When many businesses provide rival goods or services that are comparable but imperfect alternatives, monopolistic competition exists. A monopolistic competitive industry has minimal entry requirements, and decisions made by any one firm do not immediately affect those of its rivals. The price and marketing choices made by the rival companies serve as their points of differentiation. A monopoly frequently develops in many industries, and when well-known companies buy out smaller rivals, it might result in a new rivalry. The telecom sector and the presence of telecom monopoly is no different.
Understanding Monopolistic Competition
To properly understand monopolistic competition, first, you have to answer the question, ‘how do telecom monopolies exist?’ Between a monopoly and perfect competition, monopolistic competition combines aspects of both and comprises businesses with comparable but distinct product offerings. Industries with monopolistic competition include those restaurants, hair salons, household goods, and clothes. Numerous rival businesses compete to sell, advertise, and price goods like dish soap and hamburgers.
Demand is highly elastic for the products and services provided by rival businesses, and pricing is frequently a critical competitive tactic. One business may cut prices to increase sales while forgoing a more significant profit margin. A different product might charge more and employ packaging or marketing that implies higher quality or complexity. Businesses frequently use distinctive branding and marketing techniques to distinguish their products. The typical consumer often needs to discover the exact differences between the many items or how to evaluate a fair price because they all serve the same goal.
Can we consider the UAE telecom sector as a monopoly?
A perfect example is the UAE telecom market. Many can even argue it is the ultimate monopoly. For example, du, the telecom giant of the UAE, and a direct competitor in Virgin, are both owned by the same group. In comparison, the whole market is presented as a duopoly as well. A raging battle between Etisalat and du, but upon further examination, you can see the bigger picture. Both telco giants are backed and report directly to the government, presenting the perfect telecom monopoly power case in a perfect competition scenario.
A corporate philosophy known as cooperative competition directly borrows from game theory’s principles. Coopetition games are statistical models considering how collaboration between rivals can produce synergy. This idea is familiar to the telecom industry monopoly, particularly in China, where all carriers compete in a collaborative environment. Hence, playing their part in telecom monopolies.
The strategy is a good business practice between two companies because it can result in market growth and new business ties. In this sense, implementing coopetition requires agreements on standards and product development between two rivals or throughout an industry.
The technological sector engages in cooperative behavior the most frequently. Synergies between hardware and software are possible when rivals work together. Although they compete in a comparable market, many startups have distinct advantages, particularly in the technology sector. Competitors can create a coopetition agreement to share mutual gains when two competitors have complementary strengths. Through cross-channel promotion, competition between two tech or telco companies can enhance the likelihood of user growth inside each company.
The concept of big names buying out their smaller competitors is familiar. Across various sectors, this practice is a pillar of the marketing strategy of these big names. In the car-making industry, Nissan, the giant Japanese car maker, also owns Lexus. Lexus presents a more premium line of car offerings. The point is to cover the most significant part of the market possible. And the telecom industry also applies this tactic.
In contrast, while in many industries, the premium category is separated from the regular one, in telecom, the gap is not so different, specifically if we are talking about local telecom monopolies. Connectivity wins when telcos aim to buy smaller names or create smaller brands to cover various parts of the market. The small brand is a winner, and the consumers, with plans catered towards tight-budget users.
In various European cases, telcos buy out or create smaller telcos, like in the UK. The result is healthy competition or coopetition, as previously mentioned. While rural areas get more coverage, and consumers get more plans to choose from.
In situations where free-market competition would be economically inefficient, companies should regulate the price charged to consumers, or high risk and high entry costs prevent initial investment in a crucial sector, monopolies over a specific good, market, or aspect of production are regarded as suitable or economically advisable. For instance, to maintain costs to consumers to a minimum, a government may penalize or acquire a portion of a single supplier for a commodity. If the good in question is relatively inelastic or required, if there are no replacements, then taking such activities is in the public interest. And when looking at various telcos and their monopolistic performance, would you consider it only as harmful to the market? When reflecting on the industry and its performance so far, you will find out that the business practice be it a telecom monopoly or not, will never harm you as a consumer, or as a business.
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