How can a business retain its market power in a concentrated market?

A business can retain its market power in a concentrated market through innovation, customer loyalty, barriers to entry, and effective pricing strategies.

Innovation is a key strategy for businesses to maintain their market power. By continually developing new products or improving existing ones, a business can stay ahead of its competitors and maintain a strong position in the market. This could involve investing in research and development, or acquiring innovative start-ups. Innovation can also extend to business processes, such as finding more efficient ways to produce goods or deliver services.

Building customer loyalty is another important strategy. This can be achieved through high-quality products or services, excellent customer service, and effective marketing. A strong brand can also help to build customer loyalty. If customers have a positive perception of a brand and trust its products, they are more likely to stick with it, even if competitors offer similar products at lower prices.

Barriers to entry can also help a business to retain its market power. These are factors that make it difficult for new competitors to enter the market. They could include high start-up costs, regulatory requirements, or the need for specialised knowledge or technology. By maintaining high barriers to entry, a business can protect its market share and prevent new competitors from gaining a foothold.

Effective pricing strategies can also help a business to maintain its market power. This could involve setting prices that maximise profits, or using pricing strategies to deter competitors. For example, a business could use predatory pricing, where it temporarily lowers prices to a level that competitors cannot match, in order to drive them out of the market. Once the competitors have been eliminated, the business can then raise its prices again.

In conclusion, there are several strategies that a business can use to retain its market power in a concentrated market. These include innovation, building customer loyalty, maintaining high barriers to entry, and using effective pricing strategies. By implementing these strategies, a business can protect its market share and maintain a strong position in the market.