Market Model Assignment Help: Due to frequent changes in the market conditions, different industries have to make changes in its market model. In this assignment help, Auto Industry has been taken in order to identify the market model changes. Hypothesis is also created to measure the change in short-run and long-run behavior of model in the industry. Along with this, transaction cost incurred in Auto Industry is also discussed. 

Changes in Market Model: Automobile is the industry, which is highly competitive and lead to changes in market model. It is because of globalization, technologies are changing rapidly that force the companies to make changes in its market model. Further, import and export of products have been done due to globalization, which has increased the level of competition in market.

It is identified that price elasticity of demand has changed the market model of monopoly to oligopoly further reach to monopolistic competition and ends with perfect competition. Auto Industry has made changes in its market model, according to the change in overall market scenario. Earlier, Auto Industry has adopted the monopoly market model due to limited number of companies. This industry has reached towards the oligopoly market due to the entrance of some companies such as General Motors, Honda, Toyota, Nissan and Chrysler. In addition to this, it is analyzed that Automobile industry has moved towards the monopolistic competition after the emergence of consolidation among different countries. Merger between Renault and Nissan, Daimler-Benz and Chrysler, Hyundai and Kia has increased the level of competition in the market. Consolidation has intensified the competition as it is identified that emerging groups are highly researching intensive. Apart from this industry, many other industries have changed their market model based on the market scenario.

Hypothesis Short Run and Long Run Behavior Short-Run behavior in perfect competition market: In short-run, demand of products are not too much and because of launch of new products do not lead to many sales. New companies take decision regarding how much they have to produce. Company also has to set low prices for the products due to its low demand in the market. In the short-run, market share is low and cost of production is high for the companies.

Long-Run behavior in perfect competition market: In the long-run behavior, companies acquire the market knowledge and set low prices for the products. This strategy is helpful in achieving the benefit through economies of scale. Organization can attract the customers through normal marketing techniques. In such case, companies do not have to adopt the marketing strategies in case of long-run behavior. Further, organization can be able to earn high profits with low cost of production.

Areas Leads to Transaction Cost: Transaction cost is the type of cost, which companies have to incur while doing an economic exchange. For example, cost incurred by companies while participating in the market is treated as transaction cost. Automobile industry has to incur transaction cost in several areas such as search and information, bargaining and decision cost and policy and enforcement cost.

• Search and information costs: Companies have to incur the transaction cost in order to search the information from the market. Companies acquire the information related to market prices. Further, organizations also obtain information about the origin of demand of the companies’ product and services. Organizations also have to spend the money in searching information about the competitors’ strategies, taste and preferences of customers.
• Policy and Enforcement Cost: Apart from the cost incur in searching, organization has to spend money in drafting the sales contract as well as in order to enforce them. Before doing any transactions, organization has to spend money in making policy related to sales. This type of cost comes under the transaction cost. Organization also spends money to comply with government rules and regulations such as environmental laws, economic laws etc.
• Bargaining and Decision: Another area in which organization has to incur the transaction cost is bargaining and decision making. Managers in the organization has to spend money in the travelling and meeting with potential buyers. Further, organizations also incur money in the advertisement and promotion activities. While doing the negotiation, companies’ have to incur the transaction cost and it will depend on the length of negotiation. Therefore, it is analyzed that every organization has to incur the transaction cost while performing the activities.

Strategies for Dealing with Transaction Cost: The transaction cost that organization has to incur is majorly dependent on the type activities. It is analyzed that value of transaction depends on the number of goods that has been transferred. In case of Auto Industry, General Motors has merged with Fisher Body in order to get economies in transportation and inventory cost, which is indirectly come under the transaction cost. In addition to this, transaction cost is also influenced by the structure of market as well as the nature of intermediary firms. Higher the market structure, higher will be the transaction cost. Further, if organization form large intermediary network, the amount of transaction cost will also increase. It is analyzed that organization has to make payment to every intermediary firm, which indirectly reduces the overall profit of the organizations.

On the basis of transaction cost, organization makes a decision about the medium of exchange in an economy. It is because; if the cost of exporting the products through transportation agency is high, organization will adopt their own transportation network for the exchange in order to reduce the transaction cost. Therefore our assignment helper says that organization has to adopt some strategies in order to deal with transaction cost. Organization can reduce the transaction cost by increasing the volume of goods that are being transferred. This strategy can be beneficial if supplier set the fix transaction cost irrespective of the volume of goods that are being transferred. With the help of this, an organization can reduce the transportation cost. Another strategy, which is beneficial in reducing the transaction cost, is moving the intermediary network to the area, where transaction cost is low. It is analyzed that internet trading is the best means of reducing transactions with the firm. Internet trading helps in reducing the geographical gaps among various countries. In addition to this, organizations can also capture business firms and customers from all over the world. After making negotiations with the firms, suppliers should select the best medium of exchange in which transaction cost is low. Both the strategies are helpful in addressing the transactions cost-effectively.

Cost and Revenue in Auto Industry: It is analyzed that Auto Industry has made large amount of contribution in the economy of USA. In the year 2010, Auto Industry has contributed around 4 percent of the United States GDP and also provided employment to millions of workers. Managers in this industry can take an advantage by making optimum utilization of workers. Apart from this, sales of this industry have also increased by 11 percent. With the help of this, managers can acquire the large part of market and produce innovative automobiles for the buyers. Financial downturn in the year 2008 has increased the cost of automobile industry. Due to this downturn, managers should reduce the production in order to earn more profits and reduce the cost of production.

Factors Affecting Degree of Competitiveness: In today’s rapidly changing environment, level of competition has increased because of emergence of new and advanced technologies. It is analyzed that merger between the different companies has affected the degree of competitiveness. For example, merger between Renault and Nissan and Hyundai and Kia are the big companies that have increased the level of competition in the market. Another factor that affects the degree of competition is changing in prices of automotive fuels. These factors have affected the level of competition in Auto Industry. It is analyzed that organizations have adopted different measures in order to show how industry is evolving in the market. In order to deal with mergers, organization should make a contract with large retailers. In addition to this, to overcome with the challenges of rise in prices, industry should increase the production, when prices are high and reduce when prices are low. Further, organization should prepare strategic reserves in order to meet the future contingencies in the industry.

Conclusion: From the above discussion by business assignment help experts, it is analyzed that due to changes in technologies and market structure, Auto Industry has to make changes in its market model. Further, organization has to incur the transaction cost in negotiations, searching and enforcement activities. Changes in prices of automotive fuel have increased the level of competition.

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