Today, we are going to discuss monopolies! Which are unlawful, yet obscure and only serve to exploit dependent consumers, except when they are delivering quintessential services that competitive free markets kind of fail to deliver.
So, are monopolies good? Or bad? Or both? Let’s find out!
What is monopoly in the business world?
A monopoly is a market situation in which a single company or group owns the exclusive possession or control of the supply or ownership of nearly all of the market for a given type of product or service.
By definition, a monopoly is identified by the absence or truancy of competition, which often results in high values and substandard products. According to a specific academic definition, a monopoly is a market comprising a single firm.
In such cases where a single firm holds monopoly power, the company will typically be compelled to dispossess its assets. And Anti-monopoly regulation shields free markets from being bullied by a single entity.
For regulation, monopoly power endures, when a single firm controls 25% or more of a particular market. A monopoly could be created following a merger of two or more firms. Given that this will lessen competition, such mergers are subjected to close regulation and may be restricted if the two firms gain a consolidated market share of 25% or more.
For example, if you want to buy a new automobile and there is only one label from which you can purchase your car, that brand will be deemed to hold a monopoly.
In the late 1990s, Microsoft faced numerous suits due to noticed violations of these anti-trust laws. Had the Justice Department declared the company was in violation, Microsoft would have been compelled to divide itself into subsidiaries in order to break up the possible monopoly. This is happening with Google and Facebook in Europe at present.
To give you an accurate picture, we bring you some interesting prospect of a few powerful companies, exercising monopoly or that are secretly controlling the world. Have a look!
Quanta Computer Inc
Mac v/s PC, it’s been one of the biggest rivalries of the technological age. When buying a laptop a lot of people have strong loyalties to one or the other.… and it’s a battle that shows no signs of dying down anytime soon.
But, at the end of the day, does it matter?
Macs, HPs, Dells, Toshibas, Sonys, – all these laptops come from the same manufacturer and company: Quanta Computer Inc. Quanta Computer Inc is a Taiwan-based manufacturer of notebook computers and other electronic hardware and devices, which was established in 1988. The company has an evaluated 31% worldwide market share of notebook processors or computers.
With approximately 70% of adults in the Western world owning a laptop, this equates to a simply gigantic reach for Quanta. It has also grown beyond laptop production and now has fingers in many other technological pies.
Quanta has connections in mobile communication, GPS systems and home entertainment. In 2011, they even collaborated with Facebook as part of the Open Compute Project. Which aimed to create more efficient servers, storage and data centre hardware designs.
Over the years, The Walt Disney Company has acquired a few high-profile media production companies. Most notably, there were purchases of Marvel Entertainment in 2009 and Lucasfilm in 2012, both of which cost over $4 billion.
More than half of the highest-grossing movies in the last decade were owned by the company, showing how tight their grip over the film industry is. And while The Walt Disney Company are best known for their billion-dollar grossing movies and world-famous theme parks, the mass media giants reach doesn’t stop there.
Disney also owns or partly owns – loads of other companies. They own TV networks ABC, ESPN and even – perhaps surprisingly – The History Channel.
With the media playing an incomparable role when it comes to public sentiment and knowledge, Disney’s vast empires make them one of the most powerful companies in the world.
Most of the products that you buy are owned by a surprisingly small number of monopolistic companies. Take Nestle, for example, they own over 8500 different brands in 80 countries. You would expect KitKat or Milky Bar to be one of its prime products, however, there are some products that you probably never imagined would be owned by the chocolate giant, such as Shredded Wheat, Gerber baby foods, Hot Pockets and Purina Pet Food.
They also own approximately 23% of a cosmetic powerhouse, L’Oreal; which itself owns huge brands like Garnier Maybelline and The Body Shop. And Nestle isn’t the only food company whose reach is greater than you think, Kellogg’s owns big brands Eggo, Pringles and Cheez-It; Pepsi Co owns Quaker Oatmeal, Cheetos and Tropicana; and Kraft acquisitions range from Oreos to Vegemite and Cadbury to Dairylea.
Lockheed Martin Corporation
Lockheed Martin with global military expenditures standing at over 1.7 trillion dollars every year, it’s no surprise that companies producing and supplying weapons exert a huge amount of power over world events. Lockheed Martin is the world’s largest weapons manufacturer. They employ 126,000 people and rake in $69.3 billion a year in profit. National militaries around the world rely on Lockheed. For example, it’s the US’s largest government contractor, receiving 10% of the Pentagon’s funds.
They also supply weapons to Germany, India, Israel, Japan, the UK and numerous other countries showing the wide-reaching extent of their influence over worldwide conflicts.
However, Lockheed Martin’s control has spread beyond this. They spend a great deal of money on lobbying, especially in America, investing approximately $10 million a year. They tend to offer their financial support to political candidates who advocate higher national defence spending, to ensure more investments in their own products. Clever, right?
It’s no secret that alcohol plays a big role in society. 56% of American adults questioned in the 2015 National Survey admitted to drinking in the past month. An estimated 88,000 people die from alcohol-related causes every year and excessive drinking costs the health services a staggering $223.5 billion a year.
With such a variety of tipples available, you would expect the responsibility for alcohol consumption to fall into a large number of different companies. But there is one company who has a huge monopoly of the beer industry: InBev. It owns 46% of the beer markets in America and has a net profit of $3.4 billion a year. Most of the beers you can buy from a store belonging to the InBev beer empire, including Stella Artois, Budweiser, Becks and Corona.
InBev also has majority stakes in other huge companies, such as Grupo Modelo, which makes most of the beers in Mexico. Whenever you’re treating yourself to a beer or two, there’s a very strong likelihood that your money will at some point end up in InBev’s pocket.
Bankers are ultimately responsible for stabilizing the economy, which ripples through every aspect of our lives. Their power influences everything from the big scale decisions of governments to the prices of individual food items in your weekly grocery shop.
If you combined the wealth of the world’s 10 largest banks you’d have, $25.1 trillion – which would be enough to fund the entire US superpower government for over 7 years. The Industrial and Commercial Bank of China, the state-owned Banking goliath is undoubtedly the most powerful bank on the planet. It has over $3 trillion in assets and a market value of $215.6 billion, meaning it reigns supreme at the top of Forbes’ ‘World’s Biggest Public companies’ list. And the bank’s influence isn’t limited to China…
ICBC has a foothold in every continent except Antarctica, employing nearly half a million people globally. They have also extended their control by turning other major banks into ICBC subsidiaries, for example, Turkey’s TekstilBank and South Africa’s Standard Bank.
These were just a few examples of heavyweights reigning over our capitalist world and the one’s controlling our economic market, stability and thus, inflation.
Meanwhile, let’s find out why Monopolies pose as a threat to global economic balance!
Not only can monopolies hike prices, but they also can supply substandard products. That’s happened in some metropolitan neighbourhoods, where grocery markets and poor residents have few alternatives.
Monopolies are harmful because they allow one dominant shareholder to set the price on goods without courtesy for competitive, affordable pricing. This is because when there is a monopoly, there are no rival or competitors. This leaves consumers at the mercy of the monopolist.
Monopolies affect inflation. Since they can fix any rates they want, they will hike costs for consumers. It’s called cost-push inflation. A good example of how this works is the OPEC – Organisation of Petroleum Exporting Countries. The 13 oil-exporting nations in OPEC are home to nearly 80% of the world’s proven oil reserves.
Did you know about the full extent of these business superpowers and monopolies or did any surprise you? Let us know in the comments below and if you enjoyed this make sure you check out 12 interesting facts about Elon Musk you never knew as well and share while you’re at it!