StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Discuss the barriers faced by firms wishing to enter an oligopolistic market structure - Essay Example

Comments (0) Cite this document
Summary
Though there are other potential barriers to market entry in the oligopoly, pricing, intellectual property and patent protections, and the correlation between product/service differentiation and consumer demand pose the most significant risks to entry…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.4% of users find it useful
Discuss the barriers faced by firms wishing to enter an oligopolistic market structure
Read TextPreview

Extract of sample "Discuss the barriers faced by firms wishing to enter an oligopolistic market structure"

Download file to see previous pages Therefore, sellers in the oligopoly are constantly aware of competitor actions and respond accordingly in order to outperform the small volume of competition existing in the market structure. Oligopolists regularly take into consideration the strategic responses of competition, attempting to model the most likely retaliation of important market participants in order to maintain competitive edge. Even though competition is intense between the market players, there is also considerable influence in the oligopoly to prevent new competitors from entering the market. The most common barriers for new market entry include pricing, product differentiation and consumer switching costs, as well as intellectual property and patent laws. An explanation of barriers Firms operating in an oligopolistic market structure have often achieved economies of scale, which are the specific cost advantages achieved by a firm due to its size and scope of operations in which the cost of outputs continues to decrease whilst fixed costs are able to spread over a higher volume of unit outputs (Gelles and Mitchell 1996). This is achieved through better operational efficiency and productivity that also improves variable costs along the production model. Over time, as the oligopolist achieves profit maximisation, the business is able to low the cost of capital, especially as it pertains to asset procurement, thereby increasing production output whilst experiencing better cost efficiency. Economies of scale that have been achieved through continuous operation and success in sales in a market create barriers to new entrants, especially as it pertains to pricing. Businesses in the oligopoly are able to create predatory pricing structures in an effort to undercut emerging competition attempting to enter the market. Because the business competitor has achieved economies of scale and reduced the costs of capital, they are often equipped with the operational capacity to increase production without having to incur significant costs in this manufacturing effort. One should consider the beer industry, one that is currently dominated by major players such as Anheuser-Busch and MillerCoors which account for approximately 80 percent of the total market share in the international beer industry (New York Times 2009). If either of these oligopolists is aware that a new competitor is attempting to enter the market, thus providing competitive threat, these manufacturers are able to lower the prices of their selected products and sustain these low prices even though it would, in the short-term, reduce their quarterly profit expectations. New entrants, however, would have to invest considerable capital into the systems required to produce the product, distribute the product and market it. Oftentimes, the new competitor must establish brand recognition (a costly marketing objective) that requires, oftentimes, years of dedicated promotion in marketing simply to get consumers interested in the beverage brand. Major players such as Anheuser-Busch can theoretically cut their prices by 50% on products that are homogenous in relation to the production output of the new competitor. Sustaining these prices in an effort to drive out the new competitor is relatively simplistic when economies of scale have been achieved. Why is this so important in determining barriers to new market entry in the oligopolistic market structure? The law of demand indicates that as a price decreases, consumer demand increases when all other factors remain stable (Boyes and Melvin 2007). Therefore, market characteristics ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Discuss the barriers faced by firms wishing to enter an oligopolistic Essay”, n.d.)
Discuss the barriers faced by firms wishing to enter an oligopolistic Essay. Retrieved from https://studentshare.org/macro-microeconomics/1478993-discuss-the-barriers-faced-by-firms-wishing-to
(Discuss the Barriers Faced by Firms Wishing to Enter an Oligopolistic Essay)
Discuss the Barriers Faced by Firms Wishing to Enter an Oligopolistic Essay. https://studentshare.org/macro-microeconomics/1478993-discuss-the-barriers-faced-by-firms-wishing-to.
“Discuss the Barriers Faced by Firms Wishing to Enter an Oligopolistic Essay”, n.d. https://studentshare.org/macro-microeconomics/1478993-discuss-the-barriers-faced-by-firms-wishing-to.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Discuss the barriers faced by firms wishing to enter an oligopolistic market structure

Clothing Retail Market in General

The industry is оverwhelmed with cоmpetitiоn frоm cоmpаnies which hаve invested in hi-tech mаchinery leаding tо greаter efficiency оr hаve plаced their prоductiоn tо fаctоries in cheаp lаbоur cоst cоuntries tо prоduce their prоducts. Hоwever, mоst pаrt оf the cоmpаnies in this sectоr mаke nоt very high prоfits. Tо increаse the mаrket shаre in this аrenа is nоt аn eаsy tаsk, аnd therefоre it needs а greаt deаl оf endeаvоur, knоwledge, аs well аs energy аnd mоney.
Clоthes retаilers fаll intо twо brоаd cаtegоries: firstly, thоse selling оwn-brаnd clоthing аnd, secоndly, thоse selling third-pаrty weаr. Mаjоr retаilers such аs Mаrks & Spencer аnd the Аrcаdiа Grоup аre gооd exаmples оf the first grоup, аs аre chаin оperаtiоns s...
18 Pages(4500 words)Research Proposal

Structure of Ford Motor Company

It was only in 1927 when GM overtook Ford in sales that Henry Ford felt the need to innovate Model A that was more in tune with the times (Cattlel, 2000).
Today, Ford Motor Company is the biggest family-controlled auto-manufacturer with number three spots in the list of world’s biggest manufacturers and sellers of vehicles. In, 2007, for the first time in 56 years, Ford was relegated to the third spot from second by the Toyota of Japan. Ford manufactures cars, trucks, and SUVs in the brand range of Ford, Mercury, Lincoln, Volvo, and Mazda. Ford’s s distinctly home-spun variety economy class Mondeo and Mustangs sold the world over, and Lincoln stands for luxury and elegance. Lincoln Motor Company was the first stra...
13 Pages(3250 words)Term Paper

