The Pros And Cons Of Market System Economics Essay

The pros and cons of market system have been debated for old ages. Some say that it is good, nevertheless some say in a different manner. In fact each systems, either capitalist economy, which is besides known as market system, or socialism have their advantages and disadvantages.

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1.2 Question 1 – Professionals of Market System

1.2.1 Encouraging Competition

Market system encourages competition between houses. Besides leting everyone to have private belongings, there will be less complicated regulations and processs like ruddy tapes for investors to put in the state, which encourage more investors to put in the state. This can be proven by United States, where the investing rate in the state is high because of more than 60 % of lands is owned in private ( Economic Research Service, 2002 ) .

When there is more investors invest in the state, consumers benefit. This is because there will be many houses in the market, and they compete with each other to obtain gross revenues. They can non increase the monetary value as they wish ; this will do the houses to lose clients. Besides, houses will vie with each other by bring forthing better quality merchandises. Assortments of merchandises addition every bit good. This is due to the supply and demand theory ; if there is demand for peculiar merchandise, supply of the merchandise will be available, frailty versa.

When there are many houses in the industry, investors benefit. Firms have incentive to be fruitfully efficient by cutting costs to better productivity in order to vie with other houses. Firms that failed to make so will travel out of the concern. On the other manus, houses that worked difficult will be rewarded. They are able to turn their assets every bit much as they can, since there is no bound to how much wealth an person can roll up. In the long tally, this will take to economic growing.

United States, which rehearsing capitalist economy, is one of the first universe states ( Nations Online, 2010 ) .

Beginning: World Economic Outlook Database, 2005[ * ]

Figure 1.1: Top 10: First World Countries in footings of their Gross National Income

United States ‘ Gross National Income ( GNI ) per capita is $ 41,941. This superior place shows that United States has a high GNI. In another word, United States has a high economic growing. And this proves that market system can take a state to sustainable economic growing. Indirectly, the figure of people populating in poorness will diminish. United States has a low poorness rate of 12 % in 2004, while the highest poorness rate of that twelvemonth is 81 % in Gaza Strip ( NationMaster, 2004 ) .

1.2.2 Efficient in Allocation of Resources

Figure 1.2: Graph of Supply and Demand Curve in Market System

In market system, resources are allocated by market itself, it relies chiefly on the market forces to apportion resources. If the monetary value is higher than P1, there will be happening of excess in the market. The monetary value will fall as providers are seeking to dispose excess stock. This will take to the enlargement of demand curve as consumers are more interested with merchandise alternatively of replacements. At the same clip, contraction of supply curve occurs. This is because manufacturers are more interested with replacements ; hence they will exchange to the replacements.

On the other manus, if the monetary value is lower than P1, deficits will be occurred. The monetary value will lift since there are more purchasers than providers. This will take to the contraction of demand because consumers will exchange to replacements. The enlargement of supply curve happens since manufacturers found that merchandise is more attractive than replacements, so they switch off from replacements.

Either when the monetary value is at P2 or P3, it will stop up with the monetary value of P1. This is because market system is depends on the demand and supply sides in order to acquire an equilibrium point. Thus houses wo n’t bring forth goods that consumers do n’t desire, and they wo n’t raise the monetary values as they wish. This is because these of houses will be eliminated. By this force, there will be lesser house to blow resources to bring forth things that consumers do n’t desire. Not merely consumers will be benefited, scarce resources will besides be allocated expeditiously.

1.2.3 A Market with Less or Without Taxs

When there is market system, it is fundamentally a tax-exempt market. Even if there is any revenue enhancements, revenue enhancements are lesser comparison to market which intervened by authorities. Hence consumers gain benefit because the merchandises sold will non taxed by authorities ; consumers can buy cheaper merchandises.

On the other manus, houses besides have advantages because the gross earned will non be taxed by authorities and hence houses gain more net incomes. This encourages more investors to put in the state. These net incomes inducements encourage houses to be more efficient excessively. Firms can better bing merchandises and at the same clip introducing new merchandises, which benefit consumers. Consumers besides gain advantage because houses can cut the merchandise merchandising costs due to more net incomes earned.

