Oligopolistic Industries Essay
The oligopoly market structure is of the form that is dominated by a small number of sellers yet an enormous purchasing population. Due to an existence of this nature, each oligopolist is aware of the actions and strategies employed by his competitors. This is particularly imperative for every participating oligopolist in a given market setting because the decisions of one firm influence and are likewise influenced by those of others. As such, the day- today decisions of oligopolists have to take into consideration the most likely responses of the market should they be put in place. Probe says ‘too few supermarkets’ (BBC News website, 2007).
Due to the nature of the market, this offers a large population demand for a disproportionately small number of sellers, a lot often oligopolistic competition gives rise to firms employing restrictive trade practices such as collusions and market sharing which cause price escalation and restrict production of the products offered. This gives the oligopolistic market a close resemblance to the monopolistic one. Firms that exist as oligopolies are found across various sectors of countries’ and the global economy. A good example of an oligopoly is Fairfax media which together with News Corporation dominates Australia’s media outlets.
Probe says ‘too few supermarkets’ (BBC News website, 2007) . Fairfax Media Limited, founded by the Fairfax family in 1990, is possibly Australia’s largest diversified media company with a product variety entailing newspapers, magazines, radios and digital. Its market covers both Australia and New Zealand. Fairfax is a market leader given the manner in which its products have dominated its intended market’s consumers’ tastes and preferences. It publishes The Sydney Morning Herald and The Age, the mostly widely circulated newspapers in Sydney and Melbourne respectively. Due to Rural Press acquisition,
Fairfax will take of many newspapers including The Canberra Times and The Land. (Rodman, G. 2008). The company owns the lucrative online subsidiary, Fairfax Digital formerly known as the F2 Network. In November 2007, Fairfax Media acquired the former radio assets of Southern Cross Broadcasting and Magic 1278 Melbourne among many others. The company registers rather normal profits given its size and volume of activity. For the year ending July 2007, it recorded a post-tax net profit of $263. 5 million up 16% from the preceding year. As of May 2008, Fairfax had a market capitalization of over $5. 0 billion. The company has continued to
increase its market share and consequently profits through various ways. In 2007 it broadened its scope of market coverage by among many others: (Richard,M. C. 2005) • Merging with Rural Press Limited, acquisition of Border Mail and the Riverina Media Group. • New online activities . • Successful integration of the Rural Press and Fairfax Media Publishing businesses, Development of their online assets and full delivery of cost synergies. Monopolistic market structures are identified by very distinct characteristics: There exist many Producers and consumers in the given market; consumers perceive that there are non-price
differences among competitors’ products; there are very few barriers to the entry and exit to the market and producers have a degree of control over price. Firms making profit in the short-run eventually break in the long-run because whereas demand decreases, average total cost increases. This implies that in the long-run, a monopolistically competitive firm will make zero economic profit. (Vogelsang,I. 2001) Colgate toothpaste is a good case in point of a product in the monopolistic market in the USA and across the world. The toothpaste market is monopolistic in nature because there exist
many producers offering diverse brands of it. Likewise there is a large market that seeks to utilize the products. Many consumers believe that the producers have employed the use of non- price differences such as branding, packaging and flavor so as to entice the largest share of the much competed for market. There are very minimal barriers to the entry and exit of new firms into the market thus explaining the abundance of various brands of a product that seeks to serve the same purpose. (Rodman, G. 2008). Colgate increases its market share and profits primarily through massive investment in advertisements.
The company has consistently focused on market leadership on its global core categories. Every global division contributes a great deal to the ultimate success led by North America, Asia and Africa. It continues to drive top-line growth by developing innovative new products that are advertised to heighten their potential to appeal to the intended market. Colgate attains a competitive advantage over its competitors due to its broad geographic base which spans over two hundred countries and territories. Innovation is where Colgate truly shines. In the year 2000 in the United States of America, 61% of its Sales came from new products.
Colgate prospects to tap the untapped markets through increased marketing and sales with particular emphasis on the developing regions. Roughly 45% of its sales come from developing markets, it intends to increase to a much greater percentage. (Richard,M. C. 2005) .
REFERRENCES Campbell, R. McConnel & Stanley L. Brue. (2005). Economics: Principles, Problems, and Policies. London:Published by McGraw-Hill Professional Ingo, Vogelsang. (2001). Public Enterprise in Monopolistic and Oligopolistic Industries. Newyork:Published by Routledge Rodman, George. (2008). Mass Media in a Changing World. New York: McGraw Hill, .