Market dominance✔️ Flashcards
What is meant by market dominance
When a firm can control markets. A dominant firm possesses the power to affect competition and influence market price.
What is meant by market mergers
When a company joins with another company combining staff and resources as a way of expansion.
What is meant by market acquisitions
Market acquisition refers to the process of acquiring another company or businesses operating in a particular market, with the goal of increasing market share
What is meant by organic growth
Growth inside the business, for example the opening of new stores.
What is meant by a Monopoly
When a business has over 25% market share in the market
How do mergers, acquisitions and organic growth lead to creation of dominant firms
It all leads to the increase in market share, which means businesses have more sales, due to more customers so more power in the market
The impact on a business of a dominant firm operating in its market
Dominant firms are able to charge higher prices in the market so they will profit more.
How market dominance is restricted and regulated in the UK
Competition and Markets Authority (CMA): The CMA is the primary regulator of competition and consumer protection in the UK. It is responsible for enforcing competition law and ensuring that companies do not abuse their dominant market position.
Merger control: The CMA has the power to block or impose conditions on mergers and acquisitions that may result in a substantial lessening of competition.
Investigating anti-competitive practices: The CMA can investigate anti-competitive practices such as price-fixing, market sharing, and abuse of a dominant market position. If the CMA finds evidence of anti-competitive practices, it can take action against the offending company, including imposing fines, requiring divestitures, or other remedies.
Evaluate the impact and importance of the regulation of the market on a business and its stakeholders
Advantages:
Promotes Competition: Market regulation helps to promote competition by limiting the power of dominant companies and encouraging new entrants into the market. This increased competition can result in lower prices, improved quality, and a wider range of choices for consumers.
Protects Consumers: Market regulation helps to protect consumers by ensuring that businesses do not engage in anti-competitive practices such as price-fixing, market sharing, or abuse of a dominant market position.
Increases Transparency: Market regulation helps to increase transparency by requiring companies to disclose information about their business practices, financial performance, and products. This information can help consumers make more informed decisions and can also help investors make better investment decisions.
Ensures Fairness: Market regulation helps to ensure fairness by preventing companies from engaging in anti-competitive practices or exploiting their dominant market position. This helps to level the playing field and promote a fair market environment.
Disadvantages:
Adds Costs: Market regulation can add costs to businesses, as they must comply with regulations, report to regulatory agencies, and potentially face penalties for non-compliance.
Slows Innovation: Market regulation can slow innovation by limiting the ability of companies to pursue new business strategies or enter new markets. This can reduce the rate of technological progress and limit the ability of companies to adapt to changing market conditions.
Stifles Competition: Market regulation can stifle competition by creating barriers to entry for new companies and limiting the ability of existing companies to compete.
