Manufacturers and Retailers Influence On Market Structure and Pricing

The market structure and pricing are two business aspects that work collaboratively to determine profitability. From the manufacturer and retailer’s point of view, the goal of setting prices is to maximize profits. Manufacturers are top-most market participants that produce goods and services, hence highly influence the market structure. Whether or not two or more manufacturers operate in the same market is largely influenced by the nature of business activity. This paper, therefore, investigates the influences of manufacturing and retail practices on market structure and pricing. In essence, manufacturers determine market elements such as barrier to entry, uniqueness of products and scale economy, all of which are determinants of market structures. Using a quantitative approach, this research analyzes a host of literature to determine pricing strategies by manufacturers and retailers. Furthermore, research examines the four main market structures to determine how retailers and manufacturers affect their formation. The major finding, however, is that manufacturers determine and influence pricing in various ways, most notably by viewing price as a ‘four layer cake’, which includes four main elements: direct costs, manufacturing overheads, nonmanufacturing overheads, and profit. Apparently, both manufacturers and retailers use different pricing strategies, with the former affected by manufacturer suggested retail prices.