Monopolies on a Market
Monopolies are not a new concept in the market. According to this concept it means a market situation where one company holds all the market share alone and can influence the price is called monopoly. A market where this kind of situation exist is called Monopolistic Market. For example, OPEC in Oil, US in defense industry. There is also Duopoly and Oligopoly concept which exists and is relatively similar to monopoly.
Existence of monopoly in the Market
Oil Cartel
OPEC (Organization of the Petroleum Exporting Countries) controls 50% of global oil supply and holds about 90% of proven oil reserves. Countries like Islamic Republic of Iran, Kuwait, Iraq, Saudi Arabia, and Venezuela founded the OPEC and later many other countries also joined.
In pandemic the oil demand plunged as in all over the world there was lockdown going on to contain Covid-19. OPEC formed OPEC + in which Russia also joined them. The idea behind OPEC+ is to provide support to the falling oil price. This partnership also raised tension to the US government.
This type of OPEC monopoly has created severe impact on emerging economies and in underdeveloped nation they are not able to meet energy demand. The Russia-Ukraine war provides helps to these organizations due to which price reached to $123.9 in March 2022.
Monopoly in Semiconductor
In semiconductor industry the (TSMC) Taiwan Semiconductor Manufacturing Company Limited, holds world largest semiconductor production manufacturing. It has created the monopoly in it. Due to pandemic, the shortage in semiconductor has increased the price in various industry. There are many industries who depends on semiconductor. As growing concern of China and Taiwan issues reflects the monopoly of the semiconductors by TSMC. According to reports if there is clash between these two nations there will be large scale shortage which cannot be covered by any other company in short period of time. All the industry like Automobiles, Electronics and Defense, etc. will face the consequences. There will be global outburst of this which will eventually lead to increased inflation
as priced of electronics items and other items will increase suddenly.
Why monopoly is created and not banned
Monopoly in some industries is also necessary, industry like Defense equipment manufacturing which is very dangerous if licenses are available to many companies which will create imbalance in Peace among nations. Defense industry is something which can’t be removed, there is no nation who is not invested in this. So, creating monopoly in this sector is must.
There are also some industries which requires huge amount of capital and in return there is very low profit in this senior the monopoly is created own their own, for example Water purification services, Energy generation, etc. This kind of monopoly services are mainly handled by government of the nations.
Conclusion
Monopolies have several advantages and disadvantages. In monopolies prices are fixed and there are very less changes in prices as compared to other markets. It also becomes disadvantage as price are fixed at relatively higher price. Majorly government in different countries takes legal action and consider monopoly as unfair trade practices. If a monopoly was created by countries for example OPEC, then it will lead to disaster to other developed, developing and under-developed countries. But monopoly does not long last and at some point, of time it will end. As in case of petrol the alternatives are also developed and slowly it started gaining market share such as electric vehicle and hydrogen fuel-based economy is also ramping up. In case of semiconductor industry their various country who is showing keen interest like India, which are going to reduce dependence on any one nation.
For more detail Contact:
UnivDatos Market Insights
C80B, Sector-8, Noida,
Uttar Pradesh 201301
For Sales related query, please reach us at [email protected]