Marketing Structure in Australia Samples for Students-Myassingment

Question: Discuss about the Market Structures like Monopoly, Oligopoly and Monopolistic Competition in Australia. Answer: Introduction The monopolies and oligopolies play an interplay between competition and market structure such that they could dominate the market. The oligopoly is one form of monopoly where two high concentrated firms have more than 90% sales in the market. As opined by Dagge (2015), monopolies work in Australia whether it is oligopoly in retail sector or it is monopoly in telecommunications sector. The economies of scale in Australia is largely achieved in four banks and two main airlines that form a regulatory environment. Recently, the market structure in Australia has been facing turmoil in functioning of the monopolies or oligopolies due to the increasing globalization such that organizations like Wal-Mart of UK has been a strong competitors for the duopoly retailers Coles and Woolworths. Moreover, the population of Australia tends to favor the industries concentrated locally but technology revolution has been creating an unparalleled disruption (Phillips, 2016). This has been formerly due to globalizations as stated earlier but is also because of large geography that has been spread among small population. As a result, it has given incumbents chance to grow bigger and give a tough competition to the existing monopolies, oligopolies as well as the competitive market in Australia. Discussion of Article with Theory The article highlights the endangered monopolies and oligopolies in different sector that has been occurred due to one of the drawbacks of the monopolies characteristics. The drawback highlights that an incumbent can take over the normal functioning of the monopolies if its makes super normal profits in the short run. This theory can lead to price wars amongst the organization leading to rise in competition. The theory of price wars can be further explained with the help of kinked demand curve that believes that oligopolistic firms does not deal with price wars but they can as it is seen that competitors are contemplating strategies (Mankiw Taylor, 2014). The diagram for the same can be given below. Figure: Kinked Demand curve Source: (Fudenberg Tirole, 2013) One such example can be that of Telstra who has been disrupted by information sharing and has been hampering its fixed line business. Moreover, Apple Pay, Paypal and Android Pay has been aiming towards Australian four banks. The competitors are targeting technology as a loophole and to bring down the monopolies. There is one way in which the oligopolies and monopolies can save their back from getting noticed is through limit pricing because incumbents are making supernormal profits as this will encourage the new competition to enter the market within the industry (Acemoglu Cao, 2015). The new entrants can be stopped if a price is set above the supernormal profits for temporary purpose. The same can be further depicted through a diagram below. Figure: Limit Pricing Source: (Bloch Bhattacharya, 2014) However, as per Smith (2016), the entrants are practicing globalization techniques that is failing all measures of the oligopolistic/ monopolistic firms. The effective response of advertisements in telecommunication sector, use of club cards and imitating products in retail sector and other features of non-price competition can extend their campaign costs and lower their supernormal profits making the new competitors curve more inelastic in nature. Conversely, the role of government is also not clear because though it aims for development but there is need to drive efficiency in the industry of existing monopolies. However, the government can foster competition but there is need to enforce a system of competitive capitalism that will help in protecting consumers and suppliers from the market power as well as from the new rivals in the industry of retail sector (blog.adonline.id.au.,2014). This factor mainly applies to the duopoly market of supermarkets that is Woolworths and Coles. The oligopoly and monopoly market of Australian banking system has increased its level of competition and market contestability since last two decades (Gluyas, 2016). On the other hand, the growing competition from new rivals is creating more options to benefit customers through innovation and giving low prices for financial services. This in return is boosting the amount of capital held against major banks in mortgage portfolios and the case has been examined again based on the Basel framework because of the dearth of monopolies in Australia. As a result, despite all factors and measures the monopolies in Australia is under threat and notice of losing its monopoly power such that the contented investor who have gained from the new competition will lead to erosion of capital from the existing monopolies/ oligopolies. This foolish takeaway described in the article will affect the Sydney Airport and Melbourne's CityLink demand and supply, followed Cabcharges delusion of stronghold, the banks like Commonwealth Bank of Australia and others (Phillips, 2016). The major effect will be on the leading supermarkets who hold 70-80% of market share because of the inadequacy of Australian Competition Law (ACC) and lastly energy retailers and petrol chains (blog.adonline.id.au.,2014). Conclusion The article can be concluded by interpreting that the market structure in Australia is facing issues in maintaining its position as well as market power in Australia. Moreover, the increasing competition from other organizations have been creating a pressure on the existing and deep rooted monopolies and oligopolies in Australia. Conversely, the industries like supermarkets, telecom, banking sector, petrol chains, and airports dealing in monopolies and oligopolies have been affected due to growing technology and globalizations as the rivals have been taking advantage of providing cheaper ways to the customers. The main factor lies in small population that has been scattered widely under the geographical locations which has further heightened the pace of new rivals in penetrating in the market. The ways analyzed in this essay has been usefully used by the new rivals to overcome the issue of barriers of entry whether in cost, high prices or distribution channels across the country. References Acemoglu, D., Cao, D. (2015). Innovation by entrants and incumbents.Journal of Economics Theory,157, 255-294. Australian Oligopolies | The Grapevine. (2014).Blog.adonline.id.au. Retrieved 23 April 2017, from https://blog.adonline.id.au/oligopolies/ Bloch, H., Bhattacharya, M. (2014). Price Theory and Oligopoly.2014, 1914-2010. Dagge, J. (2015).Local monopolies have better results.Heraldsun.com.au. Retrieved 23 April 2017, from https://www.heraldsun.com.au/business/study-finds-australian-monopolies-have-better-results/news-story/83436800178abede28b01f82135a5da5 Fudenberg, D., Tirole, J. (2013).Dynamic models of oligopoly. Taylor Francis. Gluyas, R. (2016).Industry is an oligopoly.Theaustralian.com.au. Retrieved 23 April 2017, from https://www.theaustralian.com.au/business/financial-services/asic-chairman-says-australian-banking-industry-is-an-oligopoly/news-story/e6e279150832b005cb8153553d28e6b3 Mankiw, N., Taylor, M. (2014).Microeconomics(1st ed.). Andover: Cengage Learning EMEA. Phillips, S. (2016).Motley Fool: Monopolies beware, tech is out to get you.The Sydney Morning Herald. Retrieved 23 April 2017, from https://www.smh.com.au/money/investing/motley-fool-monopolies-beware-tech-is-out-to-get-you-20161205-gt4q30.html Smith, M. (2015). The death of the oligopoly: Australia's incumbents face new rivals. Financial Review. Retrieved 22 April 2017, from https://www.afr.com/brand/chanticleer/the-death-of-the-oligopoly-australias-incumbents-face-new-rivals-20150421-1mq11b