In order to maximise profits in oligopolistic markets, in which order firms addresses following strategic challenges?
A. Bargaining power of buyers
B. Competitive intensity of rival firms
C. Bargaining power of suppliers
D. Threat from substitute products
E. Threat of new entry
Choose the correct answer from the options given below:

Question

Question

This question was previously asked in

UGC NET Paper 2: Commerce 13th June 2023 Shift 2

Answer 1

The correct answer is D, E, A, C, B.

Key Points

An oligopoly is a type of market structure in which a small number of firms control a large share of the market.
Oligopolistic firms are often interdependent, meaning that the actions of one firm can have a significant impact on the other firms in the market.
Oligopoly markets are often characterized by high barriers to entry, which make it difficult for new firms to enter the market.
These barriers to entry can include economies of scale, brand loyalty, and government regulations.

Important PointsIn order to maximize profits in oligopolistic markets, firms should address strategic challenges in the following order -

Threat from substitute products - Substitute products are products or services that can satisfy the same need as the products or services offered by oligopolistic firms. The threat from substitute products is higher in markets where there are many close substitutes available.
Threat of new entry - Oligopolistic markets are typically characterized by high barriers to entry, such as economies of scale, brand loyalty, and government regulations. However, new entrants can still pose a threat to existing firms, especially if they offer innovative products or services at lower prices.
Bargaining power of buyers - Oligopolistic firms often sell to a small number of large buyers. This can give buyers a lot of bargaining power, which they can use to demand lower prices or better terms.
Bargaining power of suppliers - Oligopolistic firms often rely on a small number of suppliers for their inputs. This can give suppliers a lot of bargaining power, which they can use to demand higher prices or better terms.
Competitive intensity of rival firms - Oligopolistic markets are typically characterized by intense competition between a small number of firms. This competition can drive down prices and profits.