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Theory of Market

01-DEC-2014 09:51

    Market is a place where forces of demand and supply operate, and where buyers and sellers interact directly or through intermediaries to trade goods, services, or contracts or instruments, for money or barter.

    • Markets include mechanisms or means for determining price of the traded item
    • Communicating the price information,
    • Facilitating deals and transactions, and
    • Effecting distribution. The market for a particular item is made up of existing and potential customers who need it and have the ability and willingness to pay for it.

    Market research

    It is an attempt to provide accurate information that reflects a true state of affairs. Researchers should always be objective with regard to the selection of information to be featured in reference texts because such literature should offer a comprehensive view on marketing.

    Market Segmentation

    A market segmentation theory is a modern theory that tries to explain the relation of yield of a debt instrument with its maturity period. This theory brings together potential buyers into segments with common needs. There is no point in spending money for marketing of your product to certain people, if these people will not buy the product. This is market segmentation.

    To summarize, market segmentation theory is all about separating the market into smaller groups of consumers and then marketing your product only to the group of people that are your potential buyers.

    Covering Market Segment

    The aim of marketing in profit-oriented organizations is to meet needs profitably. Companies must therefore first define which needs and whose needs they can satisfy. For example, thepersonal transportation market consists of people who put different values on an automobile’scost, speed, safety, status, and styling. No single automobile can satisfy all these needs in a superior fashion; compromises have to be made.Because of such variables, an automobile company must identify the different preference groups, or segments, of customers and decide which group they can target profitably.

    Efficient Market

    If this were strictly true, no investment strategy would be better than a coin toss. Promoters of the efficient market believe that there is perfect information in the  market. This means that whatever information is available about a stock to one investor is available to all investors (except, of course, insider information, but insider trading is illegal). Since everyone has the same information about a stock, the price of a stock should reflect the knowledge and expectations of all investors. The bottom line is that an investor should not be able to beat the market since there is no way for him/her to know something about a stock that isn't already reflected in the stock's price. Proponents of this theory do not try to pick stocks that are going to be winners; instead, they simply try
    to match the market's performance. However, there is ample evidence to dispute the basic claims of this theory, and most investors don't believe it.

    Planned economy

    It is a type of economy that gives the government total control over the allocation of resources. A planned economy alleviates the use of private enterprises and allows the government to determine everything from distribution to pricing. Planned economies basically give the government dictatorship type control over the resources of the country. Planned economies can provide stability, but also can limit the growth and advancement of the country if the government does not allocate resources to the innovative enterprises.

    Conclusion

    In this new millennium, in the Indian markets, it is very essential that the sincere efforts must be most productive and industrious, so that an optimum use is made of the resources available worldwide.

    DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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