Capterra Glossary
Oligopoly
The term oligopoly describes a market structure in which a small number of large corporations set standards to control the price of their products and services, preventing new competitors from entering their market sector.
In this type of market structure, companies choose to coexist with each other instead of competing, as this ensures price stability within the market and increases the potential to receive large profits.
In an oligopoly, firms utilize non-price competition, which focuses on benefits, product quality, and extra services to outsell their competition, rather than lowering prices. Examples of industries that are considered oligopolies include the steel, telecommunications, oil, railroad, and airline industries.
What Small and Midsize Businesses Need to Know About Oligopoly
Small and midsize corporations may exist within an oligopoly, but their survival as a business is based on their ability to cut operational costs. Typically, small firms that operate within an oligopoly pay their workers lower wages than large corporations and have minimal entry and exit costs. However, since the structure of an oligopoly serves to prevent new businesses from entering their market sector, small businesses that enter an oligopoly tend to fail.
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