1.3 Question2 – Cons of Market System

1.3.1 Monopoly Power

In contrast, many of the pros of market system are besides its cons. Although it seems to be good that market forces determine the monetary value of merchandise, it is non the same instance when it comes to monopoly industry. Firms will work consumers by bear downing high monetary values, yet selling consumers less advanced merchandises. Consumers have no picks besides buying from house. This is because there is no similar replacement for consumers as the entry to barrier is high. And this decreases the satisfaction of consumers.

Monopoly power is besides harmful to the houses. When there is no authorities intercession, house with monopoly power will utilize its power to avoid rivals from come ining the market. For illustration the house will utilize marauding pricing method by cut downing its merchandises ‘ costs less than production costs to get the better of rivals. This is harmful to consumers as the house will subsequently increase the monetary value every bit high as possible. On the other manus, investors will non put to the state any longer because the “ bully patterns ” doing unjust to the investors.

A study has shown that Microsoft has harmed public by retarding invention, denying consumers ‘ picks, degrading merchandise ‘s quality, and increase merchandise ‘s merchandising cost ( Jackson, n.d. ) . Microsoft has been working consumers through forestalling its merchandises to be developed, and at the same clip avoiding other package companies from giving clip and capitals into new merchandises. This leads to a bad investing clime seeing that the populace has been exploited, and there is no longer a balance scope for societal involvements.

Government intercession to the market is of import. Action like puting act is needed to command anti-competition behavior. For case, in United States, Sherman Act is set to get rid of monopoly pattern ( Federal Trade Commission, 2010 ) . With this ordinance, investors are easier to come in the industry as everyone has the equal chance. Besides, consumers besides gain benefit as the monetary value of the merchandise is cheaper, and there will be more picks for consumers.

1.3.2 Equal Distribution of Income

Market system causes inequality. Wealth tends to redound to a little per centum of the population, where persons who are rich will go richer. On the other manus, persons who are non rich will ne’er acquire rich. Lapp to the market, big administration will be acquiring larger ; while little concern will stay little.

In 2007, United States has a Gini index of 45.0 ( CIA World Factbook, 2010 ) . The Gini index is a measuring for family incomes inequality, the higher the value, the more the inequality. The highest ranking of the same twelvemonth is Bosnia and Herzegovina, with a Gini index of 56.2. This shows that United States ‘ income distribution is unequal.

Hence, authorities intervention to the economic system is of import. With authorities intercession, where authorities imposes different revenue enhancement rates to different income groups in United States, persons have a more equal income as high income earners will be taxed more and low income earners will be taxed less ( Tax Foundation, 2010 ) . The same thing goes to the houses ; little concern will be imposed lesser revenue enhancement and inducements are given. This encourages positive ‘investment clime ‘ in a state because this is just for investors to put in the state. At the same clip persons ‘ societal involvement additions excessively.

1.3.3 Underproduction of Public Goods

In market system, where there is no authorities intercession, will be deficiency of public goods like street visible radiations and main roads. Since public goods benefits to everyone including nonpayer, it will be ends up with cipher paying for it. On the other manus, private houses will non utilize their net incomes to supply free service. This shows that market system fails to supply public goods.

A state without public goods is a state which deficiency of substructure. Lack of substructure is bad for both persons and investors. If a state is built without supplying street visible radiations, is that everyone remaining at place and non traveling out at dark? Furthermore a wholly dark dark additions condemnable rate, this causes consumers and investors to experience insecure. And this finally leads to a bad ‘investment clime ‘ .

To avoid this bad ‘investment clime ‘ happens, authorities has to step in into the economic system by enforcing revenue enhancement to everyone. The intent of roll uping revenue enhancements is to construct public goods since everyone is non paying for it if they are non forced to make so.

1.4 Question3 – Government Policies to Better ‘Investment Climate ‘

1.4.1 Policy to Promote New Businesses

In Malaysia, it takes an norm of 144 yearss in registering belongings ; it ranks 67th among 178 states for the easiness of registering belongings. Besides, get downing a concern, which involves 9 government-required processs, takes about 24 yearss ; it ranks 74th in the list ( U.S. Department of State, 2010 ) . These are the complex regulations and ruddy tapes by authorities will cut down investors to put in Malaysia.

