Michigan State University Discussion in Economic (Nature of Industry)

you have to write for this discussion 300 words then response for 3 student. I will send the students post later. I only now have for one student.

Discussion on the Nature of Industry

In this discussion, please share your views on the nature of industry in which your current employer belongs. While describing the industry you may like to use the tools we are learning in Modules 5-7.

1st student post

My employer, ADP, primarily competes in the Payroll Processing Industry. When ADP was founded in 1949, they were the only firm of its kind, automating the calculations for employee payroll and taxes. As such, the early stages of ADP’s existence could be characterized as a monopolistic market. This allowed ADP to obtain a significant market share and charge premium prices to businesses that desired the efficiency improvements for their payroll departments.

Over time, because industry profits were so high, many new competitors have entered the market by offering their own automated payroll technology solutions. With the entry of many competitors, I would now characterize the market as monopolistic competition because there are many service providers and many customers. Each provider attempts to differentiate their payroll technology by improving the user interface / user experience, providing higher levels of service and support, adding new features that give firms more flexibility in how they pay employees (real-time pay, accounting for multiple pay cycles by employee classifications, managing performance bonuses and stock options, better integration with other business software systems, etc.). The product differentiation creates loyal customers that will stick with a provider in spite of price increases – the payroll system is also so essential to running a business that customers are often hesitant to make a switch because it can come with a lot of risk. Anyone in the class who works in payroll or HR can probably attest to how painful and how much effort it is to switch payroll providers.

ADP has enjoyed a significant advantage over competitors for many yearrs because they have the largest client base in the industry and are able to position themselves as the firm with the most expertise / experience (having invented the industry). The disadvantage for ADP is that the available technology has changed dramatically over the course of 60 years, so ADP must continuously enhance their technology platform and “sunset” legacy solutions. These migrations are painful for clients and often cause them to consider other providers. ADP’s competitors will target these customers claiming they have better technology for a lower price. This market behavior has forced ADP to reevaluate it’s premium price position in the market for new customers.