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Number of firms competing
Nature of the product
Undifferentiated or differentiated
Firm’s control over price
An oligopolistic market is the one which is dominated by some large suppliers. Homogeneous products, mutual interdependence, few large producers and high entry barriers are oligopoly characteristics prevalent in such markets. The three most import characteristics of oligopoly include: Industry dominance by few large firms
Products sold by these firms are either differentiated or identical in nature Various entry barriers depending upon the industry
‘Few large firms’ is a very crucial oligopoly characteristics which states that these markets include few large firms which are dominant in existence, and each of these firms is comparatively larger than the market size. This particular oligopoly characteristic ensures that all these large firms have a fair amount of market control. The automobile industry is a very good example of an oligopolistic market. There are a few car manufacturers in the market across the world as against the demand for millions of cars every day. The dominant car manufacturers include General Motors, Honda, Chrysler, Toyota and Ford, to name a few. The automobile industry in an oligopolistic market is a Differentiate Product Oligopoly where the products manufactured are for personal consumption as consumers need a variety of products since they have different needs and wants. In Malaysia, the national automobile industry is dominated by the country’s two leading manufacturers, namely PROTON and PERODUA. PROTON is 42% owned by the Government. Rising car sales in 2010 has pushed up production in all car assemblers in Malaysia except for the national car maker, PROTON. PROTON’s market share has reached 80% at its peak but now it has lost its market share to local and foreign competitors from 60% of the domestic passenger car market in 2001 to 26% for year 2010. Proton’s brand value has also dropped from RM239 million in 2007 (rank 19) to RM150 million in 2008 (rank 23). It was revealed in November 2009 that Proton’s ranking has dropped from Malaysia’s 30 Most Valuable Brand (MMVB) ranking. It was reported in the newspapers that PROTON is only operating at half of its capacity. PROTON Shah Alam was operating at 54% while PROTON Tanjung Malim is at 42%. The combined installed capacity production for PROTON’s two plants is 350,000 units per year and PERODUA 250,000 per year that is about 48.7% and 79% respectively, accounting for about 61%, more than half of the total industry output. As reported by the Malaysian Automotive Association (MAA), UMW Toyota Motor Subsidiary, Assembly Services, was operating at 215 per cent production capacity, Honda at 212 per cent, Tan Chong Motors at 143 per cent, and PERODUA at 164 per cent. [i] For years, both PROTON and PERODUA have led charmed lives as national car companies, indulged by...