An Oligopoly Is Characterized By A Small Number Of Firms

An Oligopoly Is Characterized By A Relatively Small Number Of Firms Of

An oligopoly is characterized by a relatively small number of firms offering a similar product or service. Oligopoly products may be branded, as in soft drinks, cereals, and athletic shoes, or unbranded, as in crude oil, aluminum, and cement. The main distinction of oligopoly is that the number of firms is small enough that actions by any individual firm on price, output, product style, quality, the introduction of new models, and terms of sale has an impact on the sales of other firms in the industry. Review the Table 12.1 (pg. 416), select a dominant single firm - Athletic shoes (Nike), duopoly firm - Appliances (Best Buy), and triopoly firm - Rental Cars (Enterprise) and discuss if you foresee any weaknesses in three firms you selected that would allow entrance into this market or if one of the firms has enough strength to become a monopoly? The response should be around 300 words with in-text citations and follow APA format.

Paper For Above instruction

The dynamics of oligopolistic markets are characterized by a small number of firms wielding considerable market power, yet the potential for new entrants remains an ongoing concern. Analyzing Nike, Best Buy, and Enterprise within their respective markets reveals distinct strengths and vulnerabilities that could influence their long-term dominance or susceptibility to competition.

Starting with Nike, the dominant player in athletic shoes, its strengths lie in brand recognition, extensive distribution networks, and innovation capabilities. However, potential weaknesses include high product prices that may deter price-sensitive consumers and the increasing presence of emerging brands offering similar quality at a lower cost (Keller, 2013). Furthermore, the rise of direct-to-consumer sales channels reduces dependency on traditional retail outlets, potentially challenging Nike's market control (Drake, 2020). These vulnerabilities could be exploited by new entrants with innovative marketing or cost-efficient production strategies, illustrating that Nike's strong position is not unassailable.

Best Buy, operating in the appliance retail duopoly, maintains its position through product variety and competitive pricing. Nonetheless, its weaknesses include competition from online retailers like Amazon, which offers convenience and often lower prices, and the decline of brick-and-mortar stores impacting foot traffic (Brynjolfsson et al., 2013). These challenges open avenues for new online-only entrants or niche retailers that focus on specialized or eco-friendly appliances, potentially disrupting Best Buy’s market share. Thus, while Best Buy has established brand loyalty, its reliance on physical stores remains a vulnerability.

Enterprise, a key player in the rental car triopoly, benefits from extensive fleet management, loyalty programs, and broad geographic coverage. Yet, emerging transportation modes such as ride-sharing services like Uber and Lyft threaten traditional rental agencies (Cohen & Kietzmann, 2014). Additionally, the COVID-19 pandemic accelerated changes in travel behaviors, which could reduce demand for rental cars and expose Enterprise to market share erosion. These factors suggest that Enterprise faces potential threats that could lower entry barriers or challenge its market dominance.

In conclusion, all three firms demonstrate substantial strengths that sustain their market positions; however, each faces vulnerabilities—be it technological shifts, emerging competitors, or changing consumer preferences—that could facilitate market entry or transformation. These threats necessitate ongoing strategic innovation to sustain their oligopolistic power or prevent the emergence of a monopoly (Porter, 1980).

References

• Brynjolfsson, E., Hu, Y. J., & Rahman, M. S. (2013). Competing in the Age of Omnichannel Retailing. MIT Sloan Management Review, 54(4), 23-29.
• Cohen, P., & Kietzmann, J. (2014). Ride on! Mobility Business Models for the Sharing Economy. California Management Review, 56(2), 93-112.
• Drake, P. (2020). The Impact of Direct-to-Consumer Strategies on Nike’s Market Position. Journal of Brand Strategy, 9(2), 150-164.
• Keller, K. L. (2013). Strategic Brand Management: Building, Measuring, and Managing Brand Equity. Pearson Education.
• Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press.