Characteristics of the Monopolistic Company - Report Example

Monopoly In the economic context, there are different types of interaction. Monopoly is included in the types of interaction occurring in the local and global market. It is the corresponding scenario wherein a certain industry or market has a single or sole participant defined as the seller or the provider of the product or service. Monopoly can be considered as one of the goals of a company due to the fact that it can be equated to control in the market. There are different prerequisites that can determine monopoly in a particular market. One is the presence of a single producer in the said market. Another is the absence of any other company with products or services that can be compared to that offered by the monopolist. And lastly, there are factors that can contribute to the action of monopoly such as the barriers to the entry of other products or company (Klein; Sowell 80-87). Another important characteristic of the monopolistic company is the capability to control the price of the product in the market. This can be one of the main reasons that anti-monopoly policies are being implemented to be able to protect the consumers with regards to the uncontrollable increase in the prices of products and services. There are different products and utilities that can be classified in a monopolistic market which include gas or fuel, electricity, water, cable TV and telephone serve companies. To be able to achieve an understanding of the principles of monopoly in the market, the study of the different companies in the global market is undertaken. These companies are involved in the service and manufacture of the products classified under monopolistic market. Monopolistic Companies There are a number of companies throughout history that can be cited to achieve a state of monopoly over a particular industry. In the UK, one of the current issues though there is a deregulation with regards to monopolization is the perceived control of the National Express over the train routes as a result of the recent take over of the Greater Anglia trains franchise in September 2008 (This is London Website). The said example can be attributed to the result of competition that favored a particular company to excel. Basically, the competition that initially occurred can be stopped due to different factors such as failure of competitors or achievement of better market share of leading companies resulting to greater advantage and can ultimately arise to monopolization. Another influential company in the British market is the British Telecom which is involved in a wide variety of telecommunication services initially in UK and then expanded to the global market. The said company had been recognized to be the oldest in the telecommunication industry for that matter, it can be considered in constant advantage when it comes to delivering services in relation to telecommunication products and services (British Telecom Website; Porritt 119). The monopoly that had been achieved by the BT though can greatly be attributed to the legal monopoly undertaken wherein the said company was established and chosen to represent the totality of the telecommunication services in UK. Although there are other companies that operated similar services prior to the establishment of BT, the government being the primary factor in choosing the prevailing company with the power to control was able to initiate the monopoly in the said market. Based on the assessment of assets, BT is considered as the leading European telecommunication company while the BT Group occupies the top place in the global market (British Telecom Website; Porritt 119). In the study related to capitalism, the results presented the European and the global leading companies which are capable of achieving a state of monopolization if certain conditions in the market favor the said process. The summary is presented in Table 1. Table 1. World Asset Leaders Sector World Sector Leaders European Sector Leaders Automobiles Toyota Volkswagen Banks Westpac Banking Corp ABN Amro Basic resources Alcan Anglo American Chemicals DSM DSM Construction AMEC AMEC Cyclical goods and services Koninklijke (Royal) Philips Koninklijke (Royal) Philips Electronics Electronics Energy Statoil Statoil Financial services British Land British Land Food and beverage Unilever Unilever Healthcare Novozymes Novozymes Industrial goods and service 3M SKF Insurance SwissRe SwissRe Media Pearson Pearson Non-cyclical goods and services Proctor & Gamble Kesko Retail Marks & Spencer Marks & Spencer Technology Intel Nokia Telecommunications British Telecom (BT) Group BT Group Utilities Severn Trent Severn Trent Source: (Porritt 119). In the global market, the companies that set the trends and still exist can be considered to have the monopolistic influence and advantage in the particular market that they created. One of the most significant companies in the said field is Microsoft. The capability of the company to monopolize can be observed in the products and services that the said company offers. Due to the fact that the company is already known in the computer software market, the chance of other companies can be considered minimal specifically when the products compatibility is needed to follow the personal computer brands that are already being used by the majority of the population (Klein “Empirical Case”). In the empirical study that tackled the monopolistic capability of Microsoft, the example that had been presented is with regards to maintenance of a barrier to the entry of other companies in the operating system market. The inclusion of an operating system which includes an Internet Explorer developed by the company for free rather than a separate purchase of an internet navigator system such as the Netscape which can only be purchased resulted to the advantage of the free Microsoft system (Klein “Empirical Case”). Due to the prior capability and resources of the company, it can undertake a process of product improvement regardless of the operational cost on the main objective of maintaining the leading state which can be defined to certain extent as monopoly specifically when the competitors cannot really have a fair fight with the company in market share. Due to the capacity of Microsoft to maintain the barriers to the entry of other products in the same market or industry to the point of control, monopoly can be the best concept to describe the company’s performance (Klein “Empirical Case”). The companies that are presented can be considered as representatives of the concept of monopoly in the market that have the capability to control prices, lack able competitors and with the ability to hinder companies who want to participate in the market. The state of monopoly when achieved