Oligopoly Market
Introduction
As we can see, this assignment requires us to have an understanding on the oligopoly market, which is one of the most sought after market condition which is being applied in many sectors, including banking, airline and car industry. Many large organizations are involved in merger and acquisition to strengthen its position besides expanding their market share. As example, Hong Leong Bank completed a takeover on EON Bank to consolidate its position as one of the major bank in Malaysia (Bloomberg, 2011).
Oligopoly market is defined as a market that consists of a small number of large players (Begg & Ward, 2009). In Malaysia, airline and banking industry are two industries that have small numbers of large players. As we can see, there are certain characteristics that we could observe from oligopolistic market. The first characteristic is that the entry barriers to the market are high, thus controlling the number of players joining the market (Begg & Ward, 2009). Entry barriers exist that allow a handful of firms to achieve economies of scales, but no more beyond that. Any new firms would have too small a market share and would have to produce at too high a price Additional sources of barriers to entry often result from government regulation favouring existing firms making it difficult for new firms to enter the market.
The second characteristic of oligopoly is that it produced homogenous or differentiated products (Begg & Ward, 2009). For homogenous products, industries in these markets produce intermediate goods which are use by other different industries later on for manufacturing the products. Examples are raw materials such as petrol. As for differentiated products, goods manufactured in these kinds of markets are for personal consumption as they have different needs and wants.
Another characteristic that we could derive from oligopoly market is that the firms are interdependent of one another. In oligopoly market, each firm is so large that
As we can see, this assignment requires us to have an understanding on the oligopoly market, which is one of the most sought after market condition which is being applied in many sectors, including banking, airline and car industry. Many large organizations are involved in merger and acquisition to strengthen its position besides expanding their market share. As example, Hong Leong Bank completed a takeover on EON Bank to consolidate its position as one of the major bank in Malaysia (Bloomberg, 2011).
Oligopoly market is defined as a market that consists of a small number of large players (Begg & Ward, 2009). In Malaysia, airline and banking industry are two industries that have small numbers of large players. As we can see, there are certain characteristics that we could observe from oligopolistic market. The first characteristic is that the entry barriers to the market are high, thus controlling the number of players joining the market (Begg & Ward, 2009). Entry barriers exist that allow a handful of firms to achieve economies of scales, but no more beyond that. Any new firms would have too small a market share and would have to produce at too high a price Additional sources of barriers to entry often result from government regulation favouring existing firms making it difficult for new firms to enter the market.
The second characteristic of oligopoly is that it produced homogenous or differentiated products (Begg & Ward, 2009). For homogenous products, industries in these markets produce intermediate goods which are use by other different industries later on for manufacturing the products. Examples are raw materials such as petrol. As for differentiated products, goods manufactured in these kinds of markets are for personal consumption as they have different needs and wants.
Another characteristic that we could derive from oligopoly market is that the firms are interdependent of one another. In oligopoly market, each firm is so large that
References: 1) AirAsia. (2011). AirAsia Corporate Profile, Vision and Mission, Airasia, http://www.airasia.com/my/en/corporate/corporateprofile.page?, retrieved on 16th July 2011. 2) Atkinson, A.A., Kaplan,R.S., Matsumura, E.M. & Young, S.M. (2012). Management Accounting – Information for Decision Making and Strategy Execution 6th Edition, Pearson Education, Chapter 3 & 4, pp.86-144, pp. 145-188 3) Azman Ujang 4) BBC News. (7 March 2011). Oil price rise as Libyan unrest continues, BBC News Online, http://www.bbc.co.uk/news/business-12644002, retrieved on 20th July 2011. 5) Begg, D. & Ward, D. (2009). Economics for Business 3rd Edition, McGraw-Hill Education, Chapter 6, pp.124-151 6) Bellman, Eric 8) Goh Thean Eu. (2 Aug 2011). AirAsia market cap soars above RM 11b, Business Times, http://www.btimes.com.my/Current_News/BTIMES/articles/airasia0108/Article/, retrieved on 25th August 2011. 9) Harvard Business School. (2011). Definition of Competitive Strategy, Harvard Business School, http://www.isc.hbs.edu/firm-competitve.htm, retrieved on 21st August 2011. 10) Ibrahim, Anis. (15 Nov 2005). MAS told to consider VSS, New Straits Times, http://findarticles.com/p/news-articles/new-straits-times/mi_8016/is_20051115/mas-told-vss/ai_n44308310/, retrieved on 18th July 2011. 11) Inagaki, K. & Kachi, H. (22 July 2011). ANA, AirAsia to Lauch Budget Carrier in Japan, Wall Street Journal, http://online.wsj.com/article/SB10001424053111903554904576459343747124046.html, retrieved on 20th August 2011. 12) Inagaki, K. (17 August 2011). Low-Cost Flights Hard Sell in Japan, Wall Street Journal, http://online.wsj.com/article/SB10001424053111903480904576511970141959428.html?KEYWORDS=AirAsia, retrieved on 20th August 2011. 13) Malaysia Airlines. (2011). Malaysia Airlines Corporate Profile, Malaysia Airlines, http://www.malaysiaairlines.com/my/en/corporate-info/our-story.html, retrieved on 14th July 2011. 14) Malaysia Airlines. (2010). Five Year Statistical Review of the Group, Malaysia Airlines Annual Report, http://malaysiaairlines.listedcompany.com/misc/5-years.pdf, retrieved on 16th July 2011 15) Malaysia Airlines 16) Malaysian Insider. (4 Sept 2008). Airline losses set to exceed US$5b, Malaysia Insider Online, http://www.themalaysianinsider.com/litee/business/article/Airline-losses-set-to-exceed-US5b/, retrieved on 18th July 2011 17) Nil 19) Ricart, J.E. & Daxue, W. (26 May 2005). Now Everybody can Fly : AirAsia, Harvard Business Review, http://hbr.org/product/now-everybody-can-fly-airasia/an/IES123-PDF-ENG?Ntt=AirAsia, retrieved on 21st August 2011. 20) Stephen Ko & Claudia H.L. Woo. (11 June 2009). AirAsia: Flying Low Cost with High Hopes, Harvard Business Review, http://hbr.org/product/airasia-flying-low-cost-with-high-hopes/an/HKU833-PDF-ENG?Ntt=AirAsia, retrieved on 21st August 2011. 21) Reuters. (16 Aug 2010). Malaysia Airlines swing to Q2 net loss, AsiaOne Business, http://www.asiaone.com/Business/News/Story/A1Story20100816-232373.html, retrieved on 16th July 2011. 22) Samson, D. & Daft, R.L. (2009). Management, 3rd Edition, Cengage Learning, Chapter 3 pp. 90-131 23) Skytrax