Economics

Problem-Based Learning (PBL) Scenario: AutoEdge

Market structure suitable for AutoEdge

Oligopoly is the best option for the company. Oligopoly is the market structure where company can face the challenges through its variation in characteristics and preplanning of company's operations. There are very few firms offering such services as AutoEdge does. Following are some signs which push the company into oligopoly (EO, 2013).

Barriers to enter and exit.

Other firms produce identical products. Therefore, the huge market share price of company variates on minute change in goods and services.

Firms are price setter.

Product may be different or similar

Oligopolies have perfect information of their own expenses and order purpose, but their inter-firm knowledge may be partial.

Buyers have only defective information as to price, cost and product class.

Oligopolies can maintain long run irregular income.

This offers a gigantic power over price and other features of the marketplace.

Less and limited competition that can offers space to weak company to regain its strength.

It also offers the facility in to winding up companies; mergers and collusion.

Oligopoly is the only market structure which suits the company. The overall structure and market value of the company has changed due to switch on United States to South Korean. This market structure offers a platform for frail companies to get strength in the market by applying some revolutionary measures. The fluctuation of price, quality improvement, non price competition and many other factors of an organization which can work to get it's lost worth in the market. Moreover, an oligopoly facilitates in lowering the average cost of manufacture of the product.

How oligopoly tackles the AutoEdge situation?

Drastic decrease in share price from $51 to $4 is caused by low income. This low income has carried many factors. The company switch on to another country's product i-e South Korea which is some how fair and practicable if it managed well. The quality factor is the trade mark and the goodwill of the company. The company compromised on quality due to raising their profits. This will block the growth line. Here, there some suitable and appropriate suggestion in oligopoly market structure for the company.

I- Market behavior

Here, the company has lost its market share; it means the company has no more value to play in price game. It can not be decreased more. However, there is one solution; the company should keep its work continue until marginal cost and marginal revenue differ. Company charged more amounts when it offered high-quality services and goods. If the company is following same price then it should be decreased but not at that level where marginal cost increases than marginal revenue. The other side of decreasing market value is when the firm loses its market value at a normal level, the rival group decrease its price level and customer will move to that group. Consequently the market value of affected firm goes more down (Jonathan, 2013).

II- Non price competition

This is the best part of this market structure. These components does not only suits the firm position but also give the ...