Economic Principles: Analysis of Chemical Industry Market Structure

This report analyzes the market structure of the chemical industry, focusing on the UK market and key firms like John Matthey. The assignment examines the appropriateness of the oligopoly model, considering factors such as the nature of the product, economies of scale, the number of competitors, and market power. It discusses how the chemical industry presents characteristics of an oligopolistic market due to the high financial barriers to entry. The report also highlights the competition among firms, using the revenue of top chemical companies to illustrate the dynamics within the sector. Ultimately, the report examines the fit between the real-world market and the theoretical economic models, evaluating aspects that align and diverge from the oligopoly framework.

Economics

Market Structure of Chemical Industry
Chemical industry is considered as most valuable part of UK’s economy, which helps
manufacturing companies in offering green chemical products to them. This would help in
reducing negative impact of production on environment (Armstrong, 2020). Other opportunities
include growing demand of low-impact products in emerging market, which meet heightened
environment regulation, support global 3D printing market and more. Companies like Johnson
Matthey, Croda International, Synthomer, Carlo and more, are one of the biggest chemical
companies of UK, that added 12.2 billion in GDP and 21 billion British Pounds in sales, in 2016
to UK economy. This would help in widening economy, with millions of job opportunities to
both skilled and low-skilled employees. For example – John Matthey offers products like
emission control catalyst, fine chemicals, active pharmaceutical ingredients and more, at
worldwide level, helps manufacturing companies of UK in establishing greenery and sustainable
production. It has given employment to more than 14000 employees, with contribution over
£10.7 billion in 2019, for developing economy. Since, for entry in such industries, a large
financial reserve is required for new entrants, therefore, it indicates that Chemical industry deals
in oligopolistic market (Zondervan, Almeida-Rivera and Camarda, 2020). So, it demonstrates a
few dominant firms with substantial barriers for new entrance. Along with this, concentration
ratio is also measured by market share of largest firms only, which indicates imperfect
competition among firms associated in chemical sector. But as per the statistical report, it has
evaluated that John Matthey has highest contribution in economy than others, which shows
higher competition with other firms. So, it contradicts the fact that chemical industry deals in
oligopolistic market only.
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Figure 1: Revenue of the leading chemical companies in the United Kingdom (UK) in 2019.
2020.
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REFERENCES
Books and Journals
Armstrong, K., 2020. Regulatory Autonomy after EU Membership-Alignment, Divergence and
the Discipline of Law. European Law Review. 45(2). pp.207-221.
Zondervan, E., Almeida-Rivera, C. and Camarda, K. V., 2020. Product-Driven Process Design:
From Molecule to Enterprise. Walter de Gruyter GmbH & Co KG.
Online
Revenue of the leading chemical companies in the United Kingdom (UK) in 2019. 2020.
[Online] Available Through: < https://www.statista.com/statistics/887285/top-chemical-
companies-in-the-uk-by-revenue/>.
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