Why an Oligopoly?
What is an Oligopoly Market Structure?
An Oligopoly market structure is what is known as an imperfect form of competition. Aspects such as a few number of firms within the industry, particularly large ones owning a significant share of the particular market, the products sold by the firms within the market being similar but with some amount of variation, and significant barriers to entry for other firms attempting to enter the industry due to the few more powerful firms already controlling the industry all are characteristics of an Oligopoly. Within an Oligopoly, the major firms operating within it constantly monitor the behavior and actions of other rival firms, leading to great deals of competition existing with the industry. An example of such competition could be major firms price-cutting to drive out smaller firms attempting to enter the market, but then eventually landing themselves within a price-cutting war with a rival firm due to the competition that exists between them and the aim of getting the lowest prices to attract the most customers.
HistoryA factor which influenced us to choose a firm operating within an Oligopoly was the rich market based history of Woolworths and its large rivalry with Coles. This rivalry is what the Oligopoly market structure of the Australian supermarket industry is based on.
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Products and LocationAnother couple of factors include the location of where the Oligopoly exists and the products that they sell within the market structure, with the location of the Oligopoly being based in Australia & New Zealand rather than a much more varied location such as over a large number of countries (for example apple), and the similarity of products sold and the capability for the firms ability to manipulate their prices with relative ease.
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Competition and BarriersThe competition and barriers to entry withing the particular Oligopoly Market Structure that was chosen was probably the most important factor that influenced our choice of Woolworths, due to the heavy competition between Woolworths and Coles and the high barriers of entry that both firms have set (along with the implication that come along with the particular barriers).
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