Financial Management Challenges

Financial Management Challenges

Introduction

When one looks at the structure of these markets, it can be seen that all four of these markets type vary adopt in their structure and thus there is a huge challenge for financial manager to make sure that efficiently allocation of resourced can be made out of it. These four types of market structure also present unique opportunity for business managers as well as they have to seek out new ways to break even as well as earn sustainable profit for the given period of time. These are some of the things that interest financial managers and they have to them into the perspective before making any financial decisions or financial judgment.

Setting the Right Price

If one looks at some of these market structures, it can be seen that one of the more difficult task for financial managers in these market structures is to find the profit maximizing prices in varying market structures (Lim, 2008). The problem for financial managers is that while in some of the market structures in which there is greater sense of competition among businesses, firms are not in the driving seat as far as determination of price is concerned. They are price takers in such instance and due to such market structures, the prices are always need to be looked at. Due to the little product differentiation in these markets, it can be seen that there is a fair chance that there will be little margin for differentiation. Thus to operate businesses in such market, the costs controls are needed to be in good shape so that that whatever profit the market is offering to the firms, the most can be made from it.

One the other hand, market structures in which there is less competition, or to a certain extent, there is a monopoly, things are little easier for the business. Off course it can be seen that most of the time the administration are not really welcoming the monopolies, so sustainability of such business is always under threat. This is due to the fact that whenever there is a monopoly, there is a fair chance that Government will try to curb it down. But these are not the only challenges that are faced by monopolists and oligopolists, they also have to make sure that whatever the price that is being charged by them is maximizing the profits of the firm. They have to carefully consider their marginal costs so that there is a price level that can make sure that their profit level are maximizing. The prices are well above the average costs for these products, so there is always this potential for extra ordinary profits. These are some of the consideration for monopolists (Lim, 2008).

Thus it can be seen that even in these separate markets, there are many problems for these financial managers. While markets in which the competition is on the higher side, it can be seen that there will be more emphasize on cutting down ...