Final answer:
Market development refers to a company's expansion into new areas to grow its market share, which can involve adding services like a surgical rehab unit next to an urgent care chain. Competing firms on the same street will adopt strategies to attract maximum customers, which is also influenced by urban planning strategies like New Urbanism. Small 'Mom and Pop' firms may continue to operate without economic profits due to non-financial motivations.
Step-by-step explanation:
Market Development in Business
An example of market development is when a company expands its operations into new areas with the goal of increasing its market share. This can be seen when urgent care chains open a surgical rehab unit to complement their existing services and attract a new customer base. In a situation where two competing firms are located on Main Street, each firm has the incentive to capture its competitor's market share. When one firm, like Firm A, moves next to Firm B, it becomes an intervening opportunity, intercepting customers that would have otherwise gone to Firm B. If Firm B counters by moving closer to Firm A, this can result in a state of equilibrium where both firms have nearly equal market shares.
New Urbanism also plays a role in market development. This approach to urban planning encourages mixed-use development, with a blend of residential, business, and leisure spaces. Examples like the North Hollywood Arts District illustrate how access to efficient mass transit can foster the growth of businesses and attract customers.
In a monopolistic competition scenario, successful businesses may prompt new competitors to enter the market, offering similar or enhanced products and services. This applies to various industries, including gas stations, which may introduce additional attractions like coffee or car washes, or restaurants with unique recipes. Companies need to distinguish themselves through price, service, and product quality to remain competitive.
Small businesses, such as 'Mom and Pop' firms, sometimes continue to operate without earning economic profits. Factors like personal satisfaction, community engagement, and lifestyle choices may contribute to their persistence in the market despite limited financial incentives.