Padiberas Nasional Berhad (BERNAS)
is a company listed on the Main Market of Bursa Malaysia. BERNAS is a
company that involved in trading paddy. BERNAS currently controls about 24% of
the paddy market and 45% of the local rice demand. BERNAS is the only company
that had the license to import and export paddy. Thus, making BERNAS monopoly
the rice industry.
What is Monopoly?
Monopoly
is a single firm in the market that has absence of competition, which often
results in high prices and inferior products. High barriers to entry are also
designed to block new entrants from entering the market. By monopoly the paddy
industry, BERNAS is a price maker. They could set the price to maximize their
profit.
Why other firms couldn’t
enter the market
One
of the reasons that other firms could not enter is because that they had been
denied access by the government. Even if other firms do enter the market,
BERNAS is already in the market for a long period, it has already become a most
familiar brand in consumer mind and it has a high brand loyalty in consumer. It
is too powerful to control the market and also the market price. When the
profit is minimizing, small or new company could not afford the loss or reach
the economies of scale. Therefore, making it hard for new firms to enter the
market.
Advantage of monopoly on
paddy import
The
advantages of monopoly the paddy
industry, profits that are earned can be used for investment, research and
development in future plans. Because of the high profits earning, BERNAS
encourage risk taking and could easily invest money on their research on paddy.
Finally, the existence of natural monopoly may prevent duplication of
resources.
Disadvantage of monopoly on
paddy import
By
being the only company that had the license to import and export paddy, BERNAS
had facing a lot of issue. Society had constantly file strikes and protest
again the company. They
think that is unfair and complains that BERNAS being the only entity allowed
importing and exporting rice into Malaysia.
Do you agree that BERNAS continue
monopoly on paddy import?
Rice had become
an everyday necessity for Malaysian. Let say, if one day, BERNAS set the price
for paddy to be higher then average, as a consumers or other firms that needed
to buy paddy from BERNAS will be in trouble. We would not stop purchasing paddy
because it is our base needs. BERNAS could make use of the monopoly power to
set the price that they wan. For my opinion, I think that government should
approve more licenses for firms to import and export paddy, this will lower risk
of consumers and firms, and create a more equilibrium market.
References list
http://oryzamarket.com/Rice-News/15052.html
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