A new policy: Malayan Corporate Identity Number ( MyCoID ) has been introduced by the Prime Minister of Malaysia, Datuk Seri Najib Abdul Razak. MyCoID is the company figure that will be used as a individual consecutive mention figure for assorted enrollments and minutess at relevant authorities bureaus ( Sun Media Corporation, 2010 ) . This can cut down the clip used to get down up a concern to 3 yearss merely. With this new policy, investors will be more interested to put in Malaysia, as the concern get down up clip reduces from 24 yearss to 3 yearss, which has fasten the procedure about 7 times. With this, consumers benefit as there will be more houses, and consumers can hold more picks.

1.4.2 Policy to Abolish Corruptness

In 2010, Malaysia ranks 56th in Transparency International ‘s Corruption Perception Index among 178 states ( Star Publication, 2010 ) . It is acquiring worse, as 2009 Corruption Perception Index was 4.5 and in 2010, the index mark is 4.4. In 2007, the ranking was in 43rd, merely in three old ages clip, the ranking fell from 43rd to 56th! This is an of import issue that authorities should take note about it. When a state is with a high corruptness rate, the figure of investors will be drastically reduces. This is because graft causes unjust to the investors. And their assurance toward to state will be losing.

A new set of policies have been set by authorities late. To undertake expansive corruptness, they have to implement bing political Torahs ( PEMANDU, 2010 ) . Besides, proclamation of zero tolerance policy has been made. Government will reenforce whistleblower protection excessively. In add-on, authorities will endeavor to finish prosecution of corruptness instances within a twelvemonth, peculiarly for public involvement instances to recover public ‘s assurance on authorities. Stiffer penalties for those guilty of corruptness are enforced as good. Convicted public officers will have harsher punishments. Last, a public name and shame database of convicted wrongdoers will be developed ; it can be a hindrance and can ease employment determinations. These actions can cut down corruptness rate expeditiously and able to pull and retain more investors ‘ assurance towards Malaysia.

1.4.3 Policy for Equal Income Distribution

Malaysia has a high Gini index with the value of 46.1 in 2002 ; the rank of 36 compared to over 100s states ( CIA World Factbook, 2010 ) . This shows that Malaysia has high unequal income distribution. An unequal income distribution will do less investors invest in Malaysia as it will be unjust for them, particularly if the concern is little. Besides, persons will be demotivated to work as their wealth will non turn much while the little population of high income earners will go wealthier over clip.

Hence Malaysia authorities cod corporate and personal revenue enhancements. Different rates are available for different groups of income earners. For low income earner group, where income is lesser than RM2,500 are non required to pay for income revenue enhancement. For high income earner group, the revenue enhancement imposed is from the scope of 1 % to 26 % . This goes the same to the houses. Corporate with paid up capital more than RM2.5 million has to pay 25 % corporate revenue enhancement. This policy makes the spread between different categories income earner smaller. When there is low unequal income distribution, investors will be interested to put in Malaysia. At the same clip, persons are motivated to work as there is no unfairness in administering income. It will assist Malaysia ‘s economic growing to be higher in the long tally.

1.5 Decision

The market will be perfect, if there is a mix economic system, where the market is run by capitalist economy and authorities at the same clip.

2.1 Question 1

2.1.1 Introduction

In the yesteryear, oil monetary value is determined by the supply side ( Gibson, 2009 ) . OPEC used to command oil monetary values by commanding supply. However, from 1990 onwards, this has changed. The oil monetary value is depended on the demand side ( Gibson, 2009 ) . The more the demand of oil, the higher the monetary value is.

Beginning: WTRG Economics, 2009

Figure 2.1: Crude Oil Prices – 2008 Dollars

Figure 1 shows the broad monetary value swings of rough oil from 1947 to 2009. The unsteady monetary values are caused due to assorted grounds, for illustration oil monetary value additions when revolution occurs ; and oil monetary value lessenings when there is a recession.

