Oligopoly and a Monopolistic Competitive Industry: Porter’s Five Forces

An oligopoly and a monopolistic competitive industry are economic market structures that describe the competition between businesses. According to Bayar (2017), an oligopoly is present when a small number of dominating companies provide identical or slightly differentiated products or services, and other businesses cannot easily enter the market. According to this information, the wireless telecommunications industry is an example of an oligopoly because its members, including AT&T, Verizon, and T-Mobile, dominate the industry. These companies try to differentiate their products to attract more customers. Besides, it is challenging for a new firm to emerge and enter this industry. Simultaneously, monopolistic competition implies many firms that, however, have little power to influence the industry that is open for new businesses. That is why the accommodations industry, including Hilton, Marriott Bonvoy, InterContinental Hotel Group, and others, is an example of this market structure.

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Porter’s Five Forces are a suitable tool to determine what phenomena shape competition in every particular industry, and the following information will consider the accommodations industry. According to Bhatia (2016), these forces are the threat of new entrants, bargaining power of suppliers, bargaining power of customers, threat of substitute products, and intensity of competition. The threat of new entrants is not significant because new players will require much time and effort to gain a market share. The bargaining power of suppliers is low because hotels do not tend to order unique products or services. These firms face a rather high bargaining power of customers because the latter can choose among numerous competitors, but this power is low for hotels with sufficient brand recognition. The threat of substitute services is also low because these substitutes, including staying in friends’ homes or renting apartments, imply significant issues for customers. Finally, competition is fierce in this industry, which means that its members should do their best to overcome one another.

References

Bayar, T. Ö. (2017). Oligopoly. The Wiley-Blackwell Encyclopedia of Social Theory, 1-2.

Bhatia, J. (2016). Porter’s Five Forces industry analysis of Indian car industry. Pacific Business Review International, 8(7), 113-123.

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NerdyRoo. (2022, February 7). Oligopoly and a Monopolistic Competitive Industry: Porter’s Five Forces. Retrieved from https://nerdyroo.com/oligopoly-and-a-monopolistic-competitive-industry-porters-five-forces/

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"Oligopoly and a Monopolistic Competitive Industry: Porter’s Five Forces." NerdyRoo, 7 Feb. 2022, nerdyroo.com/oligopoly-and-a-monopolistic-competitive-industry-porters-five-forces/.

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NerdyRoo. "Oligopoly and a Monopolistic Competitive Industry: Porter’s Five Forces." February 7, 2022. https://nerdyroo.com/oligopoly-and-a-monopolistic-competitive-industry-porters-five-forces/.

References

NerdyRoo. 2022. "Oligopoly and a Monopolistic Competitive Industry: Porter’s Five Forces." February 7, 2022. https://nerdyroo.com/oligopoly-and-a-monopolistic-competitive-industry-porters-five-forces/.

References

NerdyRoo. (2022) 'Oligopoly and a Monopolistic Competitive Industry: Porter’s Five Forces'. 7 February.

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