What Are The Implications Of A Highly Concentrated Market?


2 Answers

Roger Clegg Profile
Roger Clegg answered
The definition of a highly concentrated market takes into account a number of factors. Firstly it is a large number of competitive firms operating in an industry, secondly the level of high competition which in turn leads to reduced profit margins.

There are also the dangers of more threats of acquisitions and mergers and prices being driven down for consumers led by an aggressive market drive. In today’s society and with the worst economic climate since World War II, there is a tremendous amount of competition for sales and jobs. This in turn leads to a job market which is saturated and not enough companies being able to pay salaries. This leads to wage cuts and redundancies resulting in a saturated market and a level of high unemployment because there is not enough capital around.

This forces companies to lay off staff as the client they had cannot afford to renew their services and budgets are cut accordingly. The rise in one pound shops is also a sign of a concentrated market. Buy in bulk for cheap and sell it at one pound especially for small companies. This is the reason why more and more people are deciding to go to budget friendly stores including Aldi and Netto to do their weekly shops as prices are driven low and there is an even bigger demand by a growing number of customers who are out looking for a bargain.

This is also the case with Internet purchases from companies such as Amazon, Currys and Dixons who reduce prices and get a wave of interest from even more consumers looking for their next purchase - all at a good price.
Aisha Profile
Aisha answered
A highly concentrated market is characterized by a large number of competitive firms operating in an industry. There can be many implications of such a market, some of which are:
- High competition
- reduced profit margins
- More threat of acquisitions and mergers especially for small companies.
- More value for consumers
- Market is consumer driven
thanked the writer.
Anonymous commented
Wow. I think what you are describing is a cross between a "mature" industry and "fragmented" industry.
- mature industry is characterized by consolidated firms (to reduce costs and create economies of scale), high competition, and compressed margins.
- fragmented industry is characterized by many smaller firms that do not dominate the market (small market share)

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