Market Competition and Regulation the Essay
- Length: 8 pages
- Sources: 6
- Subject: Business
- Type: Essay
- Paper: #65812053
Excerpt from Essay :
Of course, this is a good thing for customers on short-term, but is negatively affects other companies on the market. This is because smaller competitors and especially those that intend to enter the market addressed by IBM find it at least difficult to provide product prices in accordance with those provided by IBM. These smaller companies do not have the ability of reducing their production or operating costs, which does not allow them to introduce competitive prices on the market. This way, they are clearly disfavored by IBM's position and market power.
In addition to this, in a field like it, it is imperative to make continuous investments into the research and development activity. This requires significant capital amounts from these companies. The investment levels that IBM reaches cannot be reached by many of these companies. This makes it difficult for these companies to keep up with IBM and its products and services. IBM is moist of the times at least one step ahead of its competitors because of its capacity of investing large amounts of capital in innovation of products and services that create new needs of customers.
Also, technological developments have become extremely important for all business sectors, but they are mostly important in the it sector. IBM has almost become a synonym with technological development. In other words, the company establishes very high technological standards that must be met by competitors too in order for them to maintain their competitiveness on the market. While these competitors must invest important financial resources into these technological development, instead of focusing on other areas, IBM is able to maintain its focus on reducing production costs that its competitors cannot do.
In addition to these barriers that derive naturally from the strong position and market power of IBM, the company is accused of implementing a series of actions and activities intended to limit its competitors' activity on the markets addressed by IBM. The European Commission investigates the fact that IBM has apparently used its dominant position on the market in order to limit or deny the access of certain competitors to spare parts that IBM is the only source for. This way, IBM intended to keep some of its competitors from addressing the market (O'Gara, 2010).
IBM is also under the investigation of the Justice Department in the U.S. The company is accused of antitrust activities, mainly of preventing its competitors of purchasing certain types of software and other supplies. IBM has denied the accusations (Koppel, 2009). As mentioned above, IBM is the subject of two European Commission investigations, which means that the company has engaged in several anticompetitive activities (Kawamoto, 2010).
The market conditions that international institutions want to be met by companies addressing these markets become more and more often the object of investigations of companies that have not respected the regulations of these markets. One of these examples is represented by IBM and its anticompetitive practices in the U.S. And in the EU space. The company is investigated for engaging in anticompetitive behavior that affects the activity of companies in the it market.
The market power that IBM benefits from allows the company to raise a series of barriers that derive naturally from this position on the market, like reduced production costs, low levels of prices, economies of scale, technology developments, capital requirements, and others. In addition to this, IBM is accused of using its position as a supplier in this market in order to restrict or deny the access of certain competitors to the products and services provided by the company.
Based on the facts presented by the press in the U.S. And in Europe, it seems that the authorities have made the correct decision regarding the investigation on IBM. Even more, these facts are backed by the legal environment in these areas. Although the complaints that refer to anticompetitive practices have been linked with Microsoft, there are several companies that complained about IBM's activity and that made proof of the company's anticompetitive behavior.
From the fact presented to the public, it is clear that IBM engaged in activities that prevented its competitors to purchase certain products and services that IBM is the provider of. This is against regulations regarding competition, given the fact that such activities clearly interfere with the equal opportunities that all companies in the it market should benefit from. Therefore, the European Commission made the right decision about investigating the activities of IBM that led to the complaints of several companies.
1. Oates, J. (2009). IBM Faces EU Monopoly Probe. Enterprise. Retrieved November 14, 2010 from http://www.channelregister.co.uk/2009/01/20/ibm_eu_probe/.
2. Annual Report (2010). IBM. Retrieved November 15, 2010 from http://www.sec.gov/Archives/edgar/data/51143/000104746910001151/a2195966z10-k.htm.
3. Monopoly: A Brief Introduction (2006). Linux Information Project. Retrieved November 15, 2010 from http://www.linfo.org/monopoly.html.
4. O'Gara, M. (2010). EC Opens Two Antitrust Investigations of IBM. Retrieved November 15, 2010 from http://soa.sys-con.com/node/1478919.
5. Koppel, N. (2009). Justice Department Launches Antitrust Investigation of IBM. The Wall Street Journal. Retrieved November 15, 2010 from http://blogs.wsj.com/law/2009/10/08/justice-department-launches-antitrust-investigation-of-ibm/.
6. Kawamoto, D. (2010). Europe Launches Two Antitrust Investigations into IBM. Daily Finance. Retrieved November 15, 2010 from http://www.dailyfinance.com/story/company-news/eu-ibm-antitrust-investigations/19568359/.