Introduction
Firms in different industries across Australia operate in varying market structures including oligopoly, monopoly, and monopolistic markets. Monopoly firms include Telstra, a telecommunications company that has over the years proved to be the dominant supplier of the internet and mobile services. Grocery supermarkets including Aldi, Woolworths, and Coles operate in oligopoly structures where they have dominance over smaller grocery retailers. Firms operating in the monopolistic structure include restaurants and hairdressing shops where firms aim at expanding their market share through product differentiation. The paper, therefore, uses examples drawn from Australian markets to discuss various market structures.
Oligopoly market structure in Australia
The grocery retail sector in Australia is dominated by large firms including Woolworth’s, Aldi and Coles hence creating an oligopolistic structure. An oligopoly market is one in which few firms dominate the industry such that small firms and new entrants find it hard to cope in the industry (Boopathi & Sujen, 2012; Marks & Midgley, 2000). However, in spite of the dominance of large firms, the retail sector in Australia still has small firms that make the sector be highly concentrated. Oligopolistic nature of the Australia’s retail grocery sector makes it necessary for firms to remain keen on what their competitors do by countering strategies such as lowering of prices immediately. The oligopolistic market structure, therefore, creates the need for firms to ensure that they are aware of rival’s potential actions and the likely reactions in case of strategic changes. Firms operating in oligopolistic markets need to plan and try various strategic options as a way of understanding how competitors would react to the changes. Among the strategic options would be to assess whether competing with rivals is ideal, considering lowering or increasing of prices or have the option of waiting for rivals to make a move then imitate their competitive strategies. Among the ways used by the dominant firms to create entry, threats include the use of economies of scale and control of major sources of supplies hence making it impossible for the new firms to access grocery supplies. Furthermore, large firms dominating the retail sector in Australia also force new entrants to spend a lot of financial resources trying to penetrate the sector. The high set-up costs, therefore, discourage new entrants since they increase the break-even output and eventually force new firms to wait for long before realising profits. The high costs involved in the start-up process could also be sunk costs such as advertising and marketing costs, which are unrecoverable in case the new firms feel the pressure of leaving the industry.
Monopoly structure in Australia
Monopoly is Australia has been witnessed through actions of Telstra, a leading telecommunications company that sells broadband, telephone, and other services to retail customers. The company occupies a unique position in the Australian market since it sells services to other telecommunication companies including Optus, TPG, and iiNet. Such moves are strategic since they involve vertical integration process where Telstra manages to have absolute control over other firms. Telstra has also been involved in buying of other firms as it seeks to remain dominant within the industry. Evidence of Telstra’s monopolistic nature was also provided by the fact that the company refused to provide 4 G services to wholesale providers thereby limiting wholesalers influence in the market. Denying other firms 4G services, therefore, made Telstra the sole supplier, which is a characteristic of a monopoly market structure. Limited competition, therefore, ensured Telstra achieved supernormal profits.
Monopolistic market structures in Australia
Monopolistic market structures are common in industries where products and services differentiation is possible. Such services in the Australian market include the restaurant businesses. The restaurant industry is characterised by many competitors who sell products that are different from each other since they all focus on providing unique value to customers. Many small businesses such as hairdressers in Australia also operates in the monopolistic structure where they try to offer something different, but they all compete for similar customers. With monopolistic competition, each frim makes independent decisions on the prices to charge and the level of production. Furthermore, the knowledge of the market is widespread among consumers such that with the case of restaurants, consumers are able to go through the menu available and fully appreciate the services and food after they have dined. Additionally, there is freedom of entry and exit in a monopolistic market unlike in Monopoly and oligopoly structures. Products in monopolistic markets could be differentiated physically regarding the features. There is also market and distribution differentiation where firms across Australia use various channels such as internet selling to reach out to customers.
Conclusion
Different industries have varying market structures across Australia implying that firms have to understand the nature of the market before deciding to invest their resources. Among The structures are an oligopoly, monopoly and monopolistic markets where firms deal in different products. The case of monopoly is reflected in the telecommunication sectors through the example of Telstra Company; oligopoly is reflected by grocery supermarkets including Aldi, Coles, and Woolworths. Lastly, businesses such as hairdressers and restaurants operate in monopolistic markets where products and services differentiation are key to attracting and retaining customers.
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