Oligopoly Firms in Malaysia

These are examples of Oligopoly firms

There are powerful competitions within the telecommunication firm in Malaysia such as Maxis, Celcom, and Digi. As there are healthy competitions within these firms, the profit margins earn by each firm will reduce. Since there are a few large producers are competing with each other, telcos will reduce the price to gain the market share to increase the profitability. For example, Maxis launched a cheaper prepaid and IDD packages among the foreign workers with attractive price rate. Celcom launched the Celcom First Voice Plan to help the group expand its subscriber base. However, it was analyzed that in the prepaid market segment has a high churn rate where there is no customer loyalty and the customers are likely to switch to different operators.

Compete?

Cooperate?

  or

          




               


As seen on the summary above, Maxis, Celcom and Digi are considered as large sellers a competing with each other. These 3 of these telecommucation firms are considered as oligopoly.  Oligopoly is also known as the competition among the few firms. These firms have set higher barriers to entry to prevent entry of the new firms because they are so competitive among them. However, they are mutual interdependent with each other over controlling price. They are so small that each of the firms has to be aware of the reactions of their competitors in making the price policy. However, a dilemma faced by the oligopoly firms is to decide whether to compete or to cooperate. If Maxis, Celcom, and Digi are cooperating together, a larger monopoly can be formed and the firms and they will able to enjoy more profits.

           

            In my opinion, if Maxis, Celcom and Digi cooperate together, the revenue of the firm will increase. Thus, they will also provide a better customer service to the customers. As customers are satisfied, they will stick to the company causing the firm to make more profit. Besides that, as firms cooperate together, there will be larger investment where the average cost reduce because there will be a larger output quantity. Other than that, there is a disadvantage where the firms are merged together, there will be an excessive labour. An excessive labour will cause the firm will reduce the staffs working in the similar field. By doing this, the firm can save up a lot of staff cost. Therefore, many people will start losing their job. If they compete, each of the firm must provide good services and competitive price. In addition, the firms are also required to provide additional services to attract the customers. What do you think? Is it better to compete or to cooperate? 

Reference of article:

http://biz.thestar.com.my/news/story.asp?file=/2012/7/7/business/11617767&sec=business

Prepared by: Lim Kye Lyn

Student ID : 0311892