Oligopoly market in UK supermarket industry

August 16, 2017 Economics

Oligopoly Market in UK Supermarket Industry

In this essay I will seek the information about supermarket industry in the UK, focal point on the feature of oligopoly market and seek to happen out the consequence of this market construction to clients, analysis its advantages and disadvantages.

Harmonizing to my hunt, there are a five large supermarket companies in the United kingdom: Tesco, Asda, J Sainsbury, Safeway and Morrisons. We can see in the undermentioned diagram, in 2003 and 2008, Tesco is throughout holding the most market portion and the Asde.J Sainsbury Safeway and Morrisons ever competitory with each other, holding a big market portion. So, the supermarket industry in UK is oligopoly market.

The ground why the UK supermarket industry is oligopoly market for the follow ground:

1. Supply in the industry must be concentrated in the custodies of comparatively few houses. ( Anderton A. ( 2004:322 ) . In the UK, these supermarkets consider how much to provide and possibly do evaluate that how much their rivals will provide so that to see the supply

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2. Non-price competition ( Anderton A. ( 2004:322 ) . In UK supermarkets, in order to spread out their market portion, non-price competition has become a selling scheme, As Revision Guru ( 2010 ) ; the supermarket will utilize different sorts of publicity or some manner to promote the consumer to purchase more.

3. Collusion. Collusion is frequently a characteristic of the behavior of houses in oligopolistic markets where it is non illegal. ( Anderton A. ( 2004:323 )

4. Many markets are dominated by trade names. ( Anderton A. ( 2004:323 ) .Every house may bring forth the about the same good, in order to know apart their good, many houses will do it as a trade name to sell higher monetary value.

5. Price rigidness. Price in oligopoly market alterations far less than perfect competition in market. ( Anderton A. ( 2004:323 )

The above is the feature of the oligopoly marker, and UK supermarket industry is match its characteristic, hence, I draw a decision ; UK supermarket industry is oligopoly market. In the follow subdivision, will concentrate on treatment the advantages and disadvantages of this market construction for the consumers.

In the oligopoly market, consumer can profit from many ways.

First of all, in the oligopoly market, consumers may hold a better service a. For illustration in UK supermarkets, it is non merely Tesco, but besides Asda, J Sainsbury, Safeway… That means, consumers have pick to where they buy. As I mention above, oligopoly market is non-price competition, all the supermarkets sell about the same good in the same monetary value, in order to gain more money, the compete supermarkets may utilize different manner to spread out their market portion, altering their selling mixi??such as Internet shopping for clients, Store Loyalty cards, Innovative usage of engineering for shoppers including self-scanning machines and so on ( Revision Guru ( 2010 ) , by altering in four country: merchandise, publicity, topographic point, pricing so that can advance the development of service of the supermarkets. In this procedure, consumers can bask a better and convince shopping service.

Second, in the oligopoly market, consumers have more chance to purchase a new and advanced green goods. Harmonizing to Buzzle ( 2010 ) , in the oligopoly market, because of the strong endeavor strength and a batch of financess, these companies will put much money in green goods research so that to make new green goods, besides, companies want to be more competitory, they must hold something new to pull consumers. Therefore, consumers can profit from this new green goods to better their life.

Third, in the oligopoly market, the monetary value is more stable, consumers can accepted it. In the oligopoly market, the monetary value alteration really small, because if one company alteration monetary value, other company must be affected and have some reaction, For case, harmonizing to Worve ( 2010 ) , Tesco if cut down 3 % to 25 % of each good, this will increasing its gross and even increase its market portion expand 12 % in eight hebdomads. Besides, in the oligopoly market, other companies will besides cut down their monetary value, hence, the consumers may profit from this “ monetary value war ” , salvaging & A ; lb ; 150 a twelvemonth. The ground why the supermarket will diminish their monetary value is form the kinked demand curve theory, the supermarkets activated is accepting the Kinked Demand Curve. If one house reduces their monetary value, other houses will follow to cut down so that to maintain their market portion so in the oligopoly market, clients may besides profit excessively, the clients non merely had a stable monetary value for goods, but besides can purchase a cheaper goods.

