An oligopoly is a form of a market where a specific industry is under the control by a little volume of powerful retailers known as oligopolists. The dominance of the marketplace by way of a few key players creates too little competition in the market which results within an increased cost of the products and services being provided by that particular industry (Federal Trade Commission).
Due to having less key players; the competition brings a certain level of transparency at owner level where all suppliers know about the particular other does. This market is knit meticulously collectively that even the tiniest of decisions by anybody of the organization in it is affected by other styles, and has the ability to impact other companies in a huge way. Having few players in the market will make it easy for a corporation to keep an eye on its competition, but it addittionally has a downside.
Though there are just a few sources affecting the business, the quantity of ability they can exert onto the others is incredibly large. Hence the level of strategic planning undertaken by oligopolists needs to consider and look at the expected responses some of their market members might generate consequently of their activities.
Strategy implementation can be an extremely important task for interdependent industries and consists of decision like whether they are going to be market leaders, if they want to use a new strategy before every person else or hang on and observe how a specific decision for a rival pans out before putting into action it. In establishments where there is a great deal of competition, the first mover and second mover gain differs from an oligopoly create. It could be quite often case that there are only two players in the industry so the degree of competition might be not be trim neck but companies have to choose what market position will be more beneficial to their ultimate goal (Economics Online).
Though the major description of oligopoly is that the market is dominated by only a few players, however, there is a possibility that there might be a few small players engaged along with the few major players on the market (Economics Online).
Oligolpoly has to offer several advantages along with drawbacks. Talking about its downside, it is not the ideal market from for consumers. It reduces the amount of options available to them not forgetting the fact that these form of highly focused market with the extremely reduced level of competition results in overall high priced products whose result is not so large. Also, it becomes possible for the major players to improve the barriers of entry in order to deliberately stop other players from stepping into the marketplace.
It is said that oligopoly is possibly dangerous to the overall economic well-being. Furthermore, companies functioning in oligopolies do not pay much focus on consumer needs, since consumers do not have a whole lot of options available to them; oligopolies have no fear of losing their customers and are often inefficient (Economics Online).
Despite all these negatives, oligopoly has certain benefits to offer as well. For oligopolies that choose extremely competitive strategies, they become quite like the regular market structure where there is high level of competition which produces benefits like low and contending prices. The overall market is probably not uncompetitive however the habit of the organizations within the market doesnt need to be. Another attribute of oligopolies is that they are innovative and often come up with services and keep improvising their business processes which eventually is to the benefits associated with the buyer (Economics Online).
Promotional competition is really important as it pertains to market segments with differentiated products. The advert employed by such kind of firms can basically have two possible effects, to increase recognition and hence sales or even to persuade the customers to switch the brand they are currently using (Hamilton). Quite question to answer is that with billions being spent on advertising, when advertising becomes inefficient (Dukes).
Advertisement Impact- Oligopoly
Advertisement in oligopoly marketplaces is somewhat unique of the other market segments. However it is closely argued that that the efficiency and effectiveness of advertisements is very dependent upon the amount of product differentiation that is present within the market for there are many times when the consumers have varied preferences for certain product characteristics but are unaware of the characteristics of certain brands without aid from informative advertisements. The advertisements activity uses the persuasive dynamics of the adverts which corresponding to them has quite a while influence on consumer and hence is uses to ensure that consumers do not transfer to a competing brand (Cellini, Lambertini and Mantovani).
In compare to monopolies where there is perfect competition and advertising campaign can be used to just make awareness rather than increase market share, oligopolistic firms have an overabundance to gain from advertising. The major gain they enjoy from advertisements is the fact it can help them increase their overall market share and can also influence the demand of these product and lead it to rise. To achieve both these goals, the company must properly set up the supremacy of what they are providing in terms of the products compared to their companys rivals. While guaranteeing their customers that their product is preferable to their rivals, they need to ensure that they have a responsive intend to the rivals advertisement initiatives because as already discussed, a rival advertisements gets the full probable of affecting the company almost all the if not more than the company who designed the advertising campaign for themselves. Hence it is these reasons that bring about a high attentiveness of advertisements as it pertains to oligopolistic market segments.
On a wider spectrum, advertising may not produce results that show that customers have been impacted. On the other hand, it is also quite possible that advertising leads to better and more increased consumer benefits as well as efficiency. When advertising actually reaps results and produces a rise in sales, and hence causes the entire production to increase, it often leads to economy of size.
Hence ad just does not reaming a flashy mass media activity but gets the power to effect one of the major financial goals of firm- its market of range. However, it always should be remembered that tossing around the word advertisement is simple but it can be an extremely costly activity. Hence advert may improve efficiency but its benefits will have to be weighed against the price incurred to produce a clear assumption of whether it is good for a company or not.
However, it is also important to remember that in oligopolistic market segments, because there are many key competitors, they are all major firms and they more often than not have resources to spend on the top mass media activity of advertising campaign.
Advertisement in oligopoly eventually helps the customers in the decision making process. Whenever there are not a huge amount of products for customers to choose from, they have got enough time to extensively research each one of the limited available choices before they make the purchase decision. The amount of research drastically boosts when the merchandise bought are high engagement.
In these situations, the advertisements are extremely useful and are a low cost way of providing everything necessary to facilitate a buy to the client. It is rather beneficial for the customer for he does not have to put in any effort on the part to obtain the right information. The applications of the entire process where the customers are helped by advertisement rely on the actual fact that these adverts have to be designed in order to portray information and nit just to draw in customers.
The need for informative advertising grows to a new level in this case for people are not interested about knowing what options they have got, the most probably are aware of the options available to the for these options are so few. The advertising campaign must be such of a sort that it tells about the features of the merchandise and not about its mere lifetime. If this form of advertisement is adopted by firm within an oligopolistic form of market, they will definitely benefit from it and so will their customers which will enhance the overall efficiency of the firm.
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