Case: Raheel & Co. was the only manufacturer of shuttle box forpower loom in Pakistan and has monopoly for the last 60 years. Thecompany was founded in 1958, and established the market of manualloom shuttle boxes. With the passage of time, they started to makeelectronic and later smart shuttle boxes which were controlled bycomputer. These shuttle boxes are very complicated their technologyis inimitable. Back in 1998, Mr. Raheel Ashraf died with cancer andthe company owned by his two sons, Mr. Aqib and Mr. Suhail. Botherbrothers had decided to take their legal shares and make two morecompanies, with their own names. As the business was owned by theirfamily for many years, they had an advantage to have trust in themarket and the emerging business of power loom was at the boost atthat time. These two factors supported them and they made twomanufacturing units; one in Karachi and second in Faisalabad tosupport the local demand of power loom. By 2013, government hadimposed Value addition tax on textile sector and many peoplesuffered. These two brothers, who were actually doing separatebusiness but in different geographical location faced setbacks andreduction in demand. Along with other textile stake holder, theyhad gone into dialogue with government officials and with theministry to trade and development Pakistan. Response was not good,they had been threatened by government that if they did not reducethe price, government will subsidized import of shuttle box fromChina, which resultantly put positive impact on the price ofproduction. But the idea totally malicious and projected bad impactwas disastrous. Both brothers took decision to visit China andsigned agreement with almost all big suppliers of shuttle box.After that they came back and made a cartel to save theirbusinesses. They had continued their “soft” monopoly in the marketas import from European countries was far much expensive for theowners of power loom factories. Government tried so much to breakthat cartel, but remain unable to do till now. Ministry had alsodecreased duties for the import of all parts used in power looms,but it did not put a single dent in the business of twobrothers.
Question: In your opinion, is decision taken by brotherethical as they create monopoly against government? Support yourchoice while giving 2 supportive arguments.
Special Note: You are also required to consider the factthat both are sole supplier of Shuttle box and getting maximumprofit over decades.
Note: Keep in consideration the followingconcepts: 1. Economical models and their implications (Free market,controlled and mix economy) 2. Right of business (Adam Smith) 3. Law of protection of Local Manufacturer 4. Monopoly / Cartelization is ethical or unethical 5. Porter Five force model (by creating barriers for newentrants) . . .
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