Impacts and Policies to Control Single Type Industry - Coursework Example

Introduction

A single type of industry can be defined as the industry when there is a major producer of the goods and services (Hawley 2015). In addition, with kind of industry in a country, it gives itself a competitive advantage to any other industry that is operating within a country. The single type of the industry is formed through vertical integration and horizontal integration. Furthermore, there are various impacts that are felt by the country after relying on the single type of the country. Having a single type of industry in the nation is bad for an economy because a nation competitiveness between the industries is not experienced. There are various reasons that make the single type of the industry be bad for an economy. For instance, where there one type of industry operating and recognized worldwide, this restrict free trade thus preventing the market from setting the prices of products of products and services (Hawley 2015). Additionally, since there are other firms or industries that are competing with they will creating barriers for other industries or firms to enter in the industry because they want to remain as the one operating and offering products to the services. When there is the sole producer of certain goods and services, it is hard for other industries to join the market, and command the same brand loyalty the solo industry have. Thus, where there is one firm competing with itself, it will be hard for the competitive advantage to be felt worldwide (Hawley 2015).

In addition, here are the adverse effects of the single-type of the industry for the country’s economy and competitive advantage. For instance, since the single type of industry is the only provider, then they have the ability to set the price they want. This act is known as the price fixing. The company has the ability to fix the price without putting into consideration of the demand since they are aware that customers have no choice but to lament first days and later cope with the new price fixed (Hawley 2015). In this kind of single of industry, an inelastic demand is the one that is experienced, thus making people to lack flexibility since there is only one producer or manufacturer. Furthermore, a single type of industry not only raises the prices but they also have that ability to supply inferior products that do not meet some mandatory standards since they believe customers have no choice but to purchase the products. Furthermore, the single type of the industry makes it hard for massive innovations to be experienced because no other industry is posing a challenge to the sole industry in the market. This means that there is no need for providing the new and improved products thus limiting changes to be experienced. There is the likelihood that a country will experience a slow change in technology and services because the single type of industry works at its own pace but not based on needs of the customer or outdoing its competitors. Furthermore, a single type of industry has the ability to create the inflation because it set any price that fits itself, without considering whether they are raising costs to the consumers (Al-Muharrami 2009). Thus, the single type of industries has a chance of causing the cost-push inflation. If the single type of industry fails in providing its products and services because there is no competition will make the whole country to suffer because it is the sole producer or manufacturer.

Policies that will reduce impacts of single type of industry

It is evident that single type of industry creates a monopoly market environment. The monopoly power has high chances of creating intentional problems. For instance, in case of market failure no way a country can have an alternative market to take place the position of the failed market because only a single firm or industry has the almost the whole market share. Furthermore, there are higher chances of fewer choices and higher prices due to one industry taking the largest market share thus securing itself almost entire customers in the whole country. In addition, a monopoly can be termed as the great social evil since they charge the high prices due to the fact they have no close competitor thus ending up selling lesser output while on the other hand, they are earning more profit (Al-Muharrami 2009). In addition, with the monopoly market structure within a country, then it will be hard for the country to create and sustain the competitive advantage. Thus, for any organization to be capable of creating a sustainable competitive advantage, there are various policies that can be applied, namely: liberalization of the markets; regulation; merger policy; yardstick competition; and breaking up the existing monopolies. With the named-above polices, they will help in preventing excess prices; ensuring the quality of service is offered; shunning monopoly power; enhance competition, and avoiding the natural monopolies.

Liberalization of markets

Economic liberalization can be defined as the act of the country opening up to other parts of the world with the regards to taxation, regulations, trade, and more so, other areas that will impact the business in the country. In this case, it will be all about deregulating the markets with the aim of enabling new industries and firms to enter and compere with the industries that have dominated the market of the country. In addition, liberalization of the markets will aid in removing all barriers created intentionally with the aim of blocking other firms to enter the market (Comanor et al. 2014). Therefore, if all barriers or obstacles that hinder their entrance into the market, will open a great opportunity for the new and small firms to compete with the existing and powerful firms in the market. In addition, once the new firms have been permitted this will create a healthy competitive environment because monopoly market structure will be transformed to a monopolistic competition market structure where various firms producing similar products and services are playing at a leveled ground. There are few examples of the industries that has seemed to be natural monopolies that deals with the gas, telecommunication, and electricity. If the government advocate for economic liberalization it will be easy to control the monopoly power which has been ruining the nation’s competitive advantage. This policy worked effectively to some extent in the United Kingdome since it managed to overcome the monopolies through increasing access to the electricity and gas infrastructure to all interested companies and industries thus creating a level background for all companies to offer their products and services (Comanor et al. 2014).

Merger Policy

The merger can be defined as the deal to unite two or more companies that exist within a country (Comanor et al. 2014). The key aim of merging companies is an aim of forming a new company. Furthermore, mergers and acquisitions are commonly done with the aim of expanding the reach of the company, expanding into the new segments or gaining the market share. This policy will be helpful in creating and sustaining competitive advantage of the nation since it will aid in preventing an increase in the monopoly power if it happens that two firms reach an agreement of coming together (Comanor et al. 2014). Furthermore, this kind of policy will be helpful in preventing the new monopolies to arise that have chances of ruining the economy as things proceed. Furthermore, the merger policy can be helpful in investigating the mergers such that there are higher chances of creating the monopoly power. In addition, the merger policy is accompanied by the establishment of the competition commission that helps in figuring out if the firm has more than 25% of the market share (Comanor et al. 2014). The competition commission will aid in controlling the progress of the single type industry through making sure that there is an effective market environment where a healthy competition is advocated for. More so, the competition commission could help in deciding whether to allow the merger to take place or not. Establishing a competition commission helped in controlling the market share of the industries thus helping in creating and sustaining the nation’s competitive advantage. It creates a leveled playground for all firms and industries.

Breaking up existing monopolies

According to Dahl 2015 , the government may opt to break the monopoly as part of the solution that will create a market environment where there is healthy competition between all firms or industries. Therefore, if a single type industry is discovered to be super power, the government can choose to break it with the aim of creating a sustainable environment for all new and existing firms to avoid negative effects such poor quality of service; higher prices; and lack of products and services if a single type of industry operations fail (Comanor et al. 2014). This policy is one of the drastic ways that will help in increasing the competitiveness of the industries within a country thus increasing the healthy competition. To sum up, breaking up the existing monopolies will be helpful so much in eliminating super-powerful monopolies and effects linked with the existence of monopolies in a country.

Regulations

There are various regulations that can be used to control impacts of the single type of industry. For instance, windfall taxes or price capping can be used to control impacts of monopolies within a nation. The price capping which can be used for the privatized utilities is CPI- X (Jannadi & Al-Saggaf 2000). If the firms and their actions are regulated by the government, it will be hard for the existing industries or firms to control things such as prices based on their wants. There are various merits linked with this kind of policy where regulators are used. Firstly, the regulators can be used in setting the prices and increasing the prices based on the state of the industry or firm and potential efficiency savings. It surrogates competition. In case, there is no competition; the CPI-X can be used the means of increasing competition and preventing abuse of monopoly by existing industries (Jannadi & Al-Saggaf 2000). In addition, the quality of services offered by the existing firms can be regulated based on the minimum standards that must be met. In addition, when the quality of service offered is controlled it will be hard for a single industry to act according to its wants or needs but according to the set rules and regulations.