By: Muzhinga Kankinda
According to Lorie Tarshis, a monopolized market is simply a market which has a single seller of a particular product in a given market place while an oligopolistic market refers to an industry that has a few sellers. The term itself is derived from the Greek word ’oligos’ which means few.
For business men and women, assessing markets has always been crucial to business management and especially in this time of the pandemic because it gives them a clue on which market to sell their products at since making profit is highly significant in the world of products and services.
When we hear the term ‘Monopoly’, we always assume it is something to deal with exploitation. This is because a monopolist market is handled by a single firm and this means that their products and services are subjected to limited competition only. For example, among other metals that are mined in Zambia, Copper is the leading metal and if the Copper mining industry in Zambia was made up of one firm, the particular firm’s product which is copper would not face any competition because it is the only existing copper mining firm hence, single handedly handling the copper industry. The only competition the monopolistic copper mining firm would have to deal with is from other metal industries like Cobalt, Mercury, Aluminum and gold. However, there are products which do not or cannot face competition from other products in this world. This means that there is an absence of close competition and this has an important effect of the elasticity of demand of products of a monopoly market. This is due to the fact that Customers’ response to changes in regards to price rise or fall; a very significant element in a competitive industry is either weak or non-existent.
For instance, in the event that there is only one Maize mealie-meal manufacturing company in the entire Zambia; whether the prices increase or decrease, consumers will be unable to shift to another mealie-meal company because it doesn’t exist. Although some buyers may shift to a substitute product like cassava meal or rice during price increase, there will only be a smaller decline in the demand of Maize meal and there will be a smaller rise when prices are lowered in that the diverted consumers will have returned to buying maize meal once again.
This also applies with ZESCO; being the only Hydro-electricity company in Zambia puts ZESCO on the list of monopolistic government companies with no hydro-electricity competitors and limited competition which comes from Solar Energy companies and Generator manufacturing companies. With the ongoing inconveniencing load-shedding schedule, people in Zambia would have shifted to another company which supply hydro-electricity. But this is not the case because ZESCO 9is a single supplier of hydro-electricity and has limited competition from Solar energy which is abandoned once hydro-electricity is restored.
Therefore, we can say that a monopolistic product does not face issues of lowering costs of production and staying in business because there is no competition to run it down.
Meanwhile, with more than one firm selling a product, an oligopolistic market has a rather different pattern of trade. Firstly, there is an assumption that in a strong competitive industry of beverages, for instance, Firm X’s product would be highly elastic if the firm were to lower the prices of its beverages as this means it will be able to attract a significant number of customers to its products when compared to other beverage manufacturing firms. The second assumption is that other firms; A, B and Y will automatically opt to increase the prices of their beverages as soon as Firm X raises the prices opt its beverages. These are referred to as prices wars in oligopoly markets and they occur from time to time; more especially when there are few companies involved and their products are homogeneous.
companies in oligopolistic markets are almost always in a vigorous competition with one another through acts of product improvement, innovation, creation of brand preferences and provision of special services or offers to consumers, and there is no restraint when it comes to working hard and putting in more effort to build up sales; even if it is at the expense of other firms.
Looking at both categories of markets, it is imperative to note their cons too. A monopolist Firm may take advantage of having no competition to relent on product quality improvement and innovation because the firm knows that customers have but one firm to buy this particular product from; they simply have no choice because it is the only firm they can buy particular product from. however, while oligopolies are always concerned by rebranding, improvement and innovation, firms in oligopolistic industries have a risk of bankruptcy and eventually closure because competition to stay in business is high.
