Syarikat Bekalan Air Selangor
(SYABAS) is the only company in Selangor which supplies water to households.
The company remains as the sole water supplier direct to consumer. To
start it business as a monopoly, SYABAS is require to invest a
huge amount of capital, mainly for the start-up of water dams and water
treatment plant.
Why there is SYABAS the only company that supplies water to household?
There are other
companies want to start up a water supplying business as SYABAS does, but they still can't enter to the market even they have enough capital.It is because of the legal barrier to entry which is patents or licenses own by SYABAS.
In this case, SYABAS have gotten license from the federal
government to operate the business. Thus, having just one company to supply
water to consumers will help maintain a healthy market.
As an example, we assume
there are two companies supplying water in Selangor now, which are SYABAS and Ling Water
Berhad. It is definite that consumers will most likely make a decision based on
which company can offer them at a cheaper price. Furthermore, the number of water
treatment plants and water dams will increase in our country, which will lead
to over water storage facilities and pumping stations. The worst is how will
they direct the piping system to each household who chooses different suppliers. In
order to resolve these issues, the government has given the license to SYABAS only to operate this business. This helps to limit the entry into the industry
by using license. These is why monopoly industry have extreme barriers. Moreover, SYABAS is says to be more efficient in the production of goods or services if SYABAS stay as the monopoly firm.
In
conclusion, monopolies are protected from competition by barriers to entry. Therefore, it can earn a supernormal profit due to it is the only supplier. Monopoly also act as a price maker.
Written By,
Lim Zhi Xin
0314713
Syarikat Bekalan Air Selangor (SYABAS) is the only company in Selangor which supplies water to households. The company remains as the sole water supplier direct to consumer. To start it business as a monopoly, SYABAS is require to invest a huge amount of capital, mainly for the start-up of water dams and water treatment plant.
Why there is SYABAS the only company that supplies water to household?
There are other companies want to start up a water supplying business as SYABAS does, but they still can't enter to the market even they have enough capital.It is because of the legal barrier to entry which is patents or licenses own by SYABAS. In this case, SYABAS have gotten license from the federal government to operate the business. Thus, having just one company to supply water to consumers will help maintain a healthy market.
As an example, we assume there are two companies supplying water in Selangor now, which are SYABAS and Ling Water Berhad. It is definite that consumers will most likely make a decision based on which company can offer them at a cheaper price. Furthermore, the number of water treatment plants and water dams will increase in our country, which will lead to over water storage facilities and pumping stations. The worst is how will they direct the piping system to each household who chooses different suppliers. In order to resolve these issues, the government has given the license to SYABAS only to operate this business. This helps to limit the entry into the industry by using license. These is why monopoly industry have extreme barriers. Moreover, SYABAS is says to be more efficient in the production of goods or services if SYABAS stay as the monopoly firm.
In conclusion, monopolies are protected from competition by barriers to entry. Therefore, it can earn a supernormal profit due to it is the only supplier. Monopoly also act as a price maker.
Written By,
Lim Zhi Xin
0314713
why monopoly act as price maker?
ReplyDeleteMonopoly act as a price maker because it is only the firm available in the market. There are no any other competitors will compete with it. So, it can play with the price to maximize its profit.
DeleteWhat kind of business strategy that syabas do
ReplyDelete