Conversely, APS Review Oil Market Trends ( 2004 ) posted that non merely demand impacting the monetary value of oil, there are some factors like American Strategic Petroleum Reserve ( SPR ) , and European winter impacting oil monetary values.

2.1.2 Forecasting Oil Price in 2012

2.1.2.1 The Past Trend

Beginning: IOGA, 2010

Figure 2.2: Annual Average Crude Price – 1977 to Show

The monetary value oil petroleum oil was lesser than $ 40 per barrel before 2004.

Beginning: International Energy Agency, 2010

Figure 2.3: Entire IEA – Average CIF Costss of Imported Crude Oil

After the monetary value hit $ 50 per barrel in 2005, the monetary value become unstable, it rises and drops often. In 2008, the monetary value even hits over $ 130 per barrel. After that, the monetary value beads until it is lesser than $ 50 per barrel.

2.1.2.2 The Future Trend

The monetary value of oil will be progressively higher each and every twelvemonth because of the scarceness of oil. Through the past tendency, I can announce that the monetary value of oil in 2012 will be within the scope of $ 100 and $ 200 per barrel.

Harmonizing to Morgan Stanley ( 2009 ) , oil monetary values will be $ 85 per barrel in 2010 ; and it would lift until $ 95 and $ 105 in 2011 and 2012 correspondingly. At the beginning of 2010, Morgan Stanley reported that at the terminal of 2010, oil monetary values would be $ 95 per barrel ; while at the terminal of 2011 and 2012, oil monetary values would be $ 100 and $ 105 per barrel severally.

On the other manus, in 2008, the main economic expert of CIBC World Markets, Jeff Rubin said that the monetary value of rough oil would be $ 150 per barrel in 2010. This monetary value turning phenomenon will sustained in old ages, therefore in 2012, the monetary value would be over $ 200 per barrel. Again in 2010, Jeff Rubin said that the monetary value of rough oil will hit $ 100 per barrel in 2010, and in 2012, the monetary value will make $ 225 per barrel ( Carrett, 2010 ) .

Although Jeff Rubin has predicted right that oil monetary value will hit $ 50 before 2005, and he foresaw the immense monetary value spike for oil in 2008 ( HeatingOil.com, 2010 ) , it is impossible that the oil monetary value will transcend $ 200 per barrel in 2012. The $ 200 per barrel oil is coming shortly, either in the following five old ages, or the following eight old ages, but it wo n’t be in the following two old ages.

2.1.3 Reasons behind Forecasting

2.1.3.1 Supply Side of Oil

The Thunder Horse Oil Field, which is located at Gulf of Mexico, is the largest semi-submersible oil platform. It is owned by British Petroleum and ExxonMobil. Today, British Petroleum produces about 400,000 boe/d ( barrels of oil tantamount per twenty-four hours ) , from about two tonss of Fieldss ( BP, 2009 ) . Among 400,000 boe/d, 250,000 boe/d is produced by Thunder Horse. British Petroleum wished to hold a production of 4 million boe/d at Thunder Horse in 2020.

However British Petroleum ‘s want could non comes true because of hurricanes. In 2008, Hurricane Ike and Gustar hit Thunder Horse. This has caused the addition in oil monetary value at West Texas Intermediate, where the monetary value increased in 10 % to $ 70 per barrel, while the monetary value at gas Stationss rose by 50 % , to $ 3 per gallon ( Rubin, 2010 ) . When Hurricane Ike hit Thunder Horse once more in 2008, gasolene monetary values have soared to every bit much as $ 5 per gallon ( Rubin, 2010 ) . It was followed by Hurricane Gustar and Ivan. This has leaded the shut down of half of the production, where about 500,000 people unemployed ; recession occurred. At the same clip, oil monetary value increased because of the decrease of oil supply.

2.1.3.2 Demand Side of Oil

When the universe oil monetary value is increasing, everyone in the universe is paying for the expensive oil, except for the states in OPEC. Hence when everyone is devouring less because of the expensive oil, people in OPEC states can devour the oil as usual, or even more, because they are non affected by the high oil monetary values. For case, Ski Dubai, where the Ski Dubai ‘s Snow Park ‘supply ‘ the snow for 3,000 square metres of twelvemonth unit of ammunition perfect snow in one of the universe ‘s hottest comeuppances ( Rubin, 2010 ) . These unreal snows are made of oil. Ski Dubai uses 3,500 barrels of oil a twenty-four hours, which can be used for one month by American drivers pumping their gas armored combat vehicle.

