ABSTRACT
This chapter discusses the nature of horizontal and vertical relations between companies in the supply chain. It offers an introduction to the topics from a business and social perspective rather than a micro-economic analysis. Theoretical micro-economic analyses, such as the Cournot/Bertrand models and kinked demand curve, are avoided, to allow non-economists to understand the concepts of market power and strategic decision-making in oligopoly markets. The chapter provides an introduction to competition and market power in oligopoly markets and its effects on corporate strategy. The synthetic rubber cartel in the opening case will be used to analyse the market power of companies operating in an oligopoly market. The costs of entry to the synthetic rubber market are high for newcomers, although they are manageable for companies already active in either the chemical industry or in tyre manufacturing. Oligopoly markets are more susceptible to the form of horizontal cooperation than any other type of market.
