Market Structures In Australia: Monopolistic Competition And Oligopoly

There are several different forms of markets that exist in Australia, the most notable of which being are monopolistic competition, monopoly, and oligopoly. The market structure should be alive and dynamic in character. It is because that market structure is adjusted in response to changes in market demand and variations in the amount of competition in the marketplace. When altering the structure of a market, it is essential to consider the qualities and preferences of the customer and the influence of the market change on the product being sold. In regard to this report, these market structures are analysed with the help of the Australian market through the use of a few examples.

Market Structures in Australia

As per the market analysis, the following are different types of market structures in Australia that are explained with the help of a few examples.

Monopolistic Market:

A monopolistic market is one in which there is no alternative for a product or service. It may change prices of products and services without regard to market circumstances or variations in the demand-supply curve since it is the only producer of the commodity. In this case, the company may prevent new rivals from entering since they control the production (Mosca, 2018). The government holds power, water, and public utility boards (Leong and Li, 2017). Because of their dominant position in the market, monopolistic companies are sometimes referred to as ‘price-setters.’ Aside from this, certain monopolies are listed on the ASX and hence traded in Australia. These firms may make a lot of money because they have market dominance. For example, Sydney Airport is a monopoly asset owned by the Australian government due to its vital position in the aviation sector. Sydney Airport is Australia’s only airport that provides enough and excellent services to inhabitants and visitors, consequently boosting the Australian economy (Australian government, 2021). The Australian government protects Sydney Airport’s monopoly by preventing new rivals from entering the market.

Oligopoly Market

A small number of market influencers dominate an oligopoly market. It is also known as an imperfect market due to its peculiar structure. In an oligopoly market, just a few companies manufacture comparable items. In an oligopoly, existing players control new entrants. In an oligopoly market, the entities acquire the most shares. Because a tiny group controls the market, they offer all comparable items at the same price to eliminate competition. Although the things are the same price, the entities compete to sell more to generate more significant profit (Wellmann, 2004). Major Australian oligopolists include Kellogg’s, Coca-Cola, Dunlop, and Bridgestone. The Australian telecommunications sector is now a large oligopoly market with a considerable influence (The Sydney Morning Herald, 2022). Telstra was the only major player in the Australian telecommunications industry until other players entered. Later, Vodafone and Singapore-based Optus joined the market, endangering Telstra’s stronghold. It was reported that Singapore Telecom is delisting from the ASX and bringing Optus into the market to compete with Telstra. Despite initial difficulties in Australia, Vodafone has solidified its market dominance after resolving network concerns. As can be observed, the oligopoly dominates most markets in Australia (The Australian Financial Review, 2022). On the Australian market, a few significant corporations dominate each sector, and investors choose to invest in these companies for better returns. The Australian government has now formed the Australian Competition and Consumer Commission to protect consumers against monopolies and duopolies. Currently, the ACCC has established and set the amount that Telstra may charge rivals to use and access its network (The Sydney Morning Herald, 2022). It was an ACCC control measure to control and regulate Telstra’s exorbitant pricing.

Monopolistic Competition Market:

Another type of market that exists in Australia is the monopolistic competition market. This market structure in Australia is extremely dominant and prevalent in the country. According to this market structure defined by Nikaido (2015), this type of market does not impose any type of restrictions on the entry and exit of business entities from the market. As a result of this, it can be stated that this market structure is a “perfect form of market structure.” In this type of market structure in Australia, the product has similar in their characteristics but distinct from one another.

In an event if one product is not available, another product can be substituted by a company as an alternative of that product. It is very effective for the firms to mitigate the last minute changes in the customer’s needs and preferences as well as changes in product’s in a monopolistic competition market (Nikaido, 2015). In monopolistic competition market, the majority of businesses rely on advertising to influence the buying behaviour and preference of customers for generating more profit than developing customer base. The entities engaged in monopolistic competition gives the importance to increase their goodwill in the market; as a result, they see the significant increasing in the brand value of that product. Further, it has been observed from the analysis of that market structure that taste of buyers are inclined and they show their loyalty for a particular brands in the place of individual products. It is because that customer is ready to spend more money to purchase that product (Brakman and Heijdra, 2001).

This market structure can be better understand with the help of an example of Starbucks that had been providing standardised products to its customers for a long period of time to meet their needs and demand in the place to target new customers always. Hence, it had failed to identify the tastes of the local people because of the limited availability of product line (Turner, 2018). Starbucks made some changes in its product development after failure, but the new strategy of the company did not go into effect. It is because that the company failed in recognising the preferences of target customers. Further, the cost of its products was high than the purchasing capacity of the target customers in the Australia. Comparing the prices of Starbucks’ product with local companies in cafeteria, the prices of products were extremely high. As a result of this strategy, company could not justify its customers for its price strategy (businessstudiesqa, 2021). As a result, the most well-known coffee brand in the world failed in Australia in predicting the term for customers’ retention because company was unable to introduce any new product to its target customers in existing market.

As per the above discussion related to the different market structures, it is clear that Australian markets are dominated by an oligopoly market structure in the majority of cases rather than others. Australia does have monopolistic markets, but they are mostly restricted to public sectors and are few in number. Further, monopolistic market structure is also not very effective for the companies in the country. Due to the fact related to the market structure of Australia, it is a highly competitive marketing structure and it is difficult for new entities to survive in this structure. The monopolistic competitive form of market structures in Australia is rarely followed in the country.

Conclusion

The paper concludes that Australia is embracing monopolistic market arrangements in its industry despite fierce global competition. The monopolistic market structures in Australia choose to spend their money developing new path-changing inventive approaches via extensive research and development.

References

Australian government 2021. Western Sydney Airport. [Online] Available at: https://www.westernsydneyairport.gov.au/ (Accessed: 05 January, 2022)

Brakman, S. and Heijdra, B. 2001. The Monopolistic Competition Revolution in Retrospect. Cambridge University Press.

businessstudiesqa 2021. STARBUCKS (Failure in Australian Market). [Online] Available at: http://www.businessstudiesqa.com/2017/12/starbucks-failure-in-australian-market.html (Accessed: 05 January, 2022)

Leong, C. and Li, L. 2017. Singapore and Sydney: Regulation and Market-Making. Water, 9(6), pp. 434; https://doi.org/10.3390/w9060434

Mosca, M. 2018. Monopoly Power and Competition: The Italian Marginalist Perspective. Edward Elgar Publishing.

Nikaido, H. 2015. Monopolistic Competition and Effective Demand. (PSME-6). Princeton University Press.

The Australian Financial Review. 2022. Telco oligopoly gets big tick from ACCC. https://www.afr.com/chanticleer/telco-oligopoly-gets-big-tick-from-accc-20190228-h1bup1

The Sydney Morning Herald 2022. Telco oligopoly gets big tick from ACCC. [Online] Available at: https://www.afr.com/chanticleer/telco-oligopoly-gets-big-tick-from-accc-20190228-h1bup1 (Accessed: 05 January, 2022)

Turner, A. 2018. Why there are almost no Starbucks in Australia. [Online] Available at: https://www.cnbc.com/2018/07/20/starbucks-australia-coffee-failure.html (Accessed: 05 January, 2022)

Wellmann, A. 2004. Oligopolies. A Definition of Oligopolistic Markets. GRIN Verlag.