Question

How does advertising impact market structure? Does it create more competition or impede competition among companies participating in the market? Explain and argue for both sides of the arguments and give examples for your arguments. Do we need any rules and regulations for manner in which advertising is taken up by companies in our economy and explain why?

Answer 1

Advertising impacts market structures in both ways. On one hand it creates competition in the market . When one firm in the market resort to advertising the the other firm in order to protect its customers also resorts to heavy advertising. Thus it creates a competitive spirit in which a every customer is important. New technique , unique ideas and different marketing strategies are adopted to attract customers. The selling cost of firms increases. The firms to whom advertising is not a sound idea force to adopt it if rival use it as competitive advantage. Some time firms resort to cut throat competition. Many firms also use competitive advertising. This could be seen in case of Pespsi and Coca-Cola. Most of the time it brings positive changes .

One the other hand it impede competition among participating companies in the market. As every firms try to protect its market share by adopting advertising strategies and their strategies becomes ineffective due to the counter strategies of the rival firms. Thus advertising make the further movements and development of the firms quite difficult.

Rules and regulations are necessary in every society and business are also part of society. Certainly we need some rules and regulations for the manner in which advertising is taken by the companies. There is need of some ethical and moral standards that should work as guiding principles . They should make the advertisement more effective without hurting anybody. In current time we can see how these advertisememts use unethical , immoral languages . They are full of racial misoginistic expressions which is unacceptable. Hence there is need of a code of conduct because on the name of pofit hunt and creating liberty sometimes it cross the limits.