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Morris Mpala, MoB Capital Ltd
THE debate sparked by the “entry” of KweseTv onto the scene dominated by Multichoice’s DStv, passively played by ZBCtv and illegally participated by some decoders has necessitated me to explore monopolistic markets. Throw in the use of internet in the equation of TV then the market dynamics become more complex.

The era of ICT stiff competition between Mobile Network Operators (MNOs) namely NetOne, Telecel and Econet has ignited a debate on oligopolistic markets. With the Over the Top (OTP) social media like WhatsApp it has meant competition on the scene has become fierce, ruthless and mafia cartel like at the expense of the consumers.

In addition across the border in the Republic of South Africa there has been a very strong sensitive debate on white monopoly capital (WMC). I thought it was just about monopoly capital not necessarily racial.

Instinctively it is about monopoly as the underlying current. Such is the physics of the market dynamics that each action has a reaction but not necessarily equal and opposite in nature.

Definition of markets
It is a group of people, firms which are in contact with one another for the purpose of buying and selling products/services.

Market structure
This refers to the number or size, distribution of sellers and buyers in the market or consumers of services.

Market product for a product/service not only includes firms and individuals involved in buying and selling or enjoying utility but also the potential entrants.

Types of markets
We have perfect pure competition, pure monopoly, monopolistic competition and oligopoly

Monopoly characteristics
One firm industry and only supplier for the entire market with no competition at all. Normally single seller in the whole market. No close substitutes and player is a price taker.

Government interventions
Government can take over or set up competitors just to regulate monopolies.

Disadvantages
Consumers have no choice and the monopolist does as they please to the detriment of the consumer.

Overcharging consumers.
Stunted or absent of growth on the firm (lack of innovativeness).

Do not produce at the least cost (unjustifiable inefficiencies)
Strain on public due to subsidies.

Advantages
Fully exploit economies of scale positively thereby benefit the consumers in the end.

Greater output than smaller firms

There are super profits that could lead to R& D.
Monopolies are sometimes seen as evil unholy alliances, undesirable, controlling, unfair and anti competitive tendencies etc. The advocacy against them is louder in the modern day economic arena due to increased campaigns in socio-economic justice.

Oligopoly characteristics
Market is dominated by a small number of larger producers or sellers or service providers.

Few giant firms.
Extreme case oligopoly has two players ie duopoly
Produces homogenous or differentiated products eg
Homogenous products we have steel, cement, oil
Differentiated products we have electronics, automobile, electrical appliances
Great degree of interdependence or interactivity
Significant barriers to entry

Reasons for Oligopoly
They enjoy economies of scale i.e. well established in their respective areas of concern. Barriers of entry — size of market against optimum size of firm.

Need to maintain very large and complicated machinery causing barriers of entry for potential investors. Unavailability of natural resources eg nickel demand etc.

– patents rights
– limit pricing
– tendency to merge and reduce the number of firms in the industry
– absolute cost advantage
– favourable location

Because of fewness therefore there is a great deal of dependence of the firm decision to influence and is equally influenced by the decisions of others.

There are significant barriers to entry as well as non price competition.

Strong interdependent results in a range of behaviour pattern on the part of the firms.

Competition takes the form of action, reaction and counter reaction. It is tacit war (or lack of it) between competition, regulators and consumers.

These kinds of actions, reactions and counter reactions make systematic analysis of oligopoly extremely difficult. At one extreme they may engage in fierce competition while on the other extreme they may explicitly cooperate. There is no single model of oligopoly behaviour but a range of models to explain different types of behaviour. The interventions by policy makers/regulators also make interesting analogies and analysis on the oligopoly phenomena.

Lessons
Market players are profit driven and consumers chase value for their money. The equilibrium between these two forces determine the price of products and services on the market.

Like they say you are as faithful as your options so are the markets. What is happening on the markets of TV and MNOs is the lack of options to the consumers.

Thus most customers are “loyal” to existing service providers.

This semi-theoretical explanation above gives an insight on the Zimbabwe distorted market as at current.

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Morris Mpala is the managing director of MoB Capital Limited, a Bulawayo headquartered micro-finance institution with footprint across the country.