The Uk Supermarket Industry As An Oligopoly Market Economics Essay
The supermarket industry in the UK could be described as an Oligopoly Market. Based on your research into supermarkets in the UK, discuss whether this market construction creates a state of affairs that is more or less to the benefit of clients.
An oligopoly is a state of affairs of limited competition market in which it is dominated by a few Sellerss to provide goods and the market of concentration is high ( Anderton et al 2008 ) . Harmonizing to BBCnews ( 2006 ) , the UK supermarket industry that holds a combined portion of the market is taken over by the prima houses, including Tesco, Asda, Sainsbury ‘s and Morrisons. In 2008, these top four supermarkets hold about 76.0 per centum of food market market in the UK supermarket industry.
Tesco: 30.6 %
Asda: 16.6 %
Sainsbury ‘s: 16.3 %
Morrison ‘s: 11.1 %
Furthermore, Anderton ( 2008 ) states that interdependent between houses are one of the most of import features of an oligopoly. In the UK supermarket industry, the major rivals have high competitory power and the alterations in one company will impact its rivals ( 123helpme, 2009 ) . In add-on, barriers to come in are high in an oligopoly market, because taking endeavor enjoys immense economic of graduated table and supply at a really low monetary value to obtain competitory advantages. As a consequence, the UK supermarket industry can be thought as an oligopoly market. This sort of market construction has some advantages and disadvantages for consumers. One of the benefits is can allow the consumers get a stable and lower monetary value of merchandises and good services. However, this sort of construction besides have disadvantage for consumers that it may take them to pay a high monetary value accompanied by the possibility of a low quality merchandise because the collusion and monetary value rigidness can allow the prima houses to command the monetary value of merchandises easy.
( Price stableness, the selling mix and the kinked demand curve )
First of wholly, the merchandises set a stable and lower monetary value because many merchandises are replacements, which are homogenous in oligopolistic markets. Anderton ( 2008 ) points out that an oligopoly market is an imperfect competition, it brings that the monetary value is non an of import component for selling more merchandises. As a consequence, they will make up one’s mind to utilize gross revenues publicity to diminish merchandises ‘ monetary value. This procedure can allow the consumers get a lower monetary value of merchandises. In add-on, the houses sell the merchandises at a individual market monetary value because if an oligopolistic house increases monetary value, it will take to take down net incomes if other rivals do non follow to alter the monetary value. Furthermore, altering monetary value is hazardous scheme ( Anderton et al, 2008 ) . Therefore, it leads them do non alter monetary value in normal conditions. These two grounds make consumers buy most merchandises at the same monetary value and go just to them. For illustration, a generic whisky from each of the beer makers should sell for around the same monetary value, because if one house lessening monetary value it will get down a monetary value war. Furthermore, the kinked demand curve theoretical account can demo that the fringy cost has non influenced the net income maximising degree of monetary value and end product in oligopoly ( Anderton et al, 2008 ) .
Beginning: ( Revisionguru, 2010 )
As a consequence, the monetary values are comparatively stable in the UK supermarket industry. Let the consumers could acquire benefits for it.
( Non-price competition )
Furthermore, an oligopoly brings another advantage for consumers have the good services. Anderton ( 2008 ) indicates that an oligopoly market is non-price competition, hence, the most of import cause is frequently non the monetary value in this construction. It leads that the houses need to be focus on good services to pull clients. First, in the UK supermarket industry the house will open long hours for the convenience of clients ( Tutor2you, 2007 ) . For case, Tesco is opened until 10 autopsies at dark. This policy is convenient for people who work tardily or purchase merchandises at dark. Second, the house will put their ain shop trueness cards for consumer have reduced monetary value to purchase goods. This method non merely can increase the gross revenues of merchandises, but besides can allow the consumers buy merchandises cheaper. From Tutor2you ( 2007 ) , it lists some other procedures for consumers to hold good services, such as Home bringing systems, cyberspace shopping for clients and fiscal inducements to shop at off-peak times. All of these procedures can assist clients hold more convenient services, it is good for them.
( Price rigidness and collusion )
On the other manus, despite oligopoly have advantages for consumers. It besides has disadvantage for clients such as paying a high monetary values accompanied by the possibility of a low quality merchandise because of monetary value rigidness and collusion. In oligopoly market, the monetary value is set for the prima house because they take up about the whole market and in UK supermarket there is no perfect competition. Consequently, they may put the high monetary value of the merchandises without a high quality. In add-on, they may even conspire to put monetary values. In the UK supermarket industry, the top four supermarkets may vie amongst themselves and the less competitory houses are hard to entry the market. It causes that they will put high monetary value to do a maximal value. Furthermore, the companies frequently use advertisement to pull the consumers to purchase the low quality merchandises. Because there is less rivals in the market and consumers have no more pick to purchase the merchandises. All of these factors lead consumers may pay a high monetary value to purchase the lower quality merchandises.
In decision, this paper show the UK supermarket industry is known as an oligopoly market, it has benefits and disadvantage for consumers. In this construction, consumers non merely can acquire a stable and lower monetary value, but besides have first-class services. The houses use sale publicity to pull clients to purchase more merchandises, at the same clip the consumers besides can take advantage of this procedure to purchase some lower monetary value of merchandises. In add-on, an oligopoly is non like the prefect completion. Consequently, the monetary value is stableness. It let the most of consumers buy the merchandises at the same monetary value. However, clients are likely to confront to purchasing a high monetary value and lower quality merchandises because in oligopoly market the companies can utilize monetary value rigidness and collusion to command the monetary value of merchandise. As a consequence, the consumers should utilize the benefit and avoid to be cheated by the concern advertisement.