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Defining market boundaries
Author(s) -
Brooks Geoffrey R.
Publication year - 1995
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.4250160704
Subject(s) - industrial organization , supply and demand , product (mathematics) , set (abstract data type) , service (business) , market definition , variation (astronomy) , business , economics , computer science , microeconomics , marketing , market structure , mathematics , physics , geometry , astrophysics , programming language
This study shows how spatial information about product supply and demand can be used to determine the geographic extent of markets. It demonstrates that markets thus defined allow finer‐grained measurement of competitive conditions than is possible using conventional approaches. Two procedures are developed and contrasted: one, called a natural market approach, is drawn from the Industrial Organization economics literature; the second, called an enactment approach, is associated with the open systems perspective on organizations. Applied to a set of hospitals in the San Francisco Bay area, geographic market boundaries established in these ways are shown to lead to finely defined markets, and to reveal strong variation in competitive conditions across the area—variation not detectable if conventional approaches to market definition are used. It is shown that these approaches have applications beyond geographic market definition, and can also be applied to define markets in term of product or service types.