Research Paper Strategic behavior entails ascertaining what firms are likely to do in a specific situation, and then following tactics that maximize the firms' gain or minimize any harm to the firms. In oligopolies, strategic behavior is the rule. When making the decisions, the firms must to predict how their competitors would respond. Even when the decision is not related to price, strategic behavior still comes to play. In this research paper, real cases in Vietnam would be analyzed for purpose of understanding how oligopolies competitors make strategic decisions in order to moment to other peers.
An oligopoly is known as a market structure in which a few large firms dominate. The high set-up costs is a constraint for potential rivals when entering the market because many costs are sunk costs which cannot be recovered when the firm leaves a market such as marketing and advertising costs and some fixed costs. For examples, in the Vietnamese milk industry, local dairy giants such as HTH True Milk and Binomial have unveiled huge investment plans on pastures and dairy cow stock. Binomial, a leading dairy company based in Vietnam, now possesses a total asset Roth nearly IIS$ 757.
2 million while HTH True Milk, the new competitor, has to invest IIS$I . 2 billion in order to import 10,000 cows from New Zealand, Uruguay and Canada and to buy equipment and advanced technology from Israel. It is clear that high research and development cost is also a signal of that the firm has large financial reserves. For the purpose of competition, new entrants will have to match, or exceed, this level of spending in order to compete in the future. Parting from around 3,000 illegal taxies outside the authority control, the taxi industry in Ho Chi Mini City might be considered to be an example of an oligopoly.
Although there are approximately 12,400 taxies which belongs to around 15 companies, Maim Line and Vinson which are two leading taxi companies accounts for 70 percent of market share in Ho Chi Mini City. The oligopolies frequently maintain their position of dominance because it is too costly for potential rivals to enter the market. For example, Maim Line Company has around 3,000 taxies in Ho Chi Mini City, and the cost of each car is around IIS$30,OHO at average, so the total cost of 3,000 cabs is IIS$90 millions. Operating expenses such as fuel, maintenance might be also obstacle for new entity.The fuel cost in Vietnam has dramatically increased in the recent years, due to the rise in the global petrol price and mutual pressure of the economy.
[pick] Besides, those oligopolies probably own or control scarce resources that new entities need for entering the market. The constraint in the taxi industry is that under the regulation AT ten Valetta taxi Industry, HCI, Hanoi Ana Dang nave ten licensing regulations in force in order to regulate taxi numbers. Thus, it is difficult to get this auto because the total number of taxies which are allowed to drive in those big city is almost fixed.If new competitors want to entry this market, they need to wait until one of those existing taxi companies gives up its quota because of some reasons such as liquidation. In an oligopoly, a number of strategic choices the firms need to face would govern their ability to achieve a desired pay-off, including decisions on price such as whether to raise or to lower, decisions on products such as whether to keep existing products or to develop new ones, or decisions on promoting products such as whether to spend more on advertising or to spend less or to keep it constant.Furthermore, there is mutually interdependence among oligopolies competitors.
It meaner that each of which expects a potential reaction from its rivals to changes in its price and quantity when making its own decisions. Thus, they need to plan and work out a range of possible options based on how they think rivals might react. In the milk industry, the HTH True Milk has successful marketing campaigns in making its brand to be more popular with slogan of that the natural essence has been preserved in the clean fresh milk of HTH True Milk.Additionally, the HTH True Milk becomes the first company in Vietnam which has idea of opening a significant number of supply chains for HTH True Milks products. After two years, HTH True Milk accounts for 30 percent of market share and becomes a reliable brand for consumers. In its plan to compete with HTH True Milk, Binomial, a big guy on the dairy product market, installed a new production line using the most advanced technology in the world, the first production line of this kind in South East Asia and launched 100 percent pastured Binomial fresh milk in mid December 2011.
In the taxi industry, Maim Line Company, which was established in 1993, has been expanding its business into 54 provinces and cities of Vietnam as well as in overseas with around 10,000 vehicles and over 25,000 employees. Maim Line has been awarded as the most favorite brand in the transportation industry for many years. In 2003, Vinson entered in this market as the new player and the company knew that it was impossible for Vinson to compete with Maim Line at that time. Thus, Vinson used its whole scare resources to run the business in Ho Chi Mini City with the purpose of coming the market leader in this city first.After 10 years, Vinson finally becomes the market leader and Maim Line is the second in HCI with market share of 40 percent and 30 percent respectively. Responding to this situation, Maim Line now narrows and concentrates to run its business in big cities in order to take back lost market share.
Furthermore, both companies are considering whether to invest in the taxi segment for low incomers because during the economic downturn, the households' income which is tightened affects directly the demand of using taxi for traveling.It cannot be denied that any decision by management of these two companies may significantly affect their market share. To sum up, strategic behavior is the general term for actions taken by firms which are Antennae to affect ten market environment In wanly teen compete Walt toner peers. Strategic behavior includes actions which influence competitors to act cooperatively so as to raise Joint profits as well as uncooperative actions to raise the firm's profits at the expense of rivals. Moreover, strategic behavior is more likely to occur in industries with small numbers of buyers and sellers.
