Is the newspaper market contestable Essay Example

gradually diminishing; the UK and European economy is weakening; newsprint prices are rising significantly; and newspaper cover prices are inelastic. As a result, new businesses not only have to compete with established companies but also face a regressing market.

Newspaper Market - Figures

Recent circulation figures can indicate the decline or growth of newspapers and be used to estimate the market share of the main national dailies (excluding certain smaller national dailies).

Factors Influencing Contestability

Contestability, which refers to the level of competition in a market and determines the ease of entry and exit for new businesses, is influenced by several factors. A highly contestable market indicates strong competition, while a market with low contestability lacks competition and poses challenges for new entrants. One significant factor that affects market competition is the presence of a gap in the market.

A gap in the market signifies an untapped area that addresses specific needs within a particular target audience. In this situation, there is no existing competition targeting that specific group, thereby enabling new businesses to enter the market relatively effortlessly.

Creating a high-quality newspaper and selling it at a lower price can vary within the newspaper industry. However, due to the exorbitant production costs and resulting minimal profit margins, these variations are not viable. Consequently, allocating funds to other areas of the business like advertising becomes challenging.

The entry cost, or the cost of starting a business in a specific market, is lower in highly competitive markets. This helps to decrease the financial risk that comes with establishing a new business.

Competition within the newspaper market is fierce due to established firms with large turnovers and profit margins. This poses a challenge for new

businesses without strong financial support or entrepreneurship, as they can easily be ousted by these competitors.

The concept of economies of scale involves the ability to increase production and reduce unit costs. This is particularly applicable in industries that are experiencing growth.

Both external and internal economies of scale have an effect on contestability, particularly the significant impact from internal economies. These internal economies encompass technical, managerial, marketing, financial, and risk-bearing aspects. They provide the company with advantages in market share, power, and profit margins. Consequently, the company can lower prices and surpass competition from new and smaller businesses.

Large corporations with multi-billion pound valuations dominate the newspaper industry and reap substantial advantages from economies of scale. Consequently, this lack of competition in the market poses difficulties for new companies seeking to enter.

Brand Loyalty

Brand loyalty is when people remain loyal to a product, even if there are new and potentially cheaper alternatives available. This loyalty is based on the brand itself. The degree of brand loyalty that consumers have towards established companies in a market affects how competitive the market is and the likelihood of success for new businesses.

While some individuals, such as business professionals, favor specific high-quality newspapers, a noteworthy portion of the market consists of customers who lack brand loyalty. These customers instead choose the cheapest newspaper available or opt for one that provides a complimentary gift.

Expanding Market: An expanding market signifies a market that becomes more accessible for competition as it grows in size. The increase in the market's magnitude opens up opportunities for new businesses to enter and vie against established firms.

Entering the newspaper industry will be increasingly challenging for a new business, despite

the declining sales and circulation.

When entering the newspaper industry, new companies must take into account the market mix, which comprises pricing, product benefits, promotional activity, and distribution effort. The market mix involves all aspects of marketing.

The initial factor to contemplate is which segment of the market to aim for. Realistically, it would be necessary to select a niche that provides consumers with something innovative while still emphasizing the primary advantages that newspapers are capable of offering. These advantages include providing comprehensive and detailed news on a daily basis, being easily portable, disposable, and recyclable. Furthermore, these existing qualities can be further developed and expanded upon, as demonstrated by the Independent's introduction of a new, more compact tabloid version.

Branding is crucial because it signifies the market position and cultivates customer loyalty, leading to a more stable demand for the product. Advertising and product promotion are effective strategies to establish a strong brand. Consequently, the costs associated with entering the market, as indicated by the product price, can be validated.

Penetration pricing appears to be an attractive strategy for market entry, involving the reduction of product prices to lure customers away from well-established newspapers. Nonetheless, this approach carries the risk of a dire consequence where your company may be compelled to withdraw from the market and potentially face liquidation. This is primarily due to penetration pricing, particularly in a market that lacks competition, triggering a price war. If the new firm lacks sufficient financial resources to compete with the dominant established businesses, it may be forced to exit the market.

Conclusion

This coursework examined the contestability of the newspaper market. I explored various aspects of the market, including barriers to

entry and exit, as well as elements related to the marketing mix. In summary, it seems that the market is saturated with large and well-established competitors in a declining industry, posing challenges for new businesses wishing to enter and compete successfully. Any new entrant in the newspaper industry would need to identify a niche market and have substantial capital to cover expenses associated with entering this non-contestable market. To conclude, the newspaper trade is a formidable and influential market with numerous established competitors, making it difficult for new firms to enter and compete.