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MGT610 Assignment No 01 Solution & Discussion Due Date:24-01-2018
Raheel & Co. was the only manufacturer of shuttle box for power loom in Pakistan and has monopoly for
the last 60 years. The company was founded in 1958, and established the market of manual loom
shuttle boxes. With the passage of time, they started to make electronic and later smart shuttle boxes
which were controlled by computer. These shuttle boxes are very complicated their technology is
Back in 1998, Mr. Raheel Ashraf died with cancer and the company owned by his two sons, Mr. Aqib and
Mr. Suhail. Bother brothers had decided to take their legal shares and make two more companies, with
their own names. As the business was owned by their family for many years, they had an advantage to
have trust in the market and the emerging business of power loom was at the boost at that time. These
two factors supported them and they made two manufacturing units; one in Karachi and second in
Faisalabad to support the local demand of power loom.
By 2013, government had imposed Value addition tax on textile sector and many people suffered. These
two brothers, who were actually doing separate business but in different geographical location faced
setbacks and reduction in demand. Along with other textile stake holder, they had gone into dialogue
with government officials and with the ministry to trade and development Pakistan. Response was not
good, they had been threatened by government that if they did not reduce the price, government will
subsidized import of shuttle box from China, which resultantly put positive impact on the price of
production. But the idea totally malicious and projected bad impact was disastrous.
Both brothers took decision to visit China and signed agreement with almost all big suppliers of shuttle
box. After that they came back and made a cartel to save their businesses. They had continued their
“soft” monopoly in the market as import from European countries was far much expensive for the
owners of power loom factories. Government tried so much to break that cartel, but remain unable to
do till now. Ministry had also decreased duties for the import of all parts used in power looms, but it did
not put a single dent in the business of two brothers.
In your opinion, is decision taken by brother ethical as they create monopoly against government?
Support your choice while giving 2 supportive arguments.
Special Note: You are also required to consider the fact that both are sole supplier of Shuttle box and
getting maximum profit over decades.
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Monopolies are not all cancers on societal and economic welfare. In many instances, a monopoly is not only beneficial, but necessary for serving the public interest. Clearly, not all areas of work are conducive to facing the rigors and risks of a competitive marke.
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The decision taken by brother is ethical as they create monopoly against government because
1st bother brothers allows resources to be used in ways that will produce shortages of those things buyers want and cause them to be sold at higher prices than necessary
2nd In monopoly markets do not encourage suppliers to use resources in ways that will minimize the resources consumed to produce a certain amount of a commodity. Bother bothers firm is not encouraged to reduce its costs and is therefore not motivated to find less costly methods of production.
Third, a monopoly market allows the seller to introduce price differentials that block consumers from putting together the most satisfying bundle of commodities they can purchase given the commodities available and the money they can spend. Because everyone must buy from the monopoly firm, the firm can set its prices so that some buyers are forced to pay a higher price for the same goods than others.
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it is ethical becuase they save country money from import the european machinery
it is ethical because if import the machinery the price of the final product will be high
Monopoly case lag rha hai
kisi k pass solution ni hai kia?????????