Final answer:
In business-to-business markets with very large customers, customer firms can be treated as "markets of one" when they possess monopoly power within a market, requiring suppliers to cater to their specific needs. This level of personalization occurs in monopolies and oligopolies, where a few large firms have significant market power and may influence their suppliers to create highly customized products or services.
Step-by-step explanation:
Business-to-business markets with very large customers can treat customer firms individually as "markets of one." Such personalized treatment is more viable when the customer firm has no close substitutes and essentially operates as a monopoly within a specific market. Thus, the supplier has to adapt to the unique needs and wants of the monopolistic customer. When the term is applied to an oligopoly, it underlines the differences in scale between firms that operate within the same industry; Firm A might be vastly larger than Firm B, leading to a disparate bargaining power and market influence, which necessitates a customized approach for each firm.
In instances where market structures like monopolies or oligopolies exist, individual firms wield considerably more influence over their suppliers or producer firms. This can drive businesses to create uniquely specific products or services tailored for a single client as if they are a market unto themselves—a "segment of one." This is particularly true in cases where the economy is smaller, and competitive pressure within the domestic market is limited, giving certain firms more sway over market conditions and supplier relationships.
Defining markets and analyzing competition is complex, as illustrated by companies like Microsoft or DeBeers. These companies may hold significant shares in certain domains but are not as dominant when considering the broader market, which includes numerous competing products and firms. Similarly, a sole gas station in a small town may or may not represent a monopoly depending on whether competition is considered to include stations that are five, 10, or 50 miles away.