Oligopoly is a form of market structure where less than two firms are dominating the market. The market is controlled by a small group of two or more firms. It admits that the price of a firm affects the profit of the other firm. The firms can agree to price collusion and create barriers to entry for new firms. If the firm do not agree and create barriers to entry for new firms then, they will tend to lower their prices and open the market for newer firms. For example, in Kampala City, the large mineral water firms: Wavah Water and Rwenzori dominate the market. Rwenzori Beverage Company was established in 1993, and has held a market leadership in Uganda and its neighboring countries. Rwenzori Beverage Company is one of the prominent producers of …show more content…
The assumptions of monopolistic competition are as follows:
• The industry is build of large number of firms
• Firms are free to enter or leave the industry
• All firms produce slightly differentiated products
• Price maker
Like perfect competition, there are no barriers to entry or exit. Though unlike perfect competition the products are not identical, competitors sell products that are differentiated from one another. More like Monopoly, in Monopolistic Competition the firms are price makers thus the producers decide the products’ prices. Oligopoly is a market structure where its challenge is between monopoly and monopolistic competition. The market is dominated by a few firms; firms either sell identical or differentiated products. There are significant barriers to entry, meaning that other firms won’t be able to enter the industry thus firms can make supernormal profit in the long run. The firms react to rival’s change in price and output; therefore they practice non-price competition, such as:
• Gaining customer reliability
• Price collusion
• Additional services and advertisings to appeal
Monopoly is not just a board game people play for fun, monopolies became powerful and affected the late 1800’s and early 1900’s. Monopolies are the exclusive possession or control of the supply or trade in a commodity or service. Basically, monopolies are firms that have a lot of market power. They greatly controlled industries and played a role in the government, such as helping president President Benjamin Harrison. Monopolies dominated their own industries and were huge for the industrial period in the United States.
At the beginning of the Progressive Era there were many issues involving the unregulated businesses. Most of the problems involved safety issues that severely injured many workers, but it also involved business created monopolies to maximize their profits which affected the consumers because there was not a competitive price. This is why the American Government should be able to put regulations and laws in place to restrict businesses from unfair treatment of their workers health and safety; also, to limit the possibility of monopolies occurring to protect the consumers of the products. Many businesses now follow these laws and regulations put in place by our government which makes the story of how America was built one of progress not regresion.
Monopolies would coordinate with other businesses to set prices and to set policies. One example is the railroad monopoly. Cornelius Vanderbilt controlled several railroad companies and soared into wealth. With a monopoly over the railroads, he was able to cut out the middle man by reducing the power of the individual managers. John D. Rockefeller also controlled a monopoly only his was in oil.
When firms have such power, they charge prices higher than they can
Some of the ways Monopolies because monopolies were through both horizontal and vertical integration, These two processes were the foundation of Industrial businesses like the Standard oil company led by Rockefeller and Carnegie steel, it allowed these power houses to control the amount of competition they had and how much it cost. These companies would have the reduced processing price because they set the price then sold it at a cheaper price, putting other businesses in shambles, An example of this is in (Doc H). This apparent genius of a process made it so people could only buy their product from them, it did allow for them to fix prices for items like food, fuel.(Doc A) this did allow for a sort of comfortable lifestyle that was defined as American consumerism. Through corporations like sears in the 1870s people were able to buy luxuries through this new affordable lifestyle. (Doc I).
During the Progressive Era there were multiple of changes occurring that people became overwhelmed. New resources in the oil market, industrialization, fights for equality. There were many factory jobs, however, no one to stand up for the workers. So of course people will turn to their government for help, the power house of the country. However, even the government was picky in what they helped with.
Competition keeps companies striving for the highest quality products for the lowest price because they want to attract customers. However, if people had no choice where to buy their car, it would not matter what a company sold. Additionally, if there was no competition, there would be no way to benchmark your products for quality or technological advancements. Still using the car company example, the car industry would be like it is in Cuba where everyone drives cars from the 70’s, because that is all they
The temporary character of competitiveness, which can be lowered anytime. 4. The massive spending on technological advances. 5. The brand image misconception in which low prices are usually associated with low quality product.
This also causes involving price-fixing and market-division arrangements. It usually involves the private parties and the government which would also be the Department of Justice or the Federal Trade Commission. This is a firm has done something anti-competitive in order to stay ahead in the game or stay ahead in the monopoly. Monopolies without any anti-competitive behavior aren’t usually illegal. An example of these cases was in 1911 and the Supreme Court ruled abuse on John Rocketfeller's Standard Oil Co. because they had abused its monopoly power to keep other companies from going against it and it also divided into thirty-four separate companies.
Market Structure - Oligopoly Oligopoly is a market structure whereby a few number of firms owns a lion’s share in the market. This market structure is similar to monopoly, except that instead of one firm, two or more firms have control in the market. In an oligopoly, there are no upper limits to the number of firms, but the number must be nadir enough that the operations of one firm remarkably influence and affects the others (Investopedia, 2003). The Walt Disney Company is categorized under an oligopoly market structure.
The Gilded Age was a period of time when economic change was happening. In this period many workers were affected since this is when monopolies were a thing and when many of the robber barons were paying extremely low wages to the workers even though they were extremely rich since they basically created monopolies which controlled most of the industry. Many robber barons paid such low wages and increased their prices, when most workers demanded much higher wages they said their business wasn't doing good and they couldn't pay more which in reality most were filthy rich. This would also happen In the late 1800s when robber barons were a group of rich guys who created monopolies. Their creation of monopolies would affect many workers since they got paid very low wages in addition to other working rights not being respected.
In the ever changing business environment, there are both internal and external influences which affect the operations and management of a business. It is up to the business on how they deal with the effects of each influence and this will ultimately determine the success of the company. The internal influences are factors which the business has direct control over, one of these being the location. The location refers to the geographical situation of the business and has a high level of impact over how the business will function. It can become a make or break factor, depending on how well the business utilises and addresses the visibility, cost and their proximity to suppliers, customers and to support services.
McDonald’s is the world’s largest restaurant chain, serving a total of 69 million people a day at 34,000 restaurants worldwide. While facing a tough competition, McDonald’s has chosen to launch a new product to sustain competitive advantage as well as to attract customers in the ’18 to 32 years old’ range, which they have struggled with up to today. They launched the McWrap on April 1, invented by the 47 years old vice president and executive chef Dan Coudreaut. The McWrap is meant to be a healthier choice than the products McDonald’s are in general known for, as well as to compete with competitors such as Five Guys, Subway and Chipotle. However, people assimilate McDonald’s to junk food unlike the ”Subway buster”.
The oligopoly market is set up in a way so that competitors can survive because each is unique and there are so few competitors that they are virtually indispensable even if some ethics atrocity
They are differentiated by their products such as soft drinks and soap powder. There also exist little firms who produce similar products such as petrol. However, in oligopoly, there are barriers to enter the market. Similar to monopoly, the barriers are no different, and it differs from one industry to the other. This is why the firms in oligopoly are interdependent with each other, because the firms all have large market shares and each of their actions would affect the rest, so any decision-making will be based on their competitors’ reactions.