Imperfect Competition

5. Imperfect Competition

Imperfect competition means the industry in which sellers are able to gain advantage over their buyers through production in a less-than-efficiency scale. Imperfect competition is divided into 3 types which are Oligopoly market (few players), Monopolistic market (many players) and Monopoly market (one player).

(i) Thailand's telecommunication industry has few players dominating the market. This is considered an oligopoly market where the key players are AIS, DTAC and TRUE MOVE. There are five key characteristics of oligopoly as the following:

- Small No. of sellers: Three players in Thailand.

- Large No. of buyers: Thailand has 52 million mobile phone users in 2009 which is 81% of its total population.

- Monopoly power: Sellers can dominate the market using competitive advantages. They are "price makers" which means that they can change the price of their products as they (their products) are differentiated from competitors'.

- Barriers to entry: Almost impossible to enter the market. Mobile phone business needs license from government. The existing players have economies of scale, economies of large user network, brand reputation, etc. which prevents new firms from entering the market.

- High profit level: Sales revenue is always higher than total cost of production in order to maximize profits. Sellers gain "economic profit."

(ii) Strategic resources are factors that firms could use to add value and sustain dynamic competitive advantages to maintain their profitability over a long period. In a dynamic competitive environment, firms must use their strategic resources in the most effective way and attract and accumulate strategic resources over time. Strategic resources are categorized into two types:

- Tangible resources: Employees, customers, suppliers, agents, products, information, funds, machines, factories, technologies.

- Intangible resources: Employees' skills, management skills, product quality, product innovation, information quality, liquidity, reputation, brand image, business relationships, logistics management, organization culture, sound business strategies, experiences, risk management policies.

I think product and product quality are the most important factors since the goal of buyers is to maximize their consumption utility. The product must also be improved and innovated so as to follow the customers' trend and taste and to lead competitors. Reputation is also important as customers tend to choose brands that they are familiar with and not to choose an unrecognized brand. Sellers should develop and maintain good reputation over time to keep their customer base and attract new customers. Another essential factor is capital funds because firms will need to expand their