About 90 % of every barrel of oil consumed in the universe goes for conveyance fuel. This is because the universe economic system is turning, particularly in BRIC states: Brazil, Russia, India, and China. In these states, auto gross revenues are dining. Unlike America, where the auto sale merely grows 1 % to 2 % in the best economic times, auto gross revenues in BRIC states are turning at 10 to twenty times to that gait ( Rubin, 2010 ) . When the demand for auto is lifting, the demand of oil is lifting ; autos need oil to run. There are more autos in the route when Tata Nano in India and Chery in China are introduced to the market. These autos are so inexpensive that the monetary values are between scopes of $ 2,500 to $ 10,000. It seems to be a miracle for many people, as they eventually afford to purchase a auto. However it is really a incubus, where the autos in the route addition and will take to high oil monetary values.

2.1.3.3 Increase in Demand and Decrease in Supply

When the lessening of supply and addition of demand happen at the same clip, the monetary value of the merchandise will increase.

Figure 2.4: Graph of Increase in Demand more than Decrease in Supply

Figure 2.5: Graph of Increase in Demand less than Decrease in Supply

Either addition in demand more or increase in demand less than supply, it will ensue to the addition in oil monetary values. Hence oil monetary values will hit more than $ 100 in 2012.

2.1.4 Decision

In 2012, the oil monetary value will non hit over $ 200 per barrel because when oil monetary value hits over $ 100, recession will happen ; merely like what had happened in 2008. When oil monetary value additions, there will be a monolithic knock-on consequence. Get downing by increasing in monetary values of goods and services, which will finally take to lag in economic activities, as consumers refuse to pass more. Then recession happens ; some houses close down and there is high degree of unemployment. Due to economic contraction, ingestion of oil lessenings every bit good and there will be a crisp lessening in oil monetary value.

2.2 Question 4

2.2.1 Introduction

Apple Inc. has been a taking company in electronic merchandises. It was established on 1st April 1976 in US by Steve Jobs, Steve Wozniak, and Ronald Wayne ( Apple, 2010 ) .

During a conference call with investors, which held by Tim Cook, the Chief Operating Officer of Apple Inc. , a inquiry was raised up. Person asked about how Apple Inc. would work without Steve Jobs, the Chief Executive Officer and the co-founder of Apple Inc. , as he was unable to run the concern operation due to medical leave ( Cable News Network, 2009 ) . Tim Cook answered:

‘We believe that we are on the face of the Earth to do great merchandises and that ‘s non altering. We are invariably concentrating on introducing. We believe in the simple non the complex. We believe that we need to have and command the primary engineerings behind the merchandises that we make, and take part merely in markets where we can do a important part. We believe in stating no to 1000s of undertakings, so that we can truly concentrate on the few that are genuinely of import and meaningful to us. We believe in deep coaction and cross-pollination of our groups, which allow us to introduce in a manner that others can non. And honestly, we do n’t settle for anything less than excellence in every group in the company, and we have the self-honesty to acknowledge when we ‘re incorrect and the bravery to alter. And I think irrespective of who is in what occupation those values are so embedded in this company that Apple will make highly good. ‘

Cook ‘s statement clearly explained that Apple Inc. ‘s mission, which is planing and doing great electronic merchandises, will non alter. While Apple Inc. ‘s vision is to concentrate on what that is genuinely of import to the company.

2.2.2 SWOT Analysis on Apple Inc.

Figure 2.6: Table of SWOT Analysis on Apple Inc.

Apple Inc. has a strong trade name, with a high repute as its strengths. This is because a well-known trade name with a good repute attracts clients. Apple Inc. is a extremely diversified company in technological merchandises. It sells non merely package, but besides hardware. This can pull different types of clients which can take to higher gross. In add-on, Apple Inc. has a strong international presence. It has more than 300 shops worldwide, and has online shop where the merchandises are sold ( Apple, 2010 ) .

