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Oligopoly And The Disney Company. Essay

6690 words - 27 pages

1. INTRODUCTIONOligopolies have been around ever since there is trade. However, it has only recently gained grounds in this age of globalisation. Never before has oligopolistic competition been so fiercely contested across so many industries.The media industry in the United States of America (US) is one such industry. As a powerful communication tool, the media has attracted many companies but only a handful has grown big. These media giants have dominated the local market and are currently seeking to conquer the global media industry in search of better profits.One of these media giants is the Walt Disney Company (Disney). Its dramatic growth from a small company to become an oligopolist in the media industry offers an interesting case study.This report studies Disney's nature of business in the US media market. It starts with an outline of the media oligopoly in the US, which is imperative to appreciate the nature of Disney's business. Moving on to the next section, it briefly describes the history and corporate structure of Disney.Following that, the study analyses Disney's nature of business in relation to oligopoly. Here, it correlates the characteristics of oligopoly with the nature of Disney's business.The subsequent section proceeds to discuss the influence that oligopoly has on Disney's strategies. It demonstrates how Disney develops these strategies under the oligopoly structure to remain competitive.In the final section, this report discusses the influence of oligopoly on Disney's behaviour. It assesses how Disney behaves and responds towards an oligopolistic market structure.2. THE MEDIA OLIGOPOLYWhen a handful of big corporations dominate an industry, the industry is said to be concentrated (McCain n.d.). The concentration ratio (total output from the four largest firms) is used to measure the degree of concentration in the market. Generally, if the concentration ratio is more than 40%, the market is considered an oligopoly (O'Sullivan & Sheffrin 2003).The USA media industry is an oligopoly because it is concentrated with five big companies. According to McChesney (1998):The US media industry covers a very broad spectrum of related businesses. Any business that is related to the media such as film production, broadcasting, distribution, movie theatres, television, book publishing, newspaper publishing, recorded music, etc. belongs to the media industry.Traditionally, these businesses were all individual oligopoly markets with a handful of firms trying to control as much production in their own fields as possible. In general, these firms were different firms dominating each of these businesses (McChesney 1998, 1999).For years the US laws and regulations prohibited vertical integration and mass ownership in the media industry (McChesney 1999). However, some of these restrictions have been relaxed or eliminated recently. Media companies immediately capitalised on this opportunity to begin conglomeration of media ownership (McChesney...

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