Octopus
Our environment is continuously changing. Basically, the emergence of Electronic Money market in Hong Kong is only one of the innovations needed in the current era. And currently, the leading company in Electronic Money market in Hong Kong is the Octopus Card Ltd. Actually, firms are competing to achieve above normal return, but being monopoly is not the only way to achieve it. Firms can differentiate themselves with others through innovation: competing to be different. Although the innovation itself maybe profitable, the innovating firm itself may not profit from it. Therefore it is important to establish complementary assets alongside firm’s innovative capability to capitalise majority of the gain. And since Octopus Card Ltd. created a new market in which almost all of Hong Kong adults (i.e. 95%) are using their services, then it is evident that the firm is a monopoly company. Actually, the company is almost considered as pure monopoly, even though they are not the sole company in electric money market in Hong Kong they still have the power to control the market because of the extensive use of their card in different public and private establishments. It seems that the consumers have no alternative options, it’s either to take it or leave it and that is because of their exclusive collaborations with other large companies in Hon Kong. Hence, neither special advertisement nor promotion is needed to entice the consumers to patronize their cards, advertisement is actually used for service such as Octopus Card Ltd’s advisory regarding their new business partners and goodwill that the firm is promoting. The company actually have the power to control their prices, they are considered as price markers or price setters, there is only limited seller (contrary with pure competition with a number of sellers).
In addition, the company can set the price, price is adjusted only after the budget profit and output are set. And since the company dominates in the market of electronic money in Hong Kong, then it seems that the demand curve of Octopus Card Ltd’s is also the demand curve of electronic market in Hong Kong.
In this type of business, there are some companies wanted to enter in the market of Octopus Card Ltd. but as we all know monopolist of this type have ways blocking other firms entering in this dungeon. Octopus Card Ltd. blocked the new entrants because of:
1. exclusive right or privilege granted by the government to the initiator, giving them an exclusive use of their discovery for certain years.
2. exclusive collaboration with their business partners.
3. licensed granted by law.
4. whooping investment needed for its production.
These are the some reasons why new firms discourage to enter the industry despite the considerable profit they would earn. One more thing, Octopus Card Ltd. can even lower their price even up to the point of losing their profit, just to eliminate aspiring entrants. The fact that these new firms cannot afford to lower their price because it could mean loss in their part or when worst would come to worst even-bankruptcy. And once they eliminated these new firms, Octopus Card Ltd. may now again tick their price even higher level. And since Octopus Card Ltd. collaborates exclusively with other large companies in Hong Kong, then new entrants in the same industry have difficulties concerning limited business networks.
0 comments:
Post a Comment