Advantages of oligopoly in UK supermarket industry

Oligopoly in UK supermarket industry

Supermarket, which provides a retail gross revenues service, is an indispensable topographic point for people who buy the day-to-day things. The definition of oligopoly is that an economic status in which there are few independent providers of a peculiar merchandise that competitory pricing does non take topographic point ( Answer, 2010 ) . It is manifest that the UK supermarket is under the construction of oligopoly. There are four chief features of supermarket in the UK. The first point with regard to this is that all the super markets in the UK sell similar merchandises and bring forth branded merchandises. Second, expression at the saloon chart on the right, the large companies has larger market portion, because the large supermarkets will put high barriers to avoid new supermarket into market. More significantly, the companies must be mutualist. If one big supermarket takes an action, it will straight impact another supermarket. The president in the supermarkets has to take into history likely reactions of challengers to any alteration in monetary value and end product and the mutuality of Sellerss can maintain the monetary value stableness. Finally, non-price competition is a important scheme for selling, such as the VIP cards, online shopping. The term selling mix refers to different elements within a scheme designed to make demand for a merchandise ( Anderton, 2008 ; 324 ) . Sing of the selling mix right for the merchandises means all the of import bases are covered in the selling run and it will assist the companies gain more net incomes. This market construction creates both advantages and disadvantages. The lower monetary value and the originative services are the advantages, but in the oligopoly market, the collusion between the companies will hold damaging influence upon the consumers.

In oligopoly market consumers can bask a lower monetary value for the merchandises. Most of supermarkets in the UK sell the merchandises from the same food market trade names, such as Kellogg ‘s, Heinz and Walkers Crisps ( Which, 2007 ) . The merchandises which be sold in different supermarkets are the same and we called it homogenous. Mysupermarket ( 2010 ) illustrates that the same merchandises in different supermarkets have a similar monetary value. Therefore, it means that all the supermarkets need to pay about the same cost of the merchandises. The larger companies might pay somewhat lower than the smaller one, because the measure of the goods which the larger companies need to purchase is more than the little companies so that larger companies will hold a bigger price reduction. The lower cost assist the larger supermarkets have high quality in the low monetary value to pull the consumers. Because of the oligopolistic market, all the companies compete on monetary value so that different companies take different steps appeal to the consumers. Figure 2 is a kinked demand curve and it assumes that a house will cut down its monetary value if a rival starts a monetary value war, but will go forth monetary value unchanged if a rival raises its monetary value. Thankss for the oligopoly construction, monetary value is rigidness. Tesco promotes the price reduction voucher to the consumers and they can utilize these vouchers to salvage their money while they buy goods in Tesco ( Couponmountain, 2010 ) . Discount voucher entreaties consumers to shopping in this supermarket, thereby doing the part to selling. BBC ( 2006 ) reports “ Supermarket Sainsbury ‘s is to sell more than 500 of its own-brand merchandises in compostable battalions alternatively of plastic as it seeks to cut packaging waste ” . Sainsbury ‘s uses new packing manner to pack the organic fruit and veggies. This can cut down the cost of merchandises and it is besides a good manner for the environment. Supplying the low monetary value is in the best involvements of consumer.

The viing between different supermarkets are progressively stiff, which makes many companies concern about the non-price competition. Therefore, many supermarkets offer attractive service and installations to their consumers. For blink of an eye, the online shopping is the popular one, because consumers can purchase the goods which they want without go forthing place. Some of the consumers go to the supermarkets rarely so that they will purchase a batch of goods when they go shopping and they can use the bringing service. It seems that the successful supermarket flexible joint on the originative services and installations,

The advantages of oligopoly are attended by collusive companies which impel consumers to pay a higher monetary value for merchandises. The collusion takes topographic point between the large companies and monetary value is under control by large companies so that the conniving companies can derive more net income. The new companies would n’t come in the industry to take advantage of unnatural net incomes ( Anderton, 2008 ; 322 ) so that the consumers can non hold more pick and they afflicted with the high monetary value from conniving companies. The competition between the supermarkets will less and the company can raise the monetary value of merchandises. Meanwhile, Sainsbury ‘s and Asda supermarket have admitted that they were portion of a dairy price-fixing group that earned excess money from shoppers ( BBC, 2007 ) . Mike is necessary good for people ‘s day-to-day life, though the monetary value is addition, the consumers will still prefer to purchase it. The conniving companies can do more net income by this manner.

In decision, supermarket industry in the UK is an oligopoly market construction. Consumers can bask sensible monetary value and the supermarkets will put money in assorted services and installations for their consumers. However, the collusion caused by the large companies will take to the higher monetary value. As far as I am concern, in an oligopoly market construction, it is dominated by a few big providers. On the other manus, supermarkets adopt all-or-none pricing to pull out consumer ‘s excess. Though there are some disadvantages for consumers, the advantages are more because the pricing competition can give the consumers lower monetary value to purchase goods. It is necessary to heighten the competition between the supermarkets and the consumers can acquire more benefits from it. Consumers can profit from the supermarkets which in oligopoly. It is widely accepted that consumers receive a low monetary value from the monetary value war. Because the supermarkets want to pull more consumers to shopping in their company, they afford originative steps to their consumers and allow the consumers feel more convenient during they do shopping.

Mentions:

Anderton A. ( 2008 ) Economics ( 5th edit ) Ormskrik, Causeway Press Ltd.

Answer ( 2010 ) [ Online ] , What is an oligopoly

( Accessed 30th January 2010 )

BBC ( 2006 ) [ Online ] , Sainsbury ‘s in green packing push

hypertext transfer protocol: //news.bbc.co.uk/2/hi/business/5326138.stm

( Accessed 30th January 2010 )

BBC ( 2007 ) [ Online ] , Supermarkets admit milk monetary value hole

hypertext transfer protocol: //news.bbc.co.uk/2/hi/business/7132108.stm

( Accessed 31st January 2010 )

Couponmountain ( 2010 ) [ Online ] , Tesco Voucher Codes, Coupons & A ; Promotions

hypertext transfer protocol: //www.couponmountain.co.uk/Tesco-coupons-vouchers.html

( Accessed 30th January 2010 )

Mysupermarket ( 2010 ) [ Online ] , Food & A ; Drink

hypertext transfer protocol: //www.mysupermarket.co.uk/shelves/Top_Offers_in_Tesco.html

( Accessed 30th January 2010 )

Which ( 2007 ) [ Online ] , Kellogg ‘s beats Heinz to exceed food market trade name rubric

hypertext transfer protocol: //www.which.co.uk/news/2007/08/kelloggs-beats-heinz-to-top-grocery-brand-title-119485

( Accessed 28th January, 2010 )

Allexperts ( 2010 ) [ Online ] , List of current British supermarket ironss

hypertext transfer protocol: //en.allexperts.com/e/s/su/supermarkets_in_the_united_kingdom.htm ( Accessed 30th January 2010 )