Monday, August 17, 2009
Econs Answers LOL @ 8:55 PM
Hello here's the answers for Market Structure Extract 2 of the case study. LOL.
1. Purpose
Chinese govt is promoting/pushing for merger of local firms to increase mkt share so as to compete against MNCs and warn potential entrants of fierce competition present in China's retail industry.
2. Data
- China lifted most restrictions on foreign retailers.
- Foreign fuirms plan to open more outlets eg. Carrefour
- Consolidation -- Shanghai Ballion won permission to take over 4 rivals.
3. Inferences
- Lower BTE (eg. limits on number of stalls) -> Increase in no. of foreign firms
-> Increase competition btw foreign & domestic firms
-> Consolidation of domestic firms -> Increase EOS -> Increase efficiency
-> Lower cost, lower price from cost savings
4. Economic concepts
- EOS (acquiring firms to reap potential EOS)
- BTE (encourage greater competition)
5. Assumptions
- EOS reaped by domestic players after consolidation is sufficient to enable these local big players to be indeed strong enough to compete with MNCs "at home and expand overseas" (govt's goal)
- Avoid disEOS
- Sustained interest of Chinese public in imported goods (providing mkt dd for foreign pdts)
6. Implications/Consequences
Advantages
- Firms enjoy EOS from increase in firm size -> Lower COP -> Increase in profits
- Means + Incentive for R&D, therefore consumers benefit from better quality goods
- Increase GDP
- Increase Employment rate
- Increase global mkt share -> Penetrate overseas mkts (after merger)
Disadvantages
- Lesser variety of pdts -> Lesser consumer choice
- Smaller firms uninvolved in mergers will not enjoy the benefits
7. Point of view
- Objective, informative
- Fierce competition in China's retail industry
So sorry for flooding this blog with schoolwork. LOL. Please spread the word so more people can benefit from this (reap EOS HAHAHA) Jiayou all! :)
♥ jingqi