ECONOMICS 2

Economics: Coursework Brief

Economics: Coursework Brief

a) Monopoly refers to the lack of competition to produce a particular good or deliver a service. It exists when a specific person or enterprise is the only seller of a particular product in the market. Apart from a single seller having complete control, there are many other features of monopoly such as there is no close substitute for the product; the monopolist is the price setter. Since the monopolist is the only firm so the firm and the industry are the same and hence the monopoly firm faces the downward sloping demand curve. In such a situation, the firm can sell at whatever price they feel appropriate.

There are different types of monopolies which may exist in different markets. These include natural monopoly (the type of industry makes it financially impractical for another company to come in this business), geographic monopoly (only one company in a particular area), technological monopoly (patent or copyright protection) and government monopoly as some of the most common types.

b) The monopoly of Royal Mail continued for more than 350 years. It was in 1654 when the government run by Oliver Cromwell granted the Post office the monopoly status. There were though short periods of competition but they either failed by themselves or were suppressed by the incumbent firm. There was also governmental support in this regard to put an end to any competition that arose. Hence the specific features of monopoly that can be applied to Royal Mail include its dominance as the single service provider with regard to mail in the entire country. There was no close substitute to the service that it provided. Though there were smaller, localised private mail services but none was capable enough to pose any threat to the largely expanded business of the Royal Mail to provide delivery to every corner of the country (http://stakeholders.ofcom.org.uk).

c) The situation since 2005-2006 has changed with people shifting to faster cheaper means of communication, the delivery of items in a day has been reduced to 58m in 2012-13 from 80m items in 2005-2006 at the same time. State control is damaging the restructuring efforts that the company takes to bring it into profit. Political interference in commercial decisions leads to jeopardising cost-cutting. Moreover, with no external investment the company can be at risk. From the study of other companies, it can be seen that privatisation requires responding to the demands of the investors, employees and customers while reports in this regard of previous years suggest that Royal Mail is not good at handling such matters and would thus require attention to be paid in this direction too. The changing market requires new strategies and policies so that risks can be reduced and the company is able to adapt in accordance with the changing trends and starts profiting. Moreover, these changes will increase the chances of diverting the attention of the government towards privatisation (Welsh, 2013).

d) Privatisation would at one hand help in allowing it to survive in ...