Oligopolies Aren’t Good For Anyone

When it comes to SMS marketing, Nexmo is among the leading companies providing the service. It is a huge oligopolistic company that is arguably causing a lot of trouble for everyone — economy, innovation, and customers. Here, we look into the issue slightly deeper.

What Is An Oligopoly

The oligopolistic market structure is a situation where a handful of companies possess most market share. The only difference between a monopoly and an oligopoly is the number of companies participating in the structure: as the names suggest, monopoly is only one, while oligopoly doesn’t have a fixed number, but is usually made two or three firms. One problem with such structure is that they can set prices behind closed doors. Additionally, such companies are known for being slow when it comes to innovation, and happy to build barriers for new entrants. As a result, they often enjoy higher profit margins than the market would naturally allow.

Little Competition — Little Innovation

As it is probably clear, oligopoly also means little to none competition. While this is beneficial for the firms themselves, there are no pros for everyone else. As a rule of a thumb, little competition always means higher prices, poorer customer service, and lack of innovation. Innovation is highly important nowadays, as it means some savings can be made on the costs. Also, it results in a better service provided. Innovation, however, is usually stimulated by competition; when firms face competitors, they need to beat them in order to survive. Thus, they are forced to come up with new solutions. In the oligopolistic structure such need disappears, and hence the innovation process slows down.

Aggregator Becomes Dictator

From a customer point of view, oligopolistic aggregators are often unfair, too. Because there is so little competition, the few companies that provide the required service can afford to dictate the rules. The basics of marketing say, however, that those should always be dictated by the customer. For businesses, it is much harder to adjust, though, and oligopolies are not willing to do so. They offer a very similar product at a similar price point and top it all up with a poor customer service. Not having another choice, a client is forced to agree with the rules. Otherwise, they simply won’t be able to get the service at all.

The Ultimate Oligopoly Problem

To sum up shortly, oligopolies have few main issues: for one, they eliminate a fair price game out of the market. Additionally, they don’t encourage any innovation. Finally, they do everything in their power to stop new entrants from coming in. All of it results in a bad product for a customer, and an ill market structure is ruining the natural progress of global economies.

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