The last Business model dealt with Collective business model, where we mentioned about the negotiation power companies wield. In today’s blog, we would look at an extreme scenario of control over the market (a type of negotiation power) where one company holds nearly the complete supply. There are many ideal situations which companies would love to be in - Monopoly is of these.
Monopoly - derives its origin from "Monos" + "Polein" (single + to sell). It is a situation when a specific individual or enterprise has sufficient control over a particular or service to determine significantly the terms on which other individuals shall have to access to it. We will deal more about the market aspect of monopoly when we are learning about market structures, in this blog we limit to the business benefits from monopoly.
When a business holds a monopoly of a particular good or a service, it significantly enhances the fortunes of the enterprise. When there are a large number of buyers asking for your product and you are the single largest provider of this demand, definitely you can define what price you could charge for the same. Which means whatever be my cost price, I have the luxury of charging a high price for the product I produce - in fact I could not just alter the price but create situations in the market that suite my firm by just having this control in business!
This is a very nice situation to be in as a business but not always the best for the society; and hence is generally regulated. We will deal more about this elsewhere.
Read in Kannada: http://somanagement.blogspot.com/2011/04/blog-post_7532.html
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