Question

Give an example of an industry with an oligopolistic structure. What are the main products/services offered by this industry? What are the main firms in the industry? To what extent the products/services from this industry are homogeneous? What is the level of concentration in the industry? How would you characterize the barriers to entry in the industry?

Answer 1

An oligopoly can be defined as a market structure in which there are only a few firms which fulfil the demand of the market. When there are only a few firms in the market, this kind of industry is said to be highly concentrated in nature. Despite having the dominance of only some organizations, there can be some small organization which can also participate in the market.

Example:- A typical example of oligopoly can be seen as in the form of National mass media and news outlets in the United States. In this industry, almost 90% of the total market is captured by the six major organizations which are Rupert Murdoch’s News Corporation (NWSA), CBS Corporation (CBS), Walt Disney (DIS), Time Warner (TWX), NBC Universal and Viacom (VIAB)

The products or services in this industry are highly homogenous in nature as all these organizations are involved in providing the latest news to the views and readers. As if an incident occurs anywhere in the USA or world, the main content remains the same only the way of analysis and presentation differs so we can say that only bottle is changed while wine remains the same.

The barriers to this industry are as below:

All these broadcasting channels have a control of 90 on total market share thus for any new entrant it will be very difficult to take its share n rest 10% of the market as there are many other news channels who are fighting for this share of the cake.

Due to very strong brand image and worldwide recognition of these organizations, the viewers will not be attracted towards the new entrant

This industry is focused on the mass distribution of material and coverage of reporters and respondents thus it will require huge upfront investment

Economies of scale is a matter of concern in this industry as it decreases drastically.