1 What is an oligopoly?
An oligopoly is a business market that is controlled by only a small group of firms. As opposed to a monopoly (only one firm) or a duopoly (two firms) an oligopoly is defined by having three or more businesses involved. It could be described as a market with only a small amount of competition. The oligopoly relates to sellers within the market, not buyers, so the sales market would only be controlled by a small number of businesses. This usually means that a decision or financial step made by one company will directly affect the other companies in the market. A good example of an oligopoly would be the US wireless market. There are some advantages for oligopoly;
The first and most obvious advantage of an
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vehicle sales will rise to more than 14 million in 2012, that’s a far cry from 17.3 million at the turn of the millennium. Last year’s U.S. sales figures might have been higher if not for the tsunami and earthquake in Japan and flooding in Thailand, which forced Toyota, Honda, and, to a lesser extent, Nissan to curtail production in virtually all of their assembly plants around the world. Auto sales growth is far more rapid in emerging nations such as China and India, with average annual sales gains since 2001 of 23 percent and 15 percent respectively.
All of this should be good news for U.S. automakers, which have restructured their operations to be profitable at lower volumes in the U.S. General Motors, Ford, and Chrysler gained market share at the expense of the Japanese manufacturers, and the Detroit Three have now posted several quarters of consistently strong operating performance. Whether these improved earnings are short-lived will depend on a number of unknowns: * As their output returns to normal, will Japanese companies reclaim their market share? * Will the Detroit Three maintain their focus on new vehicle development and launches and continue to practice pricing discipline, which favors maximizing profits over volume or marketshare growth? * How will rapid introductions to the U.S. market of highly competitive new models from automakers around the globe, combined with slow growth, play out? How will automakers differentiate their vehicles and
An oligopolistic market is one that has several dominant firms with the power to influence the market they are in; an example of this could be the supermarket industry which is dominated by several firms such as Tesco, Sainsbury’s, and Waitrose etc... Furthermore an oligopolistic market can be defined in terms of its structure and its conduct, which involve various different aspects of economics.
Detroit, Michigan grew up around the automobile industry. At its peak, Detroit was the fifth-largest city in the United States, becoming the home to over 1.8 million people by 1950 (Davey, Monica 2013). The prolific population was due greatly to the success of the auto industry in the city. At that time, Detroit was flying high, its name coined “The Motor City” (americaslibrary.gov), and automobiles greatly impacted commercialization. From transporting goods to hastening production, to selling parts, to manufacturing and selling new automobiles, the auto industry completely transformed Detroit. Things seemed
Oligopolies are a type of market structure evident in Australia, which is comprised of 2 or more firms having a significant share of the market. In an oligopoly the few firms sell similar but differentiated or homogenous products and is characterised by a large number of buyers making it a form of imperfect competition. This market structure is evident through the Big Four Banks, Phone Industry - Vodafone, Optus and Telstra.
These barriers include, but are not limited to, the following: large established competitors, high capital requirements, limited initial access to distribution networks, and environmental regulations. Due to the existence of massive brand name manufacturers like General Motors and Ford, any new entrants in the automobile industry will be competing with companies benefiting from strong customer loyalty, economies of scale, and impressive marketing budgets. Therefore, new entrants must be able to achieve the difficult task of entering automotive manufacturing at high capacity while simultaneously building a solid consumer base. Such an entry would be quite expensive, especially in conjunction with the billions of dollars needed to construct high-volume manufacturing facilities and develop effective distribution networks to deliver new automobiles. Finally, new entrants must be able to design and manufacture their automobiles according to contemporary environmental regulations. Abiding by such regulations would further drain new entrants’ funds. Overall, entering the automotive industry competitively requires an exorbitant amount of money, so the threat of new entrants is low.
An Oligopoly refers to a market structure where-by the suppliers have formed some form of cartel and are acting in unison. In such a case the suppliers have the power to determine the price of the commodity and may set any price.
