The term market architecture is defined as a map which includes the various types of submarkets and how each of these individual submarkets is linked with each other.
What is market architecture?
The market architecture is a representation of the various types of markets divided by the types of the sectors that they are working in and also how well they are connected to ear other. With the help of the market architecture, it becomes easy to determine how the different markets are interconnected with each other and how much are they dependent on one another.
This way the functioning of one market may get affected due to the functioning of some different market on which it is dependent. Now there can be various things included in the submarket, and when all of these submarkets come together, they form a power market.
Represents the entire structure of this power market/ now this power market may include the various types of the wholesale market, other types of the wholesale forward market as well as those types of markets that provide ancillary services.
In somewhere in the middle all of these, there is a market which is for the transmission capacity is embedded. This will ensure that the proper flow of information, as well as the other goods and services, take place effectively. This market for transmission can also be separate markets if considered altogether, and then it can be further integrated with the power markets which usually take place in the real time scenario.
This same case happens with the ancillary market as well. Now since the main power market which comprises of the various submarket that is represented by the market architecture, can be categorized in multiple types of trading model which are often used alternatively used.
These trading models are divided on the basis of the extent to which the various types of operational arrangements as well as the commercial arrangements can be integrated with the spot market. Now, these commercial arrangements can, in turn, be for the imbalances, scheduling, congestions and also the ancillary services.
Now there are majorly two different which are the most common out of the any. The first model is the ‘integrated’ or the ‘centralized’ model and the second model if the ‘decentralized’ model.
On the basis of the above two types of models that are mentioned, it becomes easy to design a market architecture. In this way, the market architecture simplifies the whole system of the power market which in itself in an integration of the various submarkets each specified for a particular purpose.
This market structure depicts how the entire energy of the market is divided into the submarkets and how all of the products are organized. This way it becomes easier to operate in an entire giant market as the things are divided into simpler things.
What is the importance of market architecture?
Market architecture holds quite an importance in the field of marketing. An effective market architecture leads to an increase in the visibility of the marketplace. When the market architecture is done in the right ways, it leads to effective marketing.
Effective marketing can be defined as that process in which the prospects are made aware of the value and the importance of the design which is provided by a particular firm and then persuade those prospects into taking the next step of this process. Along with that the market structure clearly defines the layout of the entire market in the most clarified ways.
It tells about how every individual submarket is divided depending upon the sector that it is working. It also tells about how these submarkets are interconnected with each other. It specifies the functions of the buyers and the sellers.
Even with the help of market architecture, the working of the seller and the buyers are also represented as they are the backbone of any market. Any market can only function when it has a specified set of the sellers and the buyers. Thus, in general, the primary purpose of the market structure is to represent the market in the most simple way focusing on various elements.
These include the working of the individual market, their interdependency on each other, the manner in which the products are organized, the flow of the goods and services and also the functioning of the buyers and the sellers.
The modern market architecture
Now in the market architecture, things were done manually, but with the advancement in technology, the scenarios of the market architecture have started to change at a rapid rate. In the other type of market architecture, technology is being taken in use.
The modern market architecture is basically nothing but merely a combination of the software-based tools and human brains. Now in this type of market architecture, since the software-based open control system is used, it opens to us an array of the limitless possibilities in which the market place can be designed.
These software tools proved a different number of arrangements that can be possible while designing market architecture. Thus the modern architecture is much better than the traditional ones as in that there are only a limited number of possibilities while design the market place; thus chances of errors are increased. Now modern architecture allows the various builders that belong to the electronic market place for following modern architecture.
Also since the building tools that are being used for the modern architecture are usually the software and the material that is used for the whole designing process are quite flexible, it helps in creating such a market place in which the design can be subordinated.
This depends upon the various mechanism on which the market work and also to some extent it is dependent on the possible outcomes that can be generated out of it. This is almost a perfect market design can be generated that will not be a biased one.
Now the exact mechanism that will be used for exchange is usually in the coding complexity of the network and other application software that is being used; it may become much harder to determine the actual characteristics of such type of market places. Now, this was easier when it was the traditional market architecture.
In this world of technology, networking is the key especially when it comes to market control. Now the modern market architecture also takes help of the internet exchanges to create different kinds of market places depending upon the ‘n’ number of possibilities that are present out there.
All of these possibilities are determined on the fact that the different kinds of market place will be having a different type of competitive outcomes.
A comparison between the traditional market architecture and the modern market architecture
Now there are quite a lot of similarities between the traditional market architecture and the modern market architecture. But at the same time, there are many dissimilarities as well.
Now both the traditional market architecture and the modern architecture provide with a design for the marketplace which ensures the effective functioning of the market. Both the two types of market architecture do the job of determining an effective way of communication between the various components of the primary market which are the submarket.
But the main difference between the two types of market design is that in the case of the traditional market architecture, the possibilities are limited while in the case of the modern market architecture the reverse is true.
In this, there are many possibilities which are built up and analyzed by the software. In the case of the traditional, the conventional methods are used and the technology being used is not so advanced.
On the other hand, in the case of the modern, many different kinds of software tools are used which make the task more easy and simplified. Also, modern market architecture tends to give a far better result than the traditional ones.
Thus, in general, it can be said that the modern market architecture is much better than the traditional ones since it is more effective in analyzing possibilities and then generating the outcomes.
What is the need of the market architecture?
Now the market architecture is quite needed when it comes to understanding the effective working of the market place. This is because, with the help of the market architecture, one can represent the linkages between the various submarkets which then together add up to for the primary market.
By understanding these linkages, it becomes easier t understand how all of these markets perform individually and also how they are interdependent. Also, it reflects the functions of both the buyer and the seller, and this is important to determine because in this ways the outcomes of a particular market can be predicted.
It has become easier to understand the working of the market and how effectively it impacts the other factors like the flow of the information and the organization of the products and the behavior of the buyers and the sellers.
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