Is the Watch Industry dominated by an Oligopoly*, which is beneficial E

Is the Watch Industry dominated by an Oligopoly*, which is beneficial to both firms and consumers? *= See glossary for meanings. Hypothesis ========== I believe that the watch industry is dominated by an oligopoly, which is beneficial to both firms and consumers. The watch firms are both price makers*, which is good for the watch firms, and price takers*, which is good for consumers. Aim In this investigation I shall be examining the watch industry. I will use a Mintel report of the watch industry produced in 1995 and information worksheets to test my hypothesis. Findings and Application of Theories Five companies, or the 'C5 ratio', dominate the watch industry. They have 40% of the market share* (see fig.1.). Zeon Ltd. is the market leader*. There have been no recent take-overs or mergers in the watch industry, so the market leadership is slight. The growth of the industry has been organic*. GRAPH This representation makes the watch industry an oligopoly, as opposed to being perfect competition*, imperfect competition, or a monopoly*. There are a number of reasons why the watch industry is an oligopoly. Firstly are there barriers to entry* as opposed to free entry*. One barrier to entry for other prospective watch manufacturers is economies of scale*. The larger, more established firms have a number of cost advantages, such as being able to buy raw materials in bulk or borrow large sums of money. Their production costs are therefore cheaper and therefore they will probably be able to sell their watches at a lower price than smaller, newer firms. Another barrier to entry is branding. All of the firms in the oligopoly have very established names in the... ...a novelty/ luxury item. The success of this strategy depends on maintaining low costs at low volume on a high quality image with few or no competitors. - Price Makers: In a monopoly situation where there is only one, or very few suppliers. The industry can set its prices at whatever level they want without the chance of being undercut by competition (because there is none). - Price Takers: In an industry where there is a lot of competition (ideally perfect competition), the sellers must have the prices of their product low in order to sell them. If they did not have low enough prices, customers would go elsewhere as there will be many substitutes that are cheaper. Bibliography 1) The Watch Industry Mintel Report- 1995 (obtained from Sheffield Hallam University's 'Adsett's Centre') 2) Business and Economics class worksheets Is the Watch Industry dominated by an Oligopoly*, which is beneficial E Is the Watch Industry dominated by an Oligopoly*, which is beneficial to both firms and consumers? *= See glossary for meanings. Hypothesis ========== I believe that the watch industry is dominated by an oligopoly, which is beneficial to both firms and consumers. The watch firms are both price makers*, which is good for the watch firms, and price takers*, which is good for consumers. Aim In this investigation I shall be examining the watch industry. I will use a Mintel report of the watch industry produced in 1995 and information worksheets to test my hypothesis. Findings and Application of Theories Five companies, or the 'C5 ratio', dominate the watch industry. They have 40% of the market share* (see fig.1.). Zeon Ltd. is the market leader*. There have been no recent take-overs or mergers in the watch industry, so the market leadership is slight. The growth of the industry has been organic*. GRAPH This representation makes the watch industry an oligopoly, as opposed to being perfect competition*, imperfect competition, or a monopoly*. There are a number of reasons why the watch industry is an oligopoly. Firstly are there barriers to entry* as opposed to free entry*. One barrier to entry for other prospective watch manufacturers is economies of scale*. The larger, more established firms have a number of cost advantages, such as being able to buy raw materials in bulk or borrow large sums of money. Their production costs are therefore cheaper and therefore they will probably be able to sell their watches at a lower price than smaller, newer firms. Another barrier to entry is branding. All of the firms in the oligopoly have very established names in the... ...a novelty/ luxury item. The success of this strategy depends on maintaining low costs at low volume on a high quality image with few or no competitors. - Price Makers: In a monopoly situation where there is only one, or very few suppliers. The industry can set its prices at whatever level they want without the chance of being undercut by competition (because there is none). - Price Takers: In an industry where there is a lot of competition (ideally perfect competition), the sellers must have the prices of their product low in order to sell them. If they did not have low enough prices, customers would go elsewhere as there will be many substitutes that are cheaper. Bibliography 1) The Watch Industry Mintel Report- 1995 (obtained from Sheffield Hallam University's 'Adsett's Centre') 2) Business and Economics class worksheets