by a company can define an exceptional strength in terms of market share. This can then be considered as an advantageous event for any company but it is important to consider that in the economic point of view, a healthy market can be defined by an active competition between different companies and firms with high level of quality in terms of the products and services offered. It is important then to analyze the advantages and disadvantages of monopoly on the basis of different perspectives. Analysis of Monopoly in the Market The effects of monopoly in the market can be analyzed by observing the legislations and policies established by different countries. In a general view, the majority of nations had made and undertaken actions to be able to disrupt any form of monopoly in the market to be able to promote a healthy competition that can benefit the consumers. For that matter, it can be perceived that monopoly can bring about disadvantages to the public although it can benefit the market and the company in different ways (Clarke, Davies and Driffield 20). In terms of the advantages of monopoly it can be considered that the process leading to the state of monopolization of a particular company can be attributed to a tedious amount of work in research and development of the products or services that are offered in the market. For that matter, the said process can be considered to produce a high level of innovation that can contribute to the technological prowess of the public as a whole. In addition, the efforts that are undertaken by the companies to be able to maintain the monopolizing capability can also be regarded as a continuous improvement of the products and services that can answer the needs and demands of the people. If a company can hold a monopoly in a long period of time, it can be considered that the structure of such company is considerably effective in determining, analyzing and providing the continuously changing needs of the people (Klein “Monopoly: Advantages and Disadvantages”). Monopoly can be considered to give advantage to the larger more capable companies to have the machinery for research and development, thus, continuously ruling the market. For the company, the said capability is power, thus, advantageous. On the other hand, for the public it is more of a responsibility since the company needs to continuously take into consideration the needs of the consumers. Monopoly can be equated to absolute power in different ways. Due to the fact that absolute power corrupts, the company with the capability to control the prices can increase it to the disadvantage of the people. Due to the fact that there are no competitors to a particular production of goods, consumers lack the privilege to choose (Klein “Monopoly: Advantages and Disadvantages”; Zahariads 49-70). The said scenario can be considered as one of the major reasons for the establishment of policies that hinder monopolization in any type of market. In earlier part of history wherein legal monopoly or the monopoly approved by the government, lessons were learned that even in the guidance of policies consumers are not protected in cases of monopoly. For that matter, the competition is continuously promoted to be able to balance and distribute the control of the market to a number of companies. Such process maintains the drive for innovativeness while preventing the localization of control in the market. In the said scenario, the consumers have the power to judge the leading company with the capability to continuously provide quality in products and services. The age of monopoly then ended and the examples that can be cited are the companies that had been able to monopolize in the past years (Clarke, Davies and Driffield 20; Klein “Monopoly: Advantages and Disadvantages”; Zahariads 49-70). Products that are then classified to occur in monopoly underwent deregulation to be able to prevent the existence of sole control and monopoly. Although guided by the government administration, products such as water and energy resources are opened up to different companies. Other forms of regulation such as taxation are undertaken to maintain control of such products. Through the said process, monopoly is minimized (Clarke, Davies and Driffield 20; Grossman and Cole 43; Zahariads 49-70). The setting up of barriers of entry in the market can be considered as another reason for preventing the occurrence of monopoly in the market. One type of barrier can be related to geographical factors. Although this is inevitable, efficiency can be one of the main weapons to counteract the effects. In cases wherein policies can hinder entry of products in particular markets for example imported goods, advantages can be attributed to the locally produced products (Clarke, Davies and Driffield 20; Klein “Monopoly: Advantages and Disadvantages”). Conclusion Based on the study undertaken, the process of monopoly is a natural tendency in any industries or markets. This can be attributed to the fact that organizations can vary in performance with regards to delivering goods and services. At the same time, policies can also vary in different geographical settings which can affect the market. The companies then that are able to achieve monopolization had perfected the methods to be able to balance the factors related to the market and the political processes. Although these companies where able to excess, economic experiences were able to mold the concepts away from promoting monopoly in the market due to the fact that it can benefit only a part of the population. For that matter, competitions in different industries are promoted to allow for optimum market environment and less monopoly. This is based on the notion that competition promotes innovation and high performance of companies that can benefit the consumers while keeping the prices of commodities standardized. Works Cited British Telecom Website. Looking Back to the Future. 2008. 28 December 2008 Clarke, Roger, Stephen Davies and Nigel L. Driffield. Monopoly Policy in the UK: Assessing the Evidence. Edward Elgar, 1998. Grossman, Peter Z. and Daniel H. Cole. The End of a Natural Monopoly: Deregulation and Competition in the Electric Power Industry. Boston: JAI Press, 2003. Klein, Paul. “Empirical Research: Microsoft and Innovation.” Advanced Economic Seminar 327 CBS 28 December 2008. 28 December 2008 Porritt, Jonathon. Capitalism as If the World Matters: As If the World Matters. Earthscan, 2006. Sowell, Thomas. Basic Economics: A Citizens Guide to the Economy. Basic Books, 2000. This is London Website. 2008. National Express in monopoly probe. 28 December 2008 Zahariads, Nikolaos. “European Markets and National Regulation: Conflict and Cooperation in British Competition Policy.” Journal of Public Policy 24 (2004): 49-73. Read More