Introduction Between the definitions of perfect competition and pure monopoly lie oligopolies and monopolistic competition, oligopoly is where there are a few sellers with similar or identical products , which are large enough relative to the total market that they can influence the market price. It is a form for market structure quite common.
In many countries, the automobile, steel, petrochemical, electrical and computer devices all belong to category of oligopoly market structure. In recent markets, there are two main companies control the most of supply in restaurant market. which are KCF and McDonald’s. It giving priority to monopoly elements, at same time it having some competition elements.
The Mc Donald’s Company is the biggest provider of fast food, within juice drinking and coffee. In 2ndFeb, Mc Donald’s Company decide to give a discount to costumer for a whole year in China and also decrease the price of total products, and 3 days later KCF, another company which also take a great proportion of product sale in this market , say that they will drop their foods price with 10 percentage,Body There are three main features of oligopoly that involves this strategy. The first one is high industrial concentration.
Mc Donald’s is operating in an oligopoly market. The fast food market is controlled by these two main companies which is Mc Donald’s and KFC. The products manufacture and sold by which take up a great proportion in aggregate production and sale. The second one is the product is either generally homogeneous or differentiate a lot. The Mc Donald’s is the former in the market.The products provided by these two companies. They are basically homogeneous without remarkable distinction. As a result, either Mc Donald’s or KFC focus on sell new kinds of food attracting costumer.
The last one feature is high entrance and withdraw barrier. Mc Donald’s Company has enjoyed an absolute advantage in capital, technique, production and sale scale, product recognition and sale channels. Therefore the new companies are difficult to enter the market and compete with it.However, the large production and great number of capital investment of monopoly enterprises lead to Mc Donald’s Company in the high withdraw barrier. In this case, the company expand the area of their products can increase the profit and competitive power. The demand of a firm in oligopoly is made of two segments of two separate demand curves. The upper part is highly elastic because if the firm raises its price, the other firms will not follow, and the firm will lose its market share.
The lower part is inelastic because if the firm lowers its price, the other firms follow, and no firm can expand its market share. [pic] In this case, as Mc Donald’s decrease the price, its competitor KFC will follow because it will risk a loss of market in China. In the bottom diagram, we see that a rise in marginal costs will not necessarily lead to higher prices providing that the new MC curve (MC2) cuts the MR curve at the same output, suggests that there will be price stickiness in these markets, which means both Mc Donald’s and KFC ‘s profit didn’t change. pic] Conclusion In conclusion, this report has briefly related to the market structure of oligopoly of the Mc Donald’s Company. The major parties involved in the news were considered.
The main supplies control and influence the price each other in the oligopoly market. Reference yang L,lei X,Western fast-food McDonald’s, KFC duopoly war,Digital Business Times,2009