However, oligopoly market besides has it advantages for consumers.

First, high barrier to entry the oligopoly market besides is a disadvantage to consumers. Because there are a few companies in oligopoly market, such the UK supermarket, there merely a large houses competed in the market, the small companies do no hold adequate power to completive with that large one, therefore, some small companies may be quitted the market, or some even can non entry the market. Mail Online ( 2010 ) . The small supermarkets quit means consumers have less pick ; it is a disadvantage for consumers.

Second, collusion between the compete supermarkets ; it is besides cause by the first disadvantage. As I reference before, the collusion is the feature of oligopoly, the houses want to maintain their gross so that to increase their monetary value, between houses, they may conspire with each other illicitly. Consumers are forced to purchase the goods in a higher monetary value ; Telegraphi??2010i? & A ; deg ; said that “ Any exchange of information between retail merchants is bound to falsify monetary values at the disbursal of consumers “ , therefore it can be seen that this is a disadvantage for clients.

In amount up, the research I have study about UK supermarket industry I find that UK supermarket industry is an oligopoly market, and clients can profit a batch. As I reference before, consumers can non merely have a better service, but besides be provided acceptable monetary value of good. Besides, for clients, the most of import thing is the quality and monetary value of goods, in the oligopoly markets, because of completion, every company will supply a new and advanced green goods for clients. However, in this oligopoly market, because of the feature of oligopoly market, high barrier to entry the market and the illicitly collusion, clients may lose opportunity to run into other new supermarket in the market, that means clients have fewer pick and more easy to be forced to purchase good in higher price.In order to do UK supermarket better, authorities should look into whether companies have colluded with each other, to protect the consumers benefit.

Mentions:

Anderton A. ( 2004 ) Economics ( 3rd ed. ) Ormskirk, Causeway Press Ltd. ( Accessed 5th January 2010 )

Buzzle ( 2010 ) [ On line ] The Benefits of Oligopoly

Available at: hypertext transfer protocol: //www.buzzle.com/editorials/10-27-2002-29003.asp ( Accessed 5th January 2010 )

Mail Online ( 2010 ) [ On line ] Stores Sold Supermarket Sweep Create Choice Shoppers

Available at: hypertext transfer protocol: //www.dailymail.co.uk/news/article-490986/Stores-sold-supermarket-sweep-create-choice-shoppers.html ( Accessed 5th January 2010 )

Revision Guru ( 2010 ) [ On line ] Oligopoly

Available at: hypertext transfer protocol: //www.revisionguru.co.uk/economics/oligopoly.htm ) ( Accessed 5th January 2010 )

Single Marketing Ltd ( 2010 ) [ On line ] UK Market

Available at: hypertext transfer protocol: //www.singlemarketing.co.uk/uk_market.html ( Accessed 5th January 2010 )

Teagasc ( 2010 ) [ On line ] , Retailer Dominance and the Impact on Farmers: from Turning to Sustenance

Available at: hypertext transfer protocol: //www.teagasc.ie/publications/2004/20040226/paper2.asp ( Accessed 5th January 2010 )

Telegraph ( 2010 ) [ On line ] , UK Supermarkets Fixed Milk and Cheese Price

Available at:

Tutore2U ( 2010 ) [ On line ] Kinked Demand Curve Under Oligopoly

Available at: hypertext transfer protocol: //tutor2u.net/economics/content/topics/monopoly/kinked_demand.htm

( Accessed 5th January 2010 )

Worve ( 2010 ) [ On line ] Oligopolies in Supermarkets Essay

Available at: hypertext transfer protocol: //www.wovre.com/revision/oligopolies-in-supermarkets-essay/

( Accessed 5th January 2010 )

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