable Zero contestability Markets operate more like a perfectly competitive market Contestable Markets Perfectly contestable Zero contestability High street banks Smartphone City Walking tours Fast food restaurant Streaming videos Barriers to exit - Sunk Costs Think of a method that a business could use to reduce those sunk costs Loss of reputation if firm has other business concerns Redundancy costs Bad debts owed by owner Asset write-offs for machinery A budget hotel chain Courier Service Dog grooming service Breakfast cereal manufacturer Sell chain to established firm Employ people on fixed term contracts Consider ownership status Lease machinery Sunk Costs CONTESTABLE MARKETS tutor2u ‘Sunk Costs ‘Sunk costs can not be recovered i a business decides to leave an industry. Sunk costs include asset write-offs, closure costs (such as redundancy pay, penalty costs on leasing), and loss of business reputation Budget hotel Dog grooming ||" Breakfast cereal courier servee |[_°SEce || “tana ‘Task 1: What type of sunk costs could exist for the following businesses if they were to leave the industry? Task 2: Think of a method that a business could use to reduce those sunk costs Task 3: Which of the markets above is the most contestable? Justify your answer Outre wana aor2u net tutor2u Hit and Run Entry a CONTESTABLE MARKETS The Home Assistant Market tutor2u In late 2016, both Amazon and Google introduced the latest versions of their Home Assistants ~ The Amazon Echo and Google Home Both are voice activated speakers that use the home wifi to answer questions posed. You ‘can ask forall sorts of information including weather forecasts, traffic details and calendar events. You can also control any aspect of the ‘smart home’ (e.g. your lights!) as well as, play music. ‘The key to a good Home Assistant is the development of sophisticated search engines, This is considered a market with great potential fo make supernormal profits. Task? Task? What activities would you tke your Which other fms could potentially Home Assistant to undertake? ‘enter the market for creating Home ‘Remember, it can only give <> *’” ‘answers in audio format! Task 3 \What barriers to entry and ext forthe Home Assistant market could exist? © tutor2u wow tutozunet tutor2u Hit and Run Entry When a business enters an industry to take advantage of temporarily supernormal profits A New Market – the Home Assistant Task 2 Which other firms could potentially enter the market for creating Home Assistants? Hit and Run Entry When a business enters an industry to take advantage of temporarily supernormal profits A New Market – the Home Assistant Task 3 What barriers to entry and exit for the Home Assistant market could exist? Hit and Run Entry a CONTESTABLE MARKETS The Home Assistant Market tutor2u In late 2016, both Amazon and Google introduced the latest versions of their Home Assistants ~ The Amazon Echo and Google Home Both are voice activated speakers that use the home wifi to answer questions posed. You ‘can ask forall sorts of information including weather forecasts, traffic details and calendar events. You can also control any aspect of the ‘smart home’ (e.g. your lights!) as well as, play music. ‘The key to a good Home Assistant is the development of sophisticated search engines, This is considered a market with great potential fo make supernormal profits. Task? Task? What activities would you tke your Which other fms could potentially Home Assistant to undertake? ‘enter the market for creating Home ‘Remember, it can only give <> *’” ‘answers in audio format! Task 3 \What barriers to entry and ext forthe Home Assistant market could exist? © tutor2u wow tutozunet tutor2u Impact of contestability on a market Uberisation The success of the company has given rise to the term ‘uberisation’ – where firms are using the power of peer-to-peer transactions to reduce costs and improve services for consumers. Impact of contestability on a market Uberisation Task 1: What other possible industries could see a rise in ‘peer-to-peer’ transactions, where technology allows consumers and suppliers to interact more quickly or without a third party organisation’s involvement? Impact of contestability on a market Uberisation Task 2: What is the likely impact on the grocery market if Uber expands its food delivery service? How would established grocery stores respond? Contestability Boxing Bi) et So - = ie \ ae 41> tutor2u Contestability Boxing tutor2u Contestability Boxing Contestable Absence of sunk costs Low consumer loyalty Little regulation Easy access to technology for production Perfect information for supplier Easy access to raw materials Access to skilled labour Incontestable High Street Banking Little contestability smartphone Little contestability ‘Walking tours of historic city Highly contestable Fast food restaurant Some contestabilty Budget hotels, Some contestability Streaming video service ‘Some contestability tutor2u