THEORIES IN MARKET SEGMENTATION Homework Help

THEORIES IN MARKET SEGMENTATION

 

There are several theories concerning this subject, but all of them are interrelated.

 

They all are concerned with the field of in vestment either by short term or long term

 

investors. We may want to start with looking at the theory of interest rates otherwise

 

known as segmented markets theory. This theory says that there exists independence in

 

the way short-term and long-term markets act and that the maturity preferences of

 

investors are fixed[1]. There is a distinction in the markets of short-term and long-term

 

rates, with each having its unique buyers and sellers where the two are not

 

interchangeable for one another.

The theory of liquidity preference says that investors are a risk-fearing lot and

 

will insist on premium for securities which take long to mature. The premium will

 

increase at a decreasing rate owing to downward pressure from the interest-rates decrease

 

in volatility while at the same time maturity rate term increases.

 

It is as a result of the wish by investors to invest their money in liquid assets like

 

in checking accounts as opposed to nonliquid ones such as real estate, tocks or even

 

bonds. This is necessitated by the investors’ desire to keep their money ready for

 

transaction as they may need or just to be sure that the money will not be held in assets

 

which may not translate to cash in the short-term. Another reason for doing so is for

 

purposes of speculation in that interest-rates will shoot up in the due cause of time.

 

The labor market segmentation theory, which is also known as neo-classical economic

 

theory, is a theory whereby buyers compete openly with one another and its functions are

 

similar to those of other markets. The tastes and likes of workers for recreation instead of

 

work and their differences in human capital is highlighted here. It recognizes workers in

 

the category of non-competing groups[2]. Their academic and professional qualification

 

differ from one group to another and hence the true assertion that the professional

 

qualification of an engineer and that of a nurse differ significantly. Here we can see quite

 

clearly that this theory is directly linked to all spheres of the market trends and it actually

 

spreads across them in every sector because as we have earlier seen, market segmentation

 

divides the market according to the various classes of people having the same

 

characteristics so that it functions as one independent and complete system.

 

The fact that labour market segmentation theory does not focus on the individual

 

but rather groups as an entity while the theory of liquidity preference focuses on the

 

individual and his relation and interest rates in the market segmentation is a pointer to

 

how markets, economic and labour, function is an intricate web with various people with

 

varying interests but all managing to function together in a mutual relationship[3].

 

Individuals interact with the structures of institutions no matter what their form of

 

employment is and whichever their gender although there are primary and secondary

 

segments which are of great consideration in the entire market segmentation set-up.

 

These are basically the key points in the very crucial field of market segmentation,

 

together with its theories that keep it going and which whose study makes us get an

 

insight into how they interrelate, how interest-rates dictate the investors’ plans while

 

venturing into the tricky affair that that the investment and job market is.

 

REFERENCES

 

Hillmet, (2002). Labour Market Integration and Institutions; An Anglo-german

 

Comparison; Work Employment Society.

 

Kuznets, (1955). Economic Growth and Income Inequality; American Economic Review.

 

Morrison, (1990). Segmentation Theory Applied to Local, Regional and Spatial Labor

 

Markets; Progress in Human Geography.