The most seeable failing of Apple Inc. is selling expensive technological merchandises compare to its rivals. Consumers who can non afford such expensive merchandises will take to buy from Apple Inc. ‘s rivals, such as Dell and Nokia. Apple Inc. should possibly make some publicities sometimes to pull more clients. Besides, Apple Inc. loses its gross revenues in personal computing machines to other rivals because of its operating system supports limited package. Apple Inc. should better more in its package so that consumers will non lodge merely to Window ‘s package. Another failing to Apple Inc. is the unfavorable judgments to the company. Types of unfavorable judgment to Apple Inc. will destroy its repute. So Apple Inc. should take some actions to get rid of these rumors.

The chance for Apple Inc. to be more successful is to prolong a low-priced leading. Technological merchandises are expensive, if Apple Inc. makes its monetary value lower than other rivals, yet supplying a good quality merchandises, it likely will turn one of its failing into strength. Apple Inc. is great in invention. If it can maintain up with great and advanced merchandises from clip and clip, Apple Inc. could increase its market portion without lessening any of the merchandise monetary value. Apple Inc. should market Itunes every bit good since demand for on-line music is increasing.

It is non easy to be in this industry. Technology alterations quickly ; it takes a small clip to exchange to new engineering. There is besides a really high degree of competition in the industry because it is profitable. So Apple Inc. should concentrate in its research and development section in order to take the industry. Economy crisis such as recession is a dainty excessively. This is because Apple Inc. is selling its merchandises in a high monetary value. During recession, consumers are non willing to pass much, so they will buy from other cheaper trade names. Apple Inc. should aware of this to avoid losing its clients.

2.2.3 Porter ‘s Five Forces Analysis

A

Personal Computers ( Mac )

Cell Phones ( iPhone )

Portable Music Devices / Online Music Services ( iPod / iTunes )

Menace of New Entrants

Low

Low

Low

Economies of graduated table

Economies of graduated table

Economies of graduated table

Merchandise distinction

Merchandise distinction

Merchandise distinction

Cost advantages

Cost advantages

Cost advantages

Menace of Substitute Products or Servicess

Low

Low

Moderate

Switch overing costs

Switch overing costs

Switch overing costs

Substitute ‘s public presentation

Substitute ‘s public presentation

Substitute ‘s public presentation

Buyers ‘ willingness to alter

Buyers ‘ willingness to alter

Buyers ‘ willingness to alter

Dickering Power of Buyers

Moderate

Low

Low

Buyers are fragmented

Buyers are fragmented

Buyers are fragmented

Substitute available

Substitute available

Substitute available

Merchandise distinction

Merchandise distinction

Merchandise distinction

High monetary value sensitiveness

Low monetary value sensitiveness

Low monetary value sensitiveness

Dickering Power of Suppliers

Moderate

Low

High

Suppliers have power to impact monetary values

Suppliers have power to impact monetary values

Suppliers have power to impact monetary values

High exchanging cost by providers

High exchanging cost by providers

High exchanging cost by providers

Being of illegal free music download

Competitive Competition

High

High

Moderate

A few competing houses, with a clear leader

Large figure of viing houses

A few competing houses

Being of low priced Personal computer shapers

Figure 2.7: Table of Porter ‘s Five Forces on Apple Inc.

Competitive competition is the largest external force to Apple Inc. In computing machine industry, Apple Inc. is neither taking company, nor low-priced leader in computing machine industry ; it has a high competitory competition. In cell phone industry, there are many rivals like Nokia, Samsung and etc. Fortunately among the high grade of competition, Apple Inc. has a market portion of 28 % , which is higher than most of the rivals ( AppleInsider, 2010 ) . Although there are merely a few rivals in portable music industry, Apple Inc. has to maintain its merchandise innovative to forestall other rivals take over its prima place.

