Discuss about the Market Structures in Australia for Competition Level.
Market structure revolves around market characteristics such as the strength of sellers and buyers, competition level, and degree of product differentiation. The structure of the market mirrors all the most essential parts of the market. The areas of the market include the quantity of companies in the entire industry, the kind of items produced, the likelihood of the companies to enter or exit the market, number of clients, and the capacity of an individual or solitary organization to impact the general market price. The lower the association's ability to affect the market, the more aggressive the business is considered. In the restricting situation where the level of impact of one company is zero, the market is said to be perfectly competitive.
Organizations and business throughout the time they live joined to the four types of market structures. This exposition will give a few cases of the four market structures found in Australia such as Monopoly, oligopoly, duopoly, and monopoly. Businesses and organizations can move starting with one market structure then onto the next structure of the market amid the time of operation. These progressions between the structures might be the consequence of item changes, high rates of rivalry, government regulations, and the consumer interest. This paper will give clear cases on every market structure.
The Australian Post, Western Power, and Water Corp are examples of natural monopolies found in Australia. The State Government regulates them for the purpose of ensuring that consumers receive best services at a subsidized rate. Apart from providing quality services and employment opportunities, the organizations act as sources of revenues for the government. Funds obtained from the companies are channeled towards other sectors such as education, health, and infrastructure. One the other hand, there has been massive criticism from various members of the public concerning the performance of the state-owned companies. Criticism has been on a high note with more complaints relating to poor services, high prices, consecutive losses and exploitation of the consumers. For these reasons, the state government has decided to privatize some of its corporations such as Western Power. The government intends to sell the majority of its shares (51%) to individuals and the remaining amount to remain operational in the stock exchange as part of the public share. (Foster, 2016, par 1-2). This move means that the natural monopolies remaining will be Water Corp and Australian Post.
Woolworths and Coles are perfect examples which exhibit duopoly as a market structure in Australia. (Aldi & Lidl, 2015, par 1-10). The two supermarkets have been reaping massive profits from their sales. The high net profits have been linked to various contributing factors such as the price power, competition, and legal factors. Reports have emerged that the high profits are as the result of great rebate discounts which the companies receive from the suppliers. Since they are among the major retailers and wholesalers, the two are said to possess purchasing power, and in most cases, they dictate the rebate discount. Efforts by various activists to defend the suppliers against the price exploitation by the two companies have borne no fruits. Government through its commissions of inquiry reports non-existence of such manipulations. Apart from exploiting the suppliers, the duo has also been lowering the prices of their commodities to drive the rivals out of the market. The government has been criticized for turning a blind on the situation which has led to the dominance of the two competitive corporations in the Australian market.
Oligopoly is the most common type of market structure in Australia. Examples of oligopolies in Australia market include Kelloggs, Hoyts, Dunlop, Bridgestone, Carlton United, Coca-Cola, and Dulux. Companies under this type of market produce differentiated products which are meant to perform a similar function. For example, Dunlop and Bridgestone companies provide car tyre. Although the products manufactured by the two companies serve the same purpose, differentiation in relation to target market and performance draws the line between the duo. Most of the tyres produced by Dunlop Company are characterized by features such as durability, cost-effective, excellent braking, handling, and cornering. Those manufactured by Bridgestone Company possess features such as quality, durability, smooth ride, and economical when it comes to fuel consumption. The main aim of firms under this type of market is to increase the level of profits. This objective is achieved through various measures such as product differentiation. (Gans, 2011, p. 380).
This is a kind of imperfect competition whereby firms sell goods which are differentiated in relation to branding, quality, and packaging. In Australia, such businesses include the hotels and restraints. Examples of top competing hotels which fall under the category of monopolistic competition include Avenue Hotel Canberra and the Provincial Ballarat. The two hotels provide the similar type of services and goods but what differentiates them is the quality of products they provide to the customers. Apart from the hotel industry, monopolistic competition has also been observed primarily in the coffee industry. The industry is made up of various firms which enjoy a particular share in the market. Some of the major holders of the market share include Folger (21.6%) and Maxwell House (14.62%). In this type of industry, there is free entry and exit. Ease of entry and exit in this kind of market is attributed to various factors such as low cost of investment and less or no barriers. It has been estimated that the average cost establishing a well-functioning coffee business ranges between $20,000 to $375,000. This range implies that even small businesses can fit into the coffee industry and are free to leave once economic profits have been exhausted.
The Australian market is made up of several market structures such as monopoly, oligopoly, duopoly, and monopolistic competition. Examples of monopoly markets include state-owned corporations such as Western Power, Australia Post, Water Corp among others. Oligopolistic markets include Dunlop Company and Bridgestone Company. The two firms are well known for producing best car tyres but what differentiates them is product differentiation. Perfect examples of organizations which practice duopoly in Australia include Woolworths and Coles. The two have been under constant criticism for exploiting suppliers and engaging in price wars to drive small businesses out of the market. The coffee industry is an example of monopolistic competition characterized by few barriers of entry and ease of exit.
Aldi & Lidl 2016. Tomorrow, not quite the world. The Economist. [Online]. Available at: https://www.economist.com/news/business/21646224-german-discounters-successful-business-model-only-stretches-so-far-tomorrow-not-quite [Accessed 30 November 2016].
Foster B. 2016. Barnett government announces sale of Western Power. The Sydney Morning Herald. [Online]. Available at: https://www.smh.com.au/wa-news/barnett-government-to-announce-sale-of-western-power-20161130-gt0izl.html. [Accessed 30 November 2016].
Gans, J. 2011. Principles of economics. South Melbourne, Vic, Cengage Learning.