Choose an industry that is very competitive, and one that displays signs of monopoly. Use examples to show and analyse how they pursue their objectives, and in what way they differ in their business practices.

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Choose an industry that is very competitive, and one that displays signs of monopoly. Compare and contrast how the firms in each industry behave. Use examples to show and analyse how they pursue their objectives, and in what way they differ in their business practices.

As part of my Business Economic unit, I am requested to produce a report on two industries- one that is very competitive and another that presents signs of monopoly. The industries that I have decided to use are the low-cost airlines industry which is very competitive and the railway infrastructure industry that displays monopolistic signs.  In order to produce that report I will compare and contrast how firms behave in both industries and evaluate in what way firms in the two industries differ from each other.

Since the liberalisation of the European’s airline market, the low-cost airlines industry has always been buoyant especially in short haul voyages. In fact, this has led to a very competitive environment especially in the UK “where according to Keith J. Mason the industry has seen dramatic change as low-cost airlines have established and developed significant markets for their services”. While investigating the low-cost airlines industry, the first thing that caught my attention was the way in which firms in this industry set their prices. In fact, the vicious competitive nature this industry has led to a price war. According to the Mintel Oxygen report for July 2007 on No-frills/Low-cost Airlines - UK - July 2007 “Despite rolling out new destinations and aircraft, based on double-digit growth, carriers are already talking of a slowdown, ‘weaker market conditions’ and a difficult winter. Worsening load factors have necessitated further price wars and at this rate a consolidation bloodbath looks inevitable.” Indeed this summer Ryanair started up a price war by selling three million summer seats for £10(taxes and charges included), in response to this EasyJet one the main players in the industry lengthened  it s summer sales and guarantee through out the summer. Other carriers also reacted to this by either lowering their prices on major destinations (Monarch, Air Berlin, etc…) or like BMI lowered its flexible flights services from £30 to £15 for the summer. By lowering their prices carriers not only acquires more customers but also lower their costs (Economies of Scale). As you can see from the examples above the main objectives of firms in this industry is to expand basically more sale value in order for them to either increase their market share or to survive. In order for any those firms to achieve this objective they should be aware of factors of demand. One of the first factors that I am going to point out is the price. According to the Mintel’s survey table below, almost 46% of consumers interviewed consider “Price” as a major factor when buying a ticket. 

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Most important factor when choosing which airline to fly with on holiday, 2002-06 Base: adults aged 15+ who have travelled by air in the last 12 months

    Source: GB TGI, BMRB Winter 2002 & 2004 & Q1 2007/Mintel

  In fact, consumer in this industry are extremely sensitive to price and this is mainly due to the fact that there are a lot of substitutes in the industry. For example if a consumer is not happy with the price of a service offer by ...

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