Competition and markets - Essay Example

Market Structure My franchise operates an oligopoly market because of the large share of the market and a good reputation established in the market. Entry into oligopoly market is highly restricted through economics, politics, and social issues. Some firms have a great share of the market with very good reputation and brand name that gives the firm advantage over other businesses while others are just starting. Oligopoly also prevents barriers to entry in the market and control over price. The few firms competing do not depend on each other.

The companies in oligopoly market significantly control the market. Oligopolistic firms are interdependent and large. One firm is hugely affected by the deed of the other.Some of the characteristics of oligopoly are small number of large firms that generate substantial market control depending on the size of the businesses. Second characteristic of the oligopoly market is interdependence in decision-making process because the number of competition is few and any slight change in price or good eventually affects other firms (Nechyba, 2011).

Firms in oligopoly regard the response of other firms in an industry. Thirdly, firms in an oligopolistic market normally use aggressive advertising, marketing, and promotion in order to fight for its place in the market. Advertisement and sales costs the oligopolistic firms a lot of money. Companies tend to carry out their own product’s promotion and the firm’s name to attract a significant number of customers (Landsburg, 2011).Franchise in oligopoly market applies a small element of differentiation, which creates distinction between its own product and other competitors’ products as it aims at increasing its market share in the industry.

Additionally, there is no price reduction in the oligopolistic market since prices are sticky and rigid for the reason that any price cut by one firm may eventually call for reaction by the rival firms, which may affect the whole industry (Landsburg, 2011).Some of the competitors of the oligopolistic firms such as the franchise are the large few companies operating in the same markets. The availability and formation of cartels may threaten franchise and lead to closure of the business. Firms may further use tacit collusion by fixing the prices without all firms’ consent and when quantity produced and price fixing is done explicitly.

Price leadership may largely affect the prices of the franchise especially when one major firm in the industry decides to set price lower than the prevailing market price (Landsburg, 2011).Companies in the oligopolistic market that impose great threats to the franchise are the large firms with very high reputation and enjoy economies of scale. By enjoying economies of scale, a firm is able to acquire a large quantity of raw materials and even have enough resources to pay its employ better than the other competitors (Nechyba, 2011).

For instance, when a company is capable of purchasing large number of raw materials, it may receive discounts and other incentives from the suppliers and they may turn the incentives in business advertisements and promotions such as offering free samples. Furthermore, the big firms with remarkable reputation may attract effective and efficient employees due to the financial capability of paying the employees (Nechyba, 2011).My firm can improve its market by lobbying for price controls to prevent other firms from setting their own prices.

The firm should also intensify its advertisement and marketing campaigns in order to increase its revenue. Franchise should employ online techniques such as social media to market and other forms of media to improve marketing of its products. Celebrities and other public personalities should be used in promotion to enlarge its market base. Furthermore, the franchise should apply the use of technology to differentiate its products from other competitors’ products. The firm should merge with other big firms to enjoy economies of scale hence reducing the prices of its products.

The company should diversify its operations and use other techniques to prevent other companies from entering the market.ReferencesLandsburg, S. E. (2011). Price Theory and Applications. Australia: South-Western/Cengage Learning.Nechyba, T. J. (2011). Microeconomics: An Intuitive Approach with Calculus. Mason, Ohio: South-Western Cengage Learning.