BUSINESS ECONOMICS−OLIGOPOLY MARKETS (Coursework Sample)

BUSINESS ECONOMICS−OLIGOPOLY MARKETS Introduction An oligopoly market structure is one which is dominated by few players. They have a sizable market share and compete favorably against each other. There are many sectors in the business world which operate under this market structure: banking industry, airline services, mobile phone manufacturers, food industry and smart phone makers. The case study for this is smart phone makers around the world which operate under the market structure of oligopoly. There are various companies which make smart phones and have a sizable market share to back them up. This include; Apple, Nokia, HTC, RIM, Huawei and Alcatel. For a successful business environment under the oligopoly market structure there are aspects. These include; Innovation The companies are highly innovative. The market is driven by dynamic needs of the consumers who are constantly on the lookout for products that suit their needs. Every day they come up with phones with additional applications or that can run many applications and software's that the consumers want and love. Oligopoly market structure in the Smartphone industry is dependent on how much you make your product stand out in terms of service or lose out to your competitors. Price strategies To wade off stiff competition the companies operating under this market structure have to adopt pricing strategies in order to make profits and maintain the market it has captured. These include; * Price stability In an oligopoly market structure, players do not rush to increase prices if the competitors do so. There is the risk of operating under losses or running into losses if they do so. They stick to their prices as much as possible in order to survive under the competition. * Non price strategies Price wars can be damaging to the company. The risk of running into losses by merely engaging you rivals in price wars is highly likely to occur. Instead the company should adopt other means that in the end doesn't affect the sales but improve. This include offering after sales services, extensive advertisement on the product (Samsung has done his quite well), offering incentives to potential customers and involving their products in competitions where people who win are given the products. Interdependence Smartphone makers are interdependent. The creation of operating systems such as Android which is loved by many makes it virtually impossible for firms to operate without it. As such it must operate with each other and checking out innovations and inventions from its rivals in order to stay afloat in the market (McConnel, Brue and Flynn, 2009) Creation of barriers to deter entry Firms in the smart phone making industry can institute barriers it deter new entrants into the business. This ensures their dominance in the market. Barriers can be created by buying out companies in order to operate with minimal competition, creating and acquiring patents, coming up with loyalty rewards in order to maintain its market share, pushing prices low enough to force the competitors to do the same hence running into losses. Consumer satisfaction The firms that adequately satisfy the needs of the consumers have an upper hand in an oligopoly market structure. As such consumer preference which is diverse and dynamic makes smart phones makers think of the ways of satisfying all this needs. DYNAMIC OLIGOPOLY MARKET OF SMARTPHONES The smart phones manufacturing is prone to changes. Every day smart phones companies try to come up with a phone with features that a rival cannot match in the market. The major players in the smart phone business are Samsung and Apple which control 52 % market share. They compete against each other head to head and it's impossible for them to stay static. It must adapt changes and improve their products. The desire to maintain a constant customer base necessitates dynamism in the smart phone sector. The user's choices and preference keeps changing from time to time and to cope up with that companies have to be on the lookout. Price wars give evidence on dynamism. The market share is up for grabs with the company which offers the best at affordable prices. (Bastic 2013) tells of price wars in India between Samsung and Apple Inc shows the extent of dynamism. STATIC OLIGOPOLY The completion in the sector is static in the market captured. Consumers now have will be maintained because companies have found their niche market. Consumers have a preference to a brand and are loyal to it. Samsung has its own market, just as Apple Inc. the improvement on the smart phone making will only target the captured market. The competition is static in pricing. While price wars come into play, it's not often and it's only confined to a specific geographic location, prices remain static for a long time. It's the nature of sophistication of a smart phone that determines its price. BOTH STATIC AND DYNAMIC CONVERGE The criteria of the both dynamism and static completion in oligopoly market structure of smart phone making converge. Its static nature comes into play as it tries to maintain the market share it has captured. For the market to remain constant the m...