Tuesday, 20 August 2013

MS 09 IGNOU MBA Solved Assignment - Describe how oligopolistic competition exists in the real world giving examples from FMCG Companies.

Describe how oligopolistic competition exists in the real world giving examples from FMCG Companies.

Ans :

OLIGOPOLY: A situation where there are only a few sellers in a particular economy who control a particular commodity.  They can, therefore, influence prices and affect the competition.  In India, an example of this would be mobile telephony - There are only a few operators, examples of which are: Airtel, Idea, BSNL, Reliance
PERFECT COMPETITION: This is an economic situation that really doesn't exist, in which a bunch of conditions are met, not the least of which are free entry and exit from a market, tons of sellers selling the exact same product, and tons of buyers for that product who have perfect knowledge of what it does and how it works.  An Indian fish market might be an example of something close to this (though real "perfect competition" doesn't really exist.) At the fist market, lots of sellers gather together to try to sell the...
Situations like perfect market exists for markets for most of unbranded staple goods such as food grain and vegetables. However it should be noted that there is a trend of branding more and more of such goods also, and in this ways making their markets become more and more like oligopolistic markets.
Oligopolistic markets are most common form of markets we get to see today. One of the most fierce oligopolistic competition exists in the automobile industry across the world.

In an oligopoly, there are only a few firms that make up an industry. This select group of firms has control over the price and, like a monopoly, an oligopoly has high barriers to entry. The products that the oligopolistic firms produce are often nearly identical and, therefore, the companies, which are competing for market share, are interdependent as a result of market forces. Assume, for example, that an economy needs only 100 widgets. Company X produces 50 widgets and its competitor, Company Y, produces the other 50. The prices of the two brands will be interdependent and, therefore, similar. So, if Company X starts selling the widgets at a lower price, it will get a greater market share, thereby forcing Company Y to lower its prices as well. 

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