Discuss The View That Monopoly Power Is The Natural Result For Firms Who ‘Win The Game’ Of Competition?

2761 words - 12 pages

Discuss the view that monopoly power is the natural result for firms who ‘win the game’ of competition?

Monopoly power or market power is the ability for a business to earn high levels of profit by being able to choose their pricing strategies in their market and being able to raise to what they want in the same market and don’t have to worry about to losing costumers if they have true monopoly power then price still shouldn’t effect there demand. Being a monopoly means they are the only supplier in that market. They are able to keep their prices high for a sustainable amount of time. There are only certain companies that are able to higher prices for measurable periods of time these ...view middle of the document...

However they are able to do this and profit from this pricing strategy due to either sheer size in that one market or a brand that is greater than the change in price Apple and Microsoft are proven examples of companies that have other competitors in the same market but still are able to change prices with little fair of external competition moving in on the market
Apple, only allows the retailers a small discount on its products from the ipod to apple mac and ipad. With on a small percentage difference between what the sell them at themselves to what they sell to other retailers for the brand itself and demand means that Apple can implement this and do not have the be concerned with lack of sales or interest. With the gap being such a small amount to retailers from the supplier it means that the sellers do not make much of a discount compared to the apple shops themselves. Retailers have relatively little incentive to carry Apple products, or to dedicate precious retail and advertising space to them, if the potential profit from sales is so low. On the other hand, large chains often turn a barely profitable product into a "loss leader," selling it below cost to increase customer traffic or to boost sales of ancillary goods that have a higher profit margin. To deal with this tactic, Apple supplements its tiny wholesale discounts to resellers with more substantial monetary incentives that are available only if the resellers advertise its products at or above a certain price, called the "minimum advertised price" (MAP). This arrangement enables retailers to make more money per sale, but it prevents them from offering customers significant discounts, resulting in the nearly homogeneous Apple pricing we're used to seeing. The strategy helps Apple make more money on direct sales, and avoid having to compete against marked-down prices offered by its own resellers. Since Apple's own retail operations are among the most profitable in the world, undercutting their prices for the sake of a wider distribution network would be counterproductive. Apples strategy is an effective one that means that only the company itself can make and real profit on the products themselves. Apple are the best example of how to ‘Win the game’ they do not allow anyone other company, retailer or supplier to make much of a economical profit themselves. Buy building up a solid brand identity and market it means they truly hold the power in the markets in which there products are sold. Even though the software and concept of their products are not ground breaking they are the still the market leader in the table, home computer, laptop and Ipod/mp3 4 this has happened because they were able to cerement there market continue to bring in new costumers and by keeping their prices high compared to other competitors in that market become the ‘must have’ item in that market compared to others even though apples value for money for the product is relatively low compared to others figure...

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