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Different market models
There are different market models in various business environments. These include oligopoly and monopoly (Keith, 2010, p. 195). In a monopoly market model, the market is characterized by a single business that dominates the market (Koenigsberg, 1980, p. 151). In such a call, the entry of other competitors in the market is demanding. On the other hand, an oligopoly is a market with a few large corporations dominating the market. In most cases, these corporations have more or less similar standards of operations, which again makes any entry hard.
Therefore, because of competition, prices may be low as opposed to a monopoly market economy. The company to be discussed is the Safaricom company in Kenya, which provides communication, as well as internet services to its clients. It is a publicly-traded company in the Nairobi securities exchange. Initially, a monopoly company, expansion of markets, and the emergence of other companies offering similar services to their clients changed it to an oligopoly company. Other companies have entered the markets, thus affecting the pricing strategy of the company. These other companies include Bharti Airtel, which is the major competitor, besides Orange and Essar. All provide similar services to the Safaricom Company.
Hypothesis about the basic short-run behaviors
As a hypothesis about the basic short-run and long-run behaviors of the Safaricom Company in a market economy, there is a predictable significant reduction in the sales output and profit of the company. When the other three mobile service companies joined the market, they reduced the number of customers of Safaricom. This claim has a negative impact on the company because the company’s sales went down. It had to adjust its prices to conform to that of other companies, which came with a pricing strategy to woo many customers. Therefore, in the short run, the behavior of the oligopoly model is that it is tough to enter such a market, especially if the economic scale does not measure up to the companies in the market. Therefore, this may deter new entrance to the market. This was not a problem for rival companies like Bharti Airtel, which was an international company that had enough resources to enter the market. As such, in the end (long run), the company, as well as the new entrants, will have to come up with strategies that would enable them to remain competitive in the market (Koenigsberg, 1980, p. 151). This strategy includes the reduction of the company’s fees for accessing its services.
Regardless of the stiff competition
However, regardless of the stiff competition that this company has continued to receive, it has improvised various strategies that have helped it continue to be competitive. Even though its shares reduced in the securities exchange, the company has slowly recovered from this downfall. Various measures have contributed to this. One of the factors is the provision of better services to its customers. The company has improved its services by revamping its customer care (Safaricom, 2012, Para. 1). Customers’ complaints are attended to immediately with their views and opinions being listened to keenly. This has made it attract many followers. Further, it has improved in its innovation. It came up with a mobile money transfer service named M-pesa that allows customers to send and receive money through their mobile phones. This service has enabled it to record many subscribers besides playing a crucial role in its survival based on the need to increase its revenue. The second thing that the company has improvised to remain competitive in the market is the regulation of its prices (Safaricom, 2012, Para. 2).
Even though the company charges slightly higher than its competitors do, it has continued to receive more customers. Its services are faster compared to those of other companies. It has already established a positive brand image to the public, which has contributed to its continued progress. Thirdly, the company is actively involved in social corporate responsibility initiatives that have seen it become famous for its philanthropy (Safaricom, 2012, Para.3). The company has various programs that are geared at promoting peace and economic balance in society. Some of the initiatives that have contributed to its social responsibility programs are sponsoring students from low backgrounds, providing assistance to poverty-stricken populations, and supporting campaigns that promote cohesion and road safety in the country. The company is also compliant in payment of taxes. Over the years, the company has always paid its taxes without problems. Therefore, this openness has made the company build a brand that has appealed to many mobile subscribers to continue trusting it and using its products.
The two closest competitors of this company are Bharti Airtel, which is a multinational company, and Essar, which is a privately owned company. These companies are also fighting for domination of the market in the country. They have come up with different marketing strategies that are aimed at ensuring that they compete favorably in a bid to dominate over the Safaricom Company. One of the visible methods the two competitors have used aggressively is price strategy. They have reduced/adjusted their prices repeatedly in the quest for attracting more customers to their company (Bharti Airtel, 2012). They have reduced their calling rates to attract their customers. For instance, the calling quality of the Safaricom Service provider is four Kenya shillings per minute on this network, while the two competitors charge one Kenya shilling per minute for calling. They even charge no fees for sending a short message on their systems. This information on their pricing is essential for the Safaricom Company because it will help it set prices that can be competitive to avoid its customers from moving away. Therefore, based on such pricing information, my company is able to come up with right strategies that can ensure that it remains competitive to continue in a bid to meet its objectives and aims.
Based on how the aforementioned competitors charge their prices, I would recommend the Safaricom Company to look at various factors before making a decision to reduce its costs. The company should study the customers’ interests and needs to look at the profitability before lowering their prices to conform to those of its rivals. Therefore, the company needs to set a price that will enable it to compete favorably in the market to remain competitive. Its services are excellent compared to those of other companies. It has already established a brand image besides offering M-pesa services that all customers need (Safaricom, 2012, Para. 1). Therefore, in factoring in these issues, the company will remain competitive even if it offers slightly higher prices. This pricing policy will maximize the profits for the business in the sense that many customers will continue to use its services. Therefore, the company will reap from the increased rate of subscriptions compared to other competitors. The strengths of the company will play vital roles in the profitability of the company.
Bharti Airtel. (, 2012). About Us. Web.
Keith, C. (2010). Oligopoly, distribution, and the rate of profit. European Economic Review, 15(2), 195-224.
Koenigsberg, E. (1980). Uncertainty, Capacity, and Market Share in Oligopoly: A Stochastic Theory of Product Quality. Journal of Business, 53(2), 151-164.
Safaricom. (, 2012). About us. Web.