Oligopoly has been derived from Greek implying "few sellers". According to Sloman & Sutcliffe (2001) oligopolies are a type of imperfect market wherein a few firms share a huge proportion of the industry. Therefore industries such as oligopolies have dominance of small number of manufacturers which may produce either differentiated or almost similar products. Nevertheless there are differences between perfect oligopolies and imperfect oligopolies. While perfect oligopolies are characterized by firms that produce almost identical products like tea or CDs, imperfect oligopolies differentiate themselves through niche products such as motor cars and aircrafts. Oligopolies are marked by interdependence of firms operating in the market which either collude or compete among themselves. In collusion, firms consent to avoid competition amongst them. A formal collusion is a cartel wherein firms act like a monopolist and earn maximum profits. (Wellmann, 2004, pp: 1-2)
The automotive industry designs, develops, manufactures, markets and sells motor vehicles, and is one of the world’s most important economic divisions by profits. This analysis focuses on the industry, specifically, manufacturers of automobiles. There are five competitors in the StratSim environment: Firm A, B, C, D, and E. Industry sales in the most recent year were 4.3 million units, with expected growth in the next year. Within this industry, there are seven-vehicle classes: Economy, Family, Luxury, Sports, Minivan, Truck, and Utility. There are two new classes with potential – if properly marketed.
I will be comparing both companies General Motors Company and Ford Motor Company for the past three years. We will be able to see all the trends these two automotive manufacturers have and which one may be better to invest in by looking at the last few year’s ratios and percentages. This will give us a better understanding and the knowledge of who maybe the industry leader and who is the follower. These are both major corporations that strive off customer loyalty and both competing on a global scale to make their mark in the one of the top automotive manufacturers in the world. This analysis will give us an understanding of what lies ahead in the future for these two manufacturers.
Ever since the 2008 recession US automobile companies have been on a steady downhill slide, but actually you can trace this downward trend even further back than 2008. US car companies have been feeling the heat since as early as the late 1980s when Japanese car companies laid claim to American manufacturing plants . Despite a shot in the arm in sales over the past five years, American firms are still on the decline. This case analysis aims to diagnosis the problem, provide analysis of the problem, and propose a viable solution to the problem from the perspective of the US automobile market share leader, General Motors.
Competition is good for producers but better for consumers, more competition in the market means more: ideas, channels of distribution, market stability and competitive (lower) prices for consumers. Ultimately, healthy competition forces producers to offer better products and services at lower prices. Automobiles provide people with “…aspirational value in addition to a basic mode of transportation…” (Reinhardt, Yao & Egawa, 2006) consumers make purchasing “decision based on the styling, color, and concept of the cars in addition to functions and pricing” (Reinhardt, Yao & Egawa, 2006). So far, TMC has been trying to catch up with Honda and Nissan in the ‘innovative’ department. Let’s not forget the criticism the company previously faced for offering its customers “…proliferation of look-alike cars…and following rather than setting a trend” (Reinhardt, Yao & Egawa, 2006).Since, Mr.
Over the years, the U. S. auto industry's market has been experiencing fluctuations due to many reasons including: price, quality and foreign competition. General Motors Corporation (GM) which had been the leading car and truck manufacturer had been experiencing declining market share and facing stiff competition from both U.S manufacturers and foreign imports such as the Asian auto producers that included Toyota, Honda and Nissan. The main reason for increased foreign competition was that foreign cars were more fuel efficient, smaller, less expensive, and often more reliable than their American counterparts.
In 1913, Henry Ford revolutionized product manufacturing by introducing the first assembly line to the automotive industry. Ford’s hallmark of achievement proved to be a key competence for the motor company as the low cost of the Model T attracted a broader, new range of prospective car-owners. However, after many decades of success, customers have become harder to find. Due to relatively new threats to the industry, increasing numbers of cars and trucks are parked in dealer lots and showrooms creating an alarming trend of stagnation and profit erosion. Foreign-based automakers, such as Toyota and Honda, have expanded operations onto domestic shores and, in turn, have wrestled
The financial crisis starting in 2008 and the following recession hit hard the US auto sector. Traditional car makers had to realise that substantial changes were needed in order to maintain their strong position in the
The United States Automotive industry has been dominated by five major auto manufacturers: GM, Toyota, Ford, Chrysler, and Honda. As globalization increases the domestic automotive market (GM, Ford, Chrysler) suffers from foreign competitors. Although with high entrance barriers the market suffers little to none from new entries. There are several reasons for this the largest being capital. It takes a lot of capital to obtain manufacturing plants, raw materials, as well as to hire and train employees. PASTEL Analysis
The characteristics of the global motor vehicle industry are a boom in certain places and a bust in others all due to economic conditions in different nations. Four years after tow of Detroit Michigan’s big three went into bankruptcy American car makers are going “full throttle” with sales in August hitting an annual rate that if substantiated can take them back over 16 million and that is a rate that was last hit before the economic crisis and 80% higher than 2009 when GM and Chrysler went into bankruptcy. The opposite is happening in Europe being in its sixth year slump now and with a weak economy, high petroleum prices and an aging