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Monopoly is an economics term, used to mean an organisations operation in a certain sector as a sole producer; the singlehood in production makes the firm have control over a particular product or service. Sometimes the product produced may be for the public or may be a business with an advantage that gives it superiority.
One way that monopolies diversify their operation is through mergers; after a merger, there is an effect to the firm and the public (Sweezy, 2004). This paper discusses the effects of monopolies mergers; it will argue from the firms and consumers perspective.
Importance of competition among firms
Competition among firms keeps the firm on its toes as it tries to enter and remain competitive in the market. To win persuade a consumer buy a company’s products and probably win their loyalty, a company’s products need to stand out in the market. to stand out, then a company need to develop efficient processes and develop its products with time. Competition thus assists a company to:
- Devise, develop, and implement market responsive strategies
- To utilize resources effectively
- To gauge its level of competitiveness and probably develop strategies to increase competitiveness
- It creates the urge and drive to innovate and invent processes and products
- It improves customers care service that may in turn lead to customer loyalty.
Competitive environment and the society
When firms are competitive, the society stands to benefit however; some level of competitiveness injure consumers. The major benefits that societies stand to benefit are:
- Increased choice of products in the market
- Competitive prices
- Efficient utilization of resources
- High quality products as firms come-up with different combinations to win their favour
At very high competition, customers suffer from:
- Chances of low quality products as firms compete for the market, they may tamper with quality of the products to have cheap inputs
High degree of market concentration and the society
When the market has a high degree of concentration of firms, their competition is high; they will devise new method of utilizing the available resources. Efficiency in the industry will lead to reduced commodity prices and better commodities to the consumers. According to allocative efficiency theory, for a perfect competition to occur, there must be optimal distribution of goods and services, the consumers have a wide variety of choice to level that price equals the Marginal Cost (MC) of production, when there is a high degree of market concentration, then the society stands to benefit. It is a way to perfect market situation however; society may suffer if firms are not ethical thus opt to have low quality materials in their products so as they can sell at less price.
Can Oligopoly market structure and both consumers and businesses (forging common standards in industries that experience rapid technological change)
Scientific invention and innovation has resulted to an increase in technology; when firms embrace appropriate technologies, they stand to benefit. Consumers on the other hand benefits from technologies implemented by firms. When oligopoly markets forge common standards, then they benefit from a similar platform of operation thus enhance favourable competition among them. They will have a reference point to gauge their services or products and respond appropriately if they fall below the expected level.
Consumers stand to benefit from standardized oligopoly markets; they will be given high quality services and goods. Standardisation will also discourage chance of un-ethical players in a particular industry (Ruzo, Barreiro & Losada, 2006).
Competition is beneficial to firms and consumers; it leads to high levels of efficiency and consumer severity. In free markets, competition results to maximum utilization of available resources. The negative side of competition is that it is likely to encourage unethical behaviour as firms compete for consumers.
Ruzo, E., Barreiro, J. M., & Losada, F. (2006). Competitive market analysis from a demand approach. International Journal of Market Research, 48(2), 193-236.
Sweezy, P. M. (2004). Monopoly Capitalism. Monthly Review: An Independent Socialist Magazine, 56(5),78.