Meaning of Market, Concept of Market, and Types of Market
Meaning of Market
The word market is derived from the Latin word “Mercatus” which means a place for performing business acts. In a narrow view, the market is the place where buying and selling for needs and wants for getting satisfaction is performed. In broad view market may or may not be a place, there may or may not be a gathering of buyer and seller at the stated time, but to be a market there must be a transfer of title on the basis of monetary value.
A market is one of the many varieties of systems, institutions, procedures, social relations, and infrastructures whereby parties engage in exchange While parties may exchange goods and services by barter, but markets rely on sellers offering their goods or services in exchange for money from buyers. Similarly, market refers to the group of consumers or organizations that is interested in the product, has the resources to purchase the product, and is permitted by law and other regulations to acquire the product. The market also means people or organizations with some needs and wants to have resources to fulfill the needs and is also willing to participate in a mutually satisfying transaction. The most market relies on sellers offering their goods or services in exchange of money from the buyer. Markets vary in form, scale (volume and geographic reach), location, and types of participants as well as the types of goods and services traded.
A market is the aggregate demand of the potential and existing buyers of a product.
– American Marketing Association
A market may be defined as a people with needs to satisfy, money to spend, and the willingness to spend it.
– Willian J. Stanton
The market may be defined as a relationship between consumer and producer accruing or established at the time and place and at the value mutually agreeable and acceptable to the parties.
– JC Gandhi
In a broad sense, the market is a group of customers with a need to satisfy, money to spend, and a willingness or desire to spend money to create an exchange relationship. The market is the number of people who have some need and want, have resources, and are also willing to participate in a mutually satisfying transaction.
Concept of market
There are three concepts of the market: concept, demand concept, demand concept, and space concept.
1. Place concept
Place concept to market is a narrow and traditional concept of market. In this concept, the market is defined as a convenient place where potential buyers and sellers negotiate, agree to terms and conditions of transactions, settle payments,s and exchange ownership of the entity. The convenient place may be stored (wholesalers, retailers), departmental stores, shopping malls, bazaars, local markets, etc. The buyers and sellers meet and communicate directly according to this concept.
2. Space/area concept
The market is not a specific or convenient place only. It is a group of potential buyers and sellers spread over an area connected by a modern means of communication. The exchange process can take place continuously with or without direct contact between buyers and sellers. The means of space concept may be telephone, newspaper, TV, Internet, etc. It emerges as a result of the internet and e-commerce. The space concept makes business or personal transactions possible without physical nearness between the buyers and sellers.
3. Demand/people concept
The market is not convenient to place but the people or organization with demand. These concepts view a market as a category of the need or demand from a specific group. Market in this concept means people with needs to satisfy, money to buy, and willingness to spend money to create an exchange facility. So, the market is demand or people which keep changing according to time.
Types of Market
There are various classifications of the market based on area, the volume of business, competition, the intensity of demand, etc.
1. On the basis of geographical area
On the basis of geographical area, the market can be classified into four types as follows:
a. Local market:
If goods or services are sold and bought within the boundary of a small area, it is called a local market. In such a market, the sellers and buyers perform exchanges mostly with direct contact. The markets of perishable and local agricultural goods like fruits, fish, vegetables, milk, etc. are local markets. It has also become possible to expand markets of perishable goods to regional and national levels due to the development of fast means of transport and cold stores.
b. Regional market:
The market which occupies a large area compared to the local market is called a regional market. Goods and services are sold in certain districts, zone, or developing regions. Suppose, the market of some goods or services has covered only the central region, such market is called a regional market. Many business products are limited in a certain area of Nepal.
c. National market:
The national market is also called a domestic market. If the market of goods or services has expanded nationwide, such market is called a national market. Buying and selling are expanded within the boundary of the national border. Cement, biscuit, noodles, tea, etc. are bought and sold all over Nepal. So, the market of these goods is called a national market.
d. Global market:
The global market is also called an international market. Such a market covers the whole world. If a business organization crosses the national border and goods or services are sold and bought in many countries, it is called a global market. Toyota, Fiat, Gulf Oil, etc. have covered the world. They are sold and bought all around the world. So, it is an international market.