Overall, Apple Inc. is non affected much by these menaces. The barrier of entryway to technological merchandise industry is high. A new house needs a immense figure of capitals to come in this industry. Besides, a new house will non hold a strong repute on its trade name. Therefore fewer consumers will buy it. This causes the house has to bring forth merchandises in a high cost because unable to accomplish economic systems of graduated table. The menace of replacement merchandises is low excessively. This is because Apple Inc. produces differentiated merchandises compare to other rivals. It seemed to be a failing as the operating system support limited package. However this causes the exchanging cost to other trade names higher, so consumers will non alter to other merchandises. As the quality of Apple Inc. merchandises are good, it creates many loyal clients. 80 % of the clients who are utilizing Apple iPhone will go on buying iPhone in the hereafter ( AppleInsider, 2010 ) .

2.2.4 Boston Matrix

Figure 2.8: Boston Matrix on Apple Inc.

Apple Inc. sells three chief merchandises: Mac, iPod and iPhone. iPod and iPhone are in the class of star in Boston matrix. iPod has a high market portion of 73.8 % and a high market growing with a gross revenues of 225 million unit iPods in 2009 ( AfterDawn, 2009 ) . Among so many rivals, iPhone has a high market portion of 28 % , which is the 2nd smartphone highest market portion ( AppleInsider, 2010 ) . It has a high market growing that 10 million units of iPhone will be sold in 2010 ( Reuters, 2010 ) . However, Apple Inc. ‘s personal computing machine is non making every bit good as iPod and iPhone. It has a low market portion of 10.4 % and has a gross revenues figure of 1.83 million personal computing machines for a one-fourth ( 9to5 Mac, 2010 ) .

Apple Inc. has to procure the laterality of the growing market on iPod and iPhone. At the same clip, Apple Inc. needs to better on its package. Mac has a low market portion and market growing is because of its operating system support limited package. This means consumers who purchase Mac could non utilize Windows package. Apple Inc. has to introduce and better better package to derive more clients.

2.2.5 Decision

Overall, Apple Inc. is making absolutely in the concern. As a taking company in technological merchandises, Apple Inc. has to maintain focal point non merely on itself, but besides its rivals. Apple Inc. needs to better on its failings to avoid rivals from taking over its prima place. It besides needs to forestall the menaces to go its failings. In add-on, it has to set attempt to alter its chance into its strengths to go a better company. Last, its mission and vision have to ever be on the first topographic point before doing any determinations.

2.3 Question 5

2.3.1 Introduction

Monopoly is normally defined as an industry where there is merely a marketer. In UK, when a individual house or a group of linked houses have more than 25 % of the end product of a merchandise in the custodies, monopoly is formed in that peculiar industry ( Griffiths and Wall, 2008 ) . There are two types of monopoly: natural monopoly and coercive monopoly.

When a house has monopoly power, it will merely confront a small competition. Hence the house will be a monetary value shaper ; it can put the monetary value for a merchandise based on its market portion within a peculiar market. This normally occurs when there is coercive monopoly.

2.3.2 Disadvantages of Monopoly

2.3.2.1 Monopoly Exploits Consumers

Some perceivers argue that companies should non hold monopoly power because monopoly exploits consumers. When there is monopoly, there is an highly high barrier to entry for other houses ; hence there is no close replacement for a peculiar merchandise. The house will hold the ability to command the monetary value of the merchandise to some grade.

Figure 2.9: Graph of Inelastic Demand

Figure 1 shows the development of monopoly houses towards consumers. The house will bear down it in a higher monetary value ; the monetary value additions from ?50 to ?75 in the graph. The house will derive more net incomes because it is inelastic demand, where increasing the monetary value will non take to diminish in a immense sum of consumers.

Figure 2.10: Graph Showing Consumer Surplus

Increasing monetary value reduces consumers ‘ public assistance. The highlighted country in figure 2 shows consumer excess: the difference between maximal monetary value a consumer is willing to pay, and the existent monetary value that consumer is paying. Monetary values that set higher than P will be consider as consumer excess. Even though consumers are non willing to pay for expensive merchandise, but they have to, since there is no close replacement for consumers.

2.3.2.2 Productively and Allocative Inefficiency

When there is monopoly, a house can gain more gross and therefore derive higher net incomes. Although some houses are gaining supranormal net income, they are less incentive to cut costs and bring forth at the lowest mean cost curve. Hence it will be fruitfully inefficient.