Starbucks in Chinese Market

In the year 1996, the coffee giant marked its global presence. Up until 2004, the Chinese government prohibited Starbucks to operate its own stores in China. As a result, the coffee giant enters the Chinese market by joint-venturing with Chinese food and beverage companies and licensing other companies to own and operate its stores--differs from its domestic approach. But the company was able to easily overcome its initial obstacles and marked its presence in China very quickly and successfully with great brand recognition and customer satisfaction. The company also tailors its stores to match the local atmosphere. This is a transnational strategy. “For example, the Starbucks strategy in Shanghai is to attract middle to high...
7 Pages(1750 words)Case Study

The Challenges of Foreign Market

Any multinational company is exposed to risks such as change of foreign currency exchange rate, commodity prices, and interest rates because it denominates its transactions in foreign currencies. That’s why there is also some uncertainty in future earnings, liabilities and assets values.
Therefore, before taking a decision on the country of entry, a profound analysis of its current political and economical situation is to be performed. According to Kotler and Armstrong (351-361), a decision on whether to enter a foreign market should be based on a profound analysis of potential risks and opportunities, as well as the company’s internal resources.
The company is a Limited Liability that exports roasted and gro...
11 Pages(2750 words)Case Study

Oil Prices by OPEC and Market Fundamentals

Market failure is defined as the inefficient allocation of resources by the market, the free market is considered to optimally prices and resources in the production of goods and services, and this is because the price and quantity produced are determined by market forces which include the demand and the supply. The control of prices by a firm or an organization in the market results in market failure, therefore OPEC leads to market failure due to its nature in the market.

OPEC was formed in 1960 by 5 oil-producing countries which include Venezuela, Saudi Arabia, Kuwait, Iran and Iraq, The aim of this organization was to unify petroleum-producing countries in order to realize fair and stable prices of oil .other oil-pro...
6 Pages(1500 words)Report

Segmentation, Target Market, and Positioning of the Fortified Wine

There are some types of fortified wines which carry a rich legacy and ethos of the Australian culture and society. This rich history and distinct flavour can be utilised to penetrate growing markets like China and build a strong brand presence there when the market is relatively immature. Moreover, tweaking of marketing, distribution and pricing strategies would offer greater sales potential for the fortified wine industry itself in Australia.

Among the variety of wines that are available, the Australian wine industry offers an attractive bevvy of the following variants of red wine, white wine, vintage wine, sparkling wine, dessert wine and fortified wines.

The fortified wines are also termed as “liquid...
10 Pages(2500 words)Business Plan

The Effects of Financial Crisis on Supplier Selection Criteria of the Oil and Gas Industry Equipment Market

It is a difficult task to find those vendors who not only have the adequate quality and quantity of the needed raw materials but who also have an attitude of efficiency and display commitment to customer service (Sonmat, 2006). Further, organizations also strive to locate and select vendors who can be depended upon for long term relationship.

The number of factors or attributes desired from the vendor is vast, and different organizations and different industries place different importance on the attributes (Sonmat, 2006). Some of the vendor attributes may gain importance owing to the nature of the industry, for example, in the case of consumer perishables suppliers, like fresh vegetables or fruits, the buying firm would...
20 Pages(5000 words)Literature review

Structure of the Educational System in Morocco and Its Capacity for Addressing the Needs of the Hospitality Industry

... in the Hospitality and Tourism Sector and whether these are best learnt at School or on-the job (Miranda, 1999, Pp. 41) 22 22 VI. Conclusion and Recommendation 23 VI.I. Conclusion 23 It is clear from the previous discussion that a need exists in Morocco to try to constantly improve the curriculum, quality and capacity of education with a special emphasis on secondary education. The English language should be taught more vigorously because a majority of the tourists speak and understand this language. Those who can communicate in English are far more than those who know Arabic or French. Education needs to be attuned towards trying to create flexible and thinking individuals who can fit into the job market. 23 Although the government...
15 Pages(3750 words)Research Proposal

Foreign Market Entry and Diversification

...Foreign Market Entry and Diversification Table of Contents Identification and discussion of the trendsin the global beer markets 3 International expansion trends and Modelo’s internal expansion 5 The next foreign market Modelo should enter 6 Challenges from InBev 7 Modelo should diversify 8 References 10 Identification and discussion of the trends in the global beer markets Beer industry is one of the largest industries in the world. Over the last few years the entire alcohol industry enjoyed a satisfactory performance. In 14th century modern beer industry started in Europe. Since the tastes of consumers vary from region to region, the industry was clustered in nature and it was dominated by several local breweries. Earlier transportation...
7 Pages(1750 words)Assignment

What to Consider in Structure-Conduct-Performance Model

The best possible outcome for SA is when it plays L while SS plays U and the best possible outcome for SS is when it plays L, and the other plays U. These outcomes (L, U) and (U, L) are difficult to achieve. This is because these strategies are not dominant for both. There is an incentive for one player to deviate.
If the prices are decided every week then the strategy would change in terms of the components. For the repeated games, the Nash equilibriums of all the sub-games are the same as the equilibrium of each one-shot game. The number of components in the strategy would increase because of the repetition of the game (both would still play L, L) however the pay off associated with the game would be increase by times of th...
6 Pages(1500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Discuss the barriers faced by firms wishing to enter an oligopolistic market structure for FREE!

Contact Us