2. On the basis of business volume
In terms of volume of business, a market may be classified into the wholesale market and retail market.
a. Wholesale market:
The wholesale market denotes big transactions with retailers. In the wholesale market, a large number of goods are sold to retail businesses. In the wholesale market, goods are not sold to the ultimate consumers. The wholesale price of goods becomes less than the retail price. Wholesale markets are well equipped with modern means of business such as transportation and warehouses.
b. Retail market:
The market in which sellers buy goods from wholesalers and sell them in a little amount to ultimate consumers is called a retail market. The retail market performs small transactions with a large number of customers. In the retail market, the retailers have direct contact with consumers.
3. On the basis of competition
On the basis of competition market can be classified into the following two types:
a. Perfect competition:
It is the market where there is a large number of buyers and a large number of sellers. There is free entry and exit provision to sellers. A large number of sellers sell homogenous products. The price of the homogenous product is the same. Both buyers and sellers are capable of competition, so there is less chance of exploitation of buyers and sellers. This is an ideal market in the sense of the market.
b. Imperfect competition:
It is a market where sellers cannot enter or exit freely. There may be several obstacles from government policy, competitors strategies, geographical and natural diversity. There may be only one or very few sellers in the market. Price is not the same to one another. An imperfect competition market can further be classified into the following types:
- Monopoly market: In a monopoly, there is a single seller and a large number of buyers. The single seller determines the price. The price is not fixed on the basis of demand and supply in a monopoly market. The seller has full control over the supply of goods and services.
- Duopoly: It is a market with two sellers and a large number of buyers. There is difficulty in seller’s entrance due to advanced technology, excessive capital requirement, and other several terms. The two sellers may exercise great rivalry in the market.
- Monopsony: It is a market, where there is a large number of sellers but only one buyer. Buyer has a great influence over price, quality, delivery, design, and other sales term. Nepal electricity authority is the sole distributor of electricity in Nepal. So, there are many private and public big or small hydropower companies in Nepal producing electricity but NEA is the only buyer for them.
- Oligopoly market: Oligopoly is a market characterized by very few sellers and a large number of buyers. Very few sellers have great influence over price, quality and quantity of the product. Very few sellers can cartel and syndicate to influence terms of sale to the buyers.
- Monopolistic market: Monopolistic market consists of a large number of sellers and a large number of buyers. A large number of sellers sell a similar product but not exactly the same. Their products are differentiated from one another with several features. Buyers have large options for product selection in such a market.
4. On the basis of consumption
On the basis of the consumption market can be classified into the following two types:
a. Consumer market:
The market where products and services are bought by its final user for ultimate satisfaction is called the consumer market. This market destroys the utility of the product by consumption. This market consists of individuals and households.
b. Industrial market:
These markets consist of industries, businesses, and retailers who buy the product for the business uses, reselling, or making other products. They do not destroy the utility of the product but change or add further utility.
5. On the basis of time
On the basis of time market can be classified into the following two types:
a. Short term market:
The market where the supply of goods or services is stable is called short term market. In such a market, even very little time cannot be found to increase the volume of production according to the increase of demand. Supply cannot be increased with an increase in demand. Mostly, the market for perishable goods becomes very short. For example, the market for fruits, vegetables, mushrooms, fish, meat, milk, etc. becomes very short. Generally, demand affects price in such a market. If demand increases, the price goes high, and if demand decreases price comes down.
b. Long-term market:
In the long-term market, durable products are sold. Adequate time can be found to increase the volume of goods according to demands in such a market. Production of goods or services can be increased by adding machinery, resources, and means. Goods or services can be supplied to meet demands whatever greater it may be. so, in such a market price is fixed according to the rule of demand and supply. The firm studies and researches markets to identify demands develops new technology and supplies its products to the markets.
6. On the basis of the nature of products
On the basis of nature of product market can be classified in following two types:
a. Commodity market:
The market where the selling and buying of customers and industrial goods take place is called the commodity market. For example, the market of fruit, foodstuff, machinery, different equipment, furniture, etc. is a commodity market.
b. Financial market:
The market of money and financial equipment is called a financial market. In this market, money, share, debenture, treasury bill, commercial paper, etc. are dealt with. The dealing of short-term funds is called the money market and dealing of long-term funds is called a capital market.
