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Reference : Holy Oligopoly, Batman! When we think of things that…
Reference :
Holy Oligopoly, Batman!
When we think of things that are undeniably Canadian, certain ideas come to mind: hockey, beavers, Mounties, the maple leaf. A concept that does not immediately spring to mind but is quintessentially Canadian? The oligopoly.
An oligopoly is a market situation where only a few large sellers dominate the market. In this market, players compete for customer loyalty by trying to differentiate themselves in a meaningful way. Canada provides some notable textbook examples of an oligopoly, including in the airline industry (WestJet and Air Canada), the banking industry (the Big Six banks), and the telecommunications industry (TELUS, Bell, and Rogers). And, it seems, the structure of the Canadian economy is a big reason why it is a breeding ground for market control by a few organizations. While Canada is large in land mass it is relatively small when it comes to competition, especially in comparison to the United States. With fewer people comes fewer competitors in many markets, and small companies find it hard to set up the infrastructure necessary to build their business. All this means Canadians are not exposed to a more competitive economic environment for goods and services.
The CBC recently has noted that, “Canadian consumers and workers are protected from certain free-market excesses, but that coddled security comes with a price: oligopolies, in which a few firms dominate, and all the behaviour that flows from that.” And that behaviour can sometimes be bad behaviour. There have been recent incidents in Canada where manufacturers, wholesalers, and retailers have teamed up illegally to fix prices. Chocolate bar manufacturers Cadbury, Hershey, Nestlé, and Mars had to pay $23 million in a class action suit against them because it was found they had agreed to set prices on chocolate bars sold in Canada. And Canadian food wholesalers and retailers were also caught improperly acting together to set the price of bread. Over a 14-year period the price of bread in stores like Real Canadian Superstore, Sobeys, Metro, and Giant Tiger was maintained and agreed upon. While this case is still ongoing, Sobeys has admitted its role in price collusion and other companies have continued to deny the claims.
One industry where claims of price fixing and collusion have been made but not substantiated is the telecommunications industry. The Big Three wireless service providers of Rogers, Bell, and TELUS control nearly 90% percent of the wireless market in Canada. At one time, Investopedia’s definition of oligopoly included as an example “the wireless service industry in Canada.” There have been attempts to disrupt the Big Threea long list of competitors have come and gone in the wireless market in Canada. But, you might be asking, what about some of the smaller wireless providers in Canada? Let us have a look. Koodo? Owned by TELUS. Fido? Rogers. Chatr? Rogers again. Okay, what about Virgin Mobile? Run by Bell in Canada. There is the curious case of Wind Mobile, run now as Freedom Mobile. It caused a stir in the mobile market by offering low prices and large data plans. This one had the Big Three scrambling a bit, trying to match these deals. Unfortunately, Shaw Communicationsa large telecommunications company that is hoping to make it a “Big Four”bought out Freedom Mobile. Freedom indeed.
The result for Canadian wireless consumers? High prices for cell phone plans. A Canadian government report released in late 2017 revealed that among countries like the United States, Italy, Australia, Japan, and France, Canada had the most expensive mid-range and higher-tier wireless service plans. And while the prices are high, they are also similar among the Big Three organizations. Consumers struggle to find alternative options for their wireless provider needs. It seems that if any smaller or upstart business enters the market, it does so with limited success or ends up being swallowed up by one of the major players.
Sugar Mobile was one such start-up that began in 2016, offering data plans as inexpensive as $19 per month. Sugar has not (yet) been purchased by one of the larger entities, but it has struggled with establishing itself in the Canadian market. And while gaining attention in the Canadian market with low prices, this approach has not been sustainable.
Your challenge is to help Sugar Mobile get established in the Canadian wireless market. But instead of focusing on price, you remember learning that the way to win customers is through product differentiation. Lay out some ideas that will lead to a plan to crack the Canadian wireless market. Use your knowledge of business and competition to help Sugar Mobile get some good reception with Canadian consumers.
Question :
Holy Oligopoly, Batman!
Your challenge is to help Sugar Mobile get established in the Canadian wireless market. But instead of focusing on price, you remember learning that the way to win customers is through product differentiation. Lay out some ideas that will lead to a plan to crack the Canadian wireless market. Use your knowledge of business and competition to help Sugar Mobile get some good reception with Canadian consumers.
