Oligopoly Examples

Oligopoly Examples

There are ample of examples for oligopoly. In the current scenario, the number of these type of players is increasing. It is totally the opposite of a monopoly. These allow multiple competitors to coexist. So consumers are having a list of companies for a particular sector. These are prevalent and that too within the wide cross-section of industries. Some of the common industries sectors where we can see it are Aviation Industry, Media Industry, Pharma Industry, Telecom Industry, Media etc.

Oligopoly Examples

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Oligopoly Example #1 – Technology Industry

The computer technology sector shows us the best example of oligopoly. Let us list out the computer operating software and we will find out the two prominent name Apple and Windows. These two players have managed the majority of the market share for long. There is one more player in this oligopoly named Linux Open Source. But apart from these three, there are hardly any players in this sector as they command almost 100 % of the global market share. The computer can be of any brand but the operating system will be for sure from any of the aforesaid three. They have achieved this stage because of two primary factors.

One is the brand image and trust they have created in the eyes of consumers and secondly the lack of players who can stand in front of these 3 at the same time building trust among consumers. Moreover, their dominance in this sector gets increased as the majority of computer software’s made are compatible with these three operating systems which in turn is making this oligopoly self-sustaining. Their innovations into their sector also keep them unique which helps them create an ecosystem that completely sustains their growth.

The same is the case for an operating system for smartphones where the majority market share is captured by Android & iOS. These companies are coexisting without creating a threat to others.

Oligopoly Example #2 – Media Industry

Let us take the media sector in the US where almost 90% of this sector is being captured by 5-6 players. At the same time, a 10% share is being captured by the other small players who command the chunk of viewership which includes the likes of Viacom, Disney, Time Warner, NBC. They capture a significant share in terms of operating rates and usage terms. When we look at the overall prime time programming and content selection we will observe that there is also considerable unity.

It means if they keep the same primetime on every channel then their viewership will be diversified. In that case, not a single player will be able to take the edge. So what they follow through their unity is looking out for the share of the same viewer base by deciding the prime time for individual channels mutually. By following this even though their scalability of the TV channels will get limited to an extent but across those ranges, all the players can co-exist and that too with relative gains. They are not supposed to face any cut-throat competition. As a result of this oligopoly, the relative cost will also come down for new foray.

Oligopoly Example #3 – Automobile Industry

The automotive sector in the United States shows a unique example for oligopoly. The trinity of Ford, Chrysler, and GM has come into the limelight because of technological excellence. They have offered stiff challenges and competition to the major players across the world. They have smartly dominated the entire space in the US local markets. They are referred to as Big Three in the US automobile sector which shows they hold a unique position there. They have single-handled the service automobile demand in the period 1950-1960 and they also earn a huge margin. It can be apparently seen the synchronized collusive actions taken by these three players.

It can be seen in their decisions of launching small cars, the sequence in which they rose the prices of cars which clarifies that these three players took a united and well thought of strategy. One may distinguish among the three on the basis of prices but on the basis of features, all are distinct. The trend between the periods 1960 – late 1970 was like Chrysler will announce the price rise first; second price rise will be announced by the General Motors. The strategy was that General Motors will announce in price rise less than that of Chrysler. Then Chrysler will reduce its price to General Motor’s level. Further Ford joins them in raising the price and all three settle to the price of the ford. However, this oligopoly is blamed as the main cause of the downturn in the US automobile sector.

Oligopoly Example #4 – Pharma Sector

The pharma sector is globally dominated by some key players. They are not only the leaders in new drug innovation but are also the price maker for drugs. The top three companies which we can refer to in our example are Novartis, Merck, and Pfizer. The threat of new entrant to this sector is the fairly limited reason being the whopping expenses which have to be met in developing a new drug.

Patents are being registered for the drugs which are in circulation which enable easy resolution of the issue at the same time it protects the new drug from potential competition. As a result, they are able to create an edge from their experiences which will help them in succeeding in the future as well. The oligopoly here works as a symbiotic fashion.

Conclusion

The aforesaid examples of oligopoly highlight the different aspects. The economic arrangement is the primary means which will help in getting a level playing field. But at the same time from the examples mentioned above, we can conclude that oligopoly is not conducive to raising a healthy competition. The downfall of the US automobile sector is a burning example discussed in example three related to the Automobile sector. Here each player aims at pulling the other down and focuses less on innovations.

The new entrant cannot easily enter because of barriers. Moreover, the high concentration reduces consumer choices and the consumers are being treated for granted by the companies. At the same time oligopoly helps in lowering the average cost of production of goods. If the extra profit marginProfit MarginProfit Margin is a metric that the management, financial analysts, & investors use to measure the profitability of a business relative to its sales. It is determined as the ratio of Generated Profit Amount to the Generated Revenue Amount. read more is being used in innovations then this suits companies having high R&D costs.

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This has been a guide to Oligopoly Examples. Here we discuss the practical examples of oligopoly which include the technology industry, automobile industry, media industry, and pharma sector. You can learn more about financing from the following articles –

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