Although some houses are bear downing higher monetary value for the merchandise, they are supplying fewer picks for consumers. Microsoft is the illustration. It has been found to hold a monopoly over operating systems package for IBM-compatible personal computing machines ( F.T.C. , 2010 ) . Microsoft was able to utilize its dominant place in the market to except other rivals. It is troublesome for consumers to put in non-Microsoft browser package on a Microsoft ‘s operating system. This causes consumers are forced to utilize Microsoft ‘s package, alternatively of others, yet the monetary value for the merchandise sold is high. This is known as allocative inefficiency.

2.3.3 Advantages of Monopoly

2.3.3.1 Benefits “ Consumer Interest ”

Conversely, monopoly has advantages. It benefits consumer involvement. When there is monopoly, where the house has more than 25 % market portion of a merchandise at a peculiar country, the house can bring forth the merchandise at a lower norm cost.

Figure 2.11: Graph of Economies of Scale

Figure 3 shows economic systems of graduated table. The more the unit of merchandise is produced, the cheaper the cost is. As the house has monopoly advantage ; most of the people in the country is utilizing the merchandise, the measure demanded for peculiar merchandise is high. Hence the house is able to bring forth the merchandise at a lower cost. This benefits consumers because the house could sell the merchandise at a lower cost, yet it still makes net income to the house.

Besides, houses in monopoly industry can gain supranormal net income which enables the house to better its merchandise through making research. Consumers are benefited because consumers able to utilize cheaper and better merchandises. This can be proven by Ikea, where betterments are made for people and environment, utilizing the net incomes earned ( Ikea, 2010 ) .

2.3.3.2 Industries that Do Not Necessitate Competition

There is no needed of competition in some industries, particularly public public-service corporations like H2O and electricity provider. Usually it will merely be one provider in these industries, yet it is still good to consumers. In Malaysia, Tenaga Nasional Berhad ( TNB ) is the national electricity public-service corporation company ; it holds a monopoly on electricity coevals, transmittal and distribution in Peninsular Malaysia ( The Star Online, 2010 ) . If there are two providers for electricity in Peninsular Malaysia, it would likely inefficiency in apportioning scarce resources. This is because non merely renewable resources are used, non-renewable resources such as crude oil and natural gas is used to bring forth electricity. It will take to environmental pollution excessively.

2.3.4 F.T.C. Controling Monopoly Power

Federal Trade Commission ( F.T.C. ) is the competition regulator in U.S. It has a mission to advance consumer protection, and extinguish and forestall anti-competitive concern patterns ( Federal Trade Commission, 2010 ) . U.S. Antitrust Law prohibits monopolization, attempted monopolization, or confederacy or combination to monopolize patterns.

First, the tribunal will find the market power of a house. If the house has less than 50 % of the market portion in a market within a certain geographic country, it is non counted as monopoly power. The prima place must be sustainable over clip ; if new houses can take over the house easy, the house does non hold enduring market power, which is non amount to monopoly power. Then the tribunal will warrant whether the house is acting in ways to forestall rivals to success in the market.

When a house is judged that it has monopoly power, the tribunal will take action utilizing Sherman Act, one of the three nucleus federal antimonopoly Torahs. The house has to follow the opinion by tribunal, with no defense mechanism or justification. Besides, the house can non go against Sherman Act. Violating the act will be taken as a condemnable instance ; house will be prosecuted by the Department of Justice.

2.3.5 Decision

I partly agree and disagree with the actions taken by F.T.C. to extinguish monopoly patterns. I agree with F.T.C. , where monopoly houses are forced to accept the opinion. Any houses go againsting the act will be taken as a condemnable instance. This is good to consumers, as monopoly houses harder to work consumers. But I disagree with how the tribunal determines market power. In UK, a house with 25 % market portion is considered as monopoly. However in US, the house must hold more than 50 % market portion to be sum to monopoly. The system of opinion on monopoly power is excessively loose, and some houses will still work consumers with “ lawfully ” permission by the jurisprudence.

3.1 Mention

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