The business world has become very competitive and this has forced many companies to look for ways to be ahead of others in the market. They have adopted various strategies like advertisements, trade fares and exhibitions, gifts, after sale services and offering huge discounts on their goods and services.
However, all these mechanisms have been adopted by almost all companies and this makes the competition to gain great momentum. This has led to some of them adopting the use of monopoly in order to stay ahead of other companies in the market. This research paper outlines the various factors that relate to the issue of monopoly.
Monopoly is a practice that involves a company taking charge of the production and distribution of a particular good or service to the consumers. The company is given the sole right of this process by the state and no other company is allowed to offer such services (Orbanes 12). Whenever a company is given this opportunity, it enjoys all the market demands since there are no other companies to compete with and production costs become very low.
Monopoly occurs as a result of two main forces that necessitate companies to specialize in this practice. The most common way through which a monopoly is founded is through government enforcements by legislation of policies that outline how the companies in question will operate. The government may decide to monopolize a company due to a number of reasons.
First, when a company or institution deals with the provision of very sensitive commodities or services that may threaten the states security when left under the control of private owners or many companies. These services include printing of currency, training of military personnel and provision of arms and ammunitions. Secondly, when the services provided are very basic and essential for survival for example, the provision of national identification cards, voters cards and registration of births.
Furthermore, when the existing companies continuously exploit the consumers through provision of substandard goods and services or when they offer very high rates and costs for their services and goods. In addition, monopoly can be achieved when a company makes very impressive steps that attract a greater percentage of the market. Consumers will always be tempted to believe such companies are the best in the market while others are just participators (Acemoqlu 43).
Whenever a company enjoys the greater percentage of the market there are very high chances that this will force other upcoming and struggling companies to shut down leading to very few companies remaining to offer the services. Therefore, monopoly can be achieved through self growth and expansion of a company depending on the success of the strategies adopted to market their goods and services.
The degree of monopolization usually varies from country to country and various companies have different levels of penetration in the market. There are two types of degrees of monopoly by companies in various countries and these are absolute and partial monopolies.
Absolute monopoly occurs when a company decides to take charge of all the processes involved in the production and distribution of goods or services. In this case, there is no other company allowed to participate in the production or distribution of such services or goods. In many countries absolute monopoly is evident in the provision of military services and supply of electricity. This is always necessitated by the sensitivity and the nature of risks involved in the production and distribution of the said services.
Partial monopoly occurs when a company takes a specific part of the production and distribution process of goods or services. This is usually common when a country wants to privatize some of its operations and still maintain the basic elements of the processes.
This type of monopoly is also evident when a company ventures in an activity that requires a lot of capital that can not be raised by a single company hence, necessitating the need to merge with other companies to provide the services. In this case a company may decide to monopolize the production process and delegates the distribution processes to other companies.
Sometimes companies achieve temporary monopoly in markets after the government grants it to them. Sometimes there are services that are essential for human survival but the government feels its operations are not being done well. In this case such operations are delegated to the private sector through a process of privatization to improve their efficiency (Kennedy 71).
Some countries use this process of partial monopolization to attract investors to their countries and boost developments in areas that were underdeveloped. In other occasions a country may be having insufficient funds or technology to exploit its natural resources and therefore, offers temporary monopoly to companies that are very experienced and economically stable. Such operations include oil exploration and tourism industry.
Monopoly has its own shares of advantages that make it very applicable in many instances. One of the greatest advantages that come with monopoly is specialization in the provision of goods and services. Specialization leads to innovations and inventions of the best ways to provide goods or services. Such commodities are usually of high quality that corresponds with what consumers pay.
Secondly, monopoly eliminates an unnecessary competition that usually puts the consumer’s health at risk. This is due to the fact that whenever there are unhealthy competitions producers usually forget the quality of what they produce as their attention is fixed on how to increase sales at the expense of other factors.
Monopoly also ensures that essential services are offered throughout the year and eliminate hording of commodities. Monopoly also helps to promote local companies to develop and this encourages local investments. However, despite these advantages of monopoly to the government and consumers, it has its shares of disadvantages. The most outstanding shortcoming of monopoly is the possibility to compromise the standard of goods produced due to lack of competitors in the market (Coe 132).
Monopoly discourages other smaller companies from developing and therefore hinders developments as new entrants in the market fear stiff competition from well established companies. Lastly, in the event that a big monopoly company collapses due to unavoidable reasons it becomes difficult to fill the gap left as the market demand is usually very high.
Some companies that have achieved monopoly include the Armco Company that has enjoyed being a lone ranger in the oil sector since its establishment. The AT and T merger with T-Mobile is also geared towards enjoying monopoly in the near future should their association bear fruits. Google Company had also enjoyed immense control of the online market until Microsoft Company came in and threatened its monopoly.
Monopoly is as good as the company that has the mandate of provision of these services. However, monopoly should be guided by professional, legal and social ethics in order to ensure they use their market influence in a positive manner.
Acemoqlu, Daron. Why Nations Fail: The Origins Of Power, Prosperity And Poverty. New York: Crown Business, 2012. Print.
Coe, John. The Fundamentals of Business – Business Sales and Marketing. New York: McGraw Hill, 2003. Print.
Kennedy, Rod. Monopoly: The Story behind the Worlds Best Selling Game. New York: MJF, 2006. Print.
Orbanes, Philip. Monopoly: The Worlds Most Famous Game. New York: Da Capo Press, 2007. Print.