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Business organisation and policy cartels and monopolies - Essay Example

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On the other hand, monopoly is the complete control of trade operations such as provision of particular commodities or services. (Sangla 2009, p.190). Apparently, cartels…
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Download file to see previous pages On the other hand, buying cartels aim at purchasing raw materials for its members while the output determining cartels determine the quantity of output for each member unit as the name suggests (Sangla 2009, p.181).
Without government intervention, an isolated monopolistic firm would only exist in an ideal world. This is because most monopolistic firms make a lot of profits thus encouraging the formation of rival firms. In the long run, the new firms break the monopoly. Most governments in the 1920s embraced mergers and trade unions in key economical sectors such as chemical and metal industries (McTavish 2005, p.52). However, most of the business organizations preferred cartels to the other forms of trade convergence.
After the World War II, the business field developed thorough monopolies and restrictive practices, which had salient effects on business organizations (McTavish 2005, p.52). Currently, it is only America in the whole world, which has not legalized cartel formation. One of the most popular cartels today is the organization of petroleum-exporting countries (OPEC). OPEC was established mainly to control the amount of oil each member produced.
Member units that form cartels always enjoy a wide variety of benefits. Each member usually has a guarantee to earn fixed minimum profit which is not the case with other business institutions. In addition, all marketing and other secondary functions of the individual business organizations such as transportation, advertisement and marketing research are normally carried out by the cartels (Sangla 2009, p.181).
In addition, the member firms also enjoy price control. Since, in working as a pool, the individual firms acquire monopolistic characteristics, they are in a position to charge the prices of their products at their own will.
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