A market is a place where the potential buyers and sellers come in contact with one another to finalize a deal and trade commodities or services at an agreed-upon exchange rate. The market system is one of the fundamental issues based on which markets are classified into numerous types. The market system is the regulated process that determines the buyers and sellers as well as the means of exchange.
Markets can be categorized into four major types based on the number of buyers and sellers present in a market structure -
When there is only one seller against a huge number of buyers in a market with nearly no good enough substitute or competitor, they enjoy a complete Monopoly. It happens when one brand takes control of one specific commodity or product in a market and other brands take time to catch up to them in quality or availability and as a result, the buyers keep choosing that one single brand every time.
In a market, when there is only one buyer but a number of sellers, that is the Monopsony scenario. For example, an employer becomes the sole buyer against multiple sellers when a good number of prospective employees are willing to sell their labor and skillset to him/her. Since the buyer here has the control, s/he can set up the rules as they please with a view to sorting through the lot and pick the best.
Latin words - olígoi meaning “few” and pōléō meaning “to sell” joins to make the word - Oligopoly which indicates that there are only a few important sellers in a market system. In some industries, there are only a handful of companies selling differentiated yet similar types of products, and the buyers choose from similar products that are differently labeled under different brands and sold at a slightly varied price but the parent company is often the same. For example, in the United States News and Media market, the top six media firms (Walt Disney, Time Warner, CBS Corporation, Viacom, NBC Universal and News Corporation) own around about 90% of the US mass media market.
Contrary to oligopoly, when there are a few important buyers in one market, it would be an Oligopsony. A good example would be the US food industry where fast-food giants like McDonald’s, KFC, Wendy’s and Burger King buy a lion’s share of the total meat produced in the US by the local ranchers. Their control over the total production of meat gives them the power to dictate the price of meat in general and that would be the example for Oligopsony for you.
There are two major classifications of markets based on their tangibility and they are -
1. Physical Markets
The markets that have tangible existence are called physical markets. Customers or buyers can walk into these markets in person where the seller(s) has already set up counters or stalls to sell their products. Shopping malls, super shops and vendor’s markets can be good examples of Physical Markets.
2. Virtual Markets
The markets that do not have a physical existence outside of the internet or the computer screen are usually called the virtual market since they only exist in the virtual realm. They are also termed as Non-physical or Internet Markets. Online shops and e-commerce websites are good examples of Virtual Markets.
Both these major classifications of the market (Physical and Virtual) can work in the types below -
1. Consumer Markets
The markets where ready consumer goods are sold are called the Consumer Markets. These final goods are seen stocked on the shelves of the stores before being sold to the average consumer and they range from foods, clothing and jewelry. The price is often fixed by the sellers and the bargaining also ends on their terms.
2. Industrial Markets
In this type of market, goods or services are not sold to the consumer themselves directly but to other businesses. This is the trade between businesses which can be done in exchange for services or goods or it can be money. The price or exchange rate is often a point of discussion and only agreed upon when both parties are satisfied.
3. Auction Markets
Auction Markets follow the bidding method where the highest bidder gets the product concerned upon the interactive back and forth bidding. The price here remains undecided until the very end of the auction and ends up being decided by the buyers and how much they are willing to pay for the product being auctioned off.
4. Government Markets
The Government Markets are comprised of government-funded institutions and facilities that conduct purchases dictated by the government itself only after a budget has been allotted and issued by the government itself. It is a Nonprofit Market in the sense that the seller makes no tangible profit in monetary assets.
5. Institutional Markets
The institutions that provide one-of-a-kind care and service to the people of the community and thus, contribute to society are the ones that make the Institutional Markets. They are usually funded by sponsors inspired by sole goodwill. Schools, hospitals, old age homes, nursing homes and prisons are among the organizations that are included in the Institutional Market.
6. Global Market
The air of globalization hasn’t escaped the market systems and the expanse of businesses. Global Market would be a market that is expanded beyond national borders. Companies wanting to go beyond the border of the nation they were born in, are increasing by the day. Brands with their biggest global presence would be Coca-cola, Microsoft, Xiaomi etc.
7. Black Markets
Black Market is a shadow economy where illegal goods and services are sold under the radar so that the government-regulated prices can be tweaked to the convenience of the seller or so that the tax can be avoided. Illegal drug deals, human trafficking etc. are usually done exclusively in the Black Market.
8. The Market for Intermediate Goods
Intermediate goods are made from raw materials and later used in producing the final products. The intermediate products required in the production of the final consumer goods or other intermediate goods are usually sold in the Market for Intermediate Goods. This kind of trade too is done between businesses.
9. Knowledge Markets
Data and information are among the most valuable assets of the twenty-first century and that is exactly what creates the Knowledge Market. The market where data, information and knowledge are sold instead of tangible goods is called the Knowledge Market.
10. Financial Markets
This is the kind of marketplace where various financial assets are traded starting from money to bonds, debentures etc. Since this kind of market deals in financial aspects, the market is labeled Financial Market.
a) Money Market
In the Money Market, monetary assets like commercial papers, treasury bills etc. are traded.
b) Capital Market
The Capital Market sees the deals of long-term assets such as houses, lands etc.
c) Stock Market
Stock Market is a type of Capital Market where already-issued securities change the hands of the investors.
d) Cash Market
The real-time transactions between the buyers and sellers are done with cash and those are done in the Cash Market.
e) Future Market
In the Future Market, the financial transactions are done but the deliveries are expected at a certain date in the future which is set in the present.
f) Foreign Exchange Market
Foreign Exchange Market is the market where national currencies are traded on a global scale. It is also known as the FOREX Market or FX Market.
g) Debt Market
The fixed claims or debt instruments like bonds, certificates, debentures, bills of exchange, leases, promissory notes etc. are traded in the Debt Market.
h) Exchange-Traded Market
This kind of market is regulated by a centralized organization and the transactions happen in a physical setting between buyers and sellers.
i) Over-the-Counter Market
These are online marketplaces regulated by decentralized organizations where the brokers and dealers deal via the internet using their computers or other smart devices. Over-the-Counter Markets are often shortened to OTC Markets.