The Supermarket Industry In The United Kingdom Economics Essay

The supermarket industry in UK is believed that an oligopoly market and it is extremely competitory by few big houses. The chief four houses in supermarket industry about dominate 75 % of the whole market portion. They are Tesco, Sainsbury, Asda and Morrison ‘s. ( Ireland, 2007 ) The features of oligopoly are the supplies in the industry are owned by some comparatively houses ; houses must be mutualist and high barriers to entry the industry. ( Anderton, 2007: p322 ) The advantages and disadvantages will be analyzed with the oligopoly characteristicsi??market conductsi??kinked demand curve and some rules of oligopoly.

The features and map of oligopoly bring some benefits to the market and consumers. First of all, in oligopoly, the supply in the industry is largely concentrated in the custodies of comparatively few houses ( Anderton, 2008: p322 ) . In other words, the bulk of supply is held by really small figure of companies ‘ . For case, In the UK, the four large houses hold a really large per centum of the supply in supermarket. There are sum of citizens in the UK prefer this four large supermarkets because their good will and large power. Therefore, the four supermarkets can derive immense net income to develop economic sciences of graduated table which can assist company to take down the cost in operating expenses due to their power and cognition in this country. This can straight salvage money and avoid waste of resources which is good for society, particularly for the UK. Furthermore, the capital they put in research are higher than monopoly or perfect competition because the new engineering is an effectual manner for developing the company. In add-on, they will increase their service quality to pull more clients to vie with the other three chief rivals which can be called as non-price competition. Thus, clients can have a better merchandise or preferred service by oligopolist.

Second, the companies in the oligopoly are mutualist. This means if a big house has an action in the market, it will do a large consequence on the other big company in oligopoly. ( Anderton, 2008: p322 ) . The advantage of this is consumer may have a far lower monetary value in the market. For illustration, in 2003, Tesco launched a monetary value war that they announce a program about more than 100 million lbs deserving of their monetary value will be cut in the hereafter. It is surely a large bomb in the supermarket. The another large supermarket-Asda, reacted at one time that to denote their program in that hebdomad is cut monetary value on many good sell goods, such as lower the monetary value of denims to six lbs. ( Fletcher, 2003 ) In the oligopoly, the chief competition between the houses is monetary value war which is non good for rivals. One house will desire to sometimes lower their monetary value for deriving more market portion through selling mix which uses four elements ( merchandise, monetary value, topographic point and publicity ) to do a suited market scheme for the merchandise, but another large company in the market will non let the rival to accomplish this mark. The big houses in the market will raise or lower their monetary value carefully. The state of affairs in the oligopoly about monetary value can be shown in the kinked demand curve below which can demo the influence of sell by altering the monetary value in oligopoly market. Consequently, they will take down their monetary value either or do some series publicity activities for stabling their market portion. The consumers will prefer to see monetary value war because they can buy goods in a lower monetary value than before. However, the monetary value is stabled in most of the oligopoly market. Because a stable monetary value is good for all the large houses in the market by avoiding monetary value war and besides profit to consumers in a unchanged good monetary value. This can besides be called as monetary value rigidness.

Last, there are high barriers for entry the oligopoly. ( Anderton, 2008: p322 ) . The houses in oligopoly will utilize their economic sciences of graduated table to take down the monetary value as they can to avoid other companies to acquire in the market and take away their market portion. For case, the barriers to entry the supermarket industry in the South of the UK is hard for the other supermarket because of the planning permission is difficult to acquire. This is one of the barriers-Legislation. ( “ The UK supermarket ” , n.d ) Therefore, the Morrison ‘s decided to get Safeway in order to command the market in the South of the UK and Scotland. ( “ Morrison ‘s acquires Safeway ” ,2003 ) Without this action, the Morrison ‘s may be impossible to come in the market in the South of the UK. The advantage for the oligopolist is they can cut down the opportunity of other companies to take away their market portion due to the statute law and competition. For the consumers, they can hold a more stable market instead than tonss of unsure alteration in the supermarket industry that may convey some incommodiousnesss to them.

The oligopoly has some disadvantages to the market and consumers. The first 1 is the barriers are excessively high for other rival to acquire in the oligopoly market. Therefore, it makes the degree of competition become lower and it straight influences the attitudes of the houses and the velocity of development that the house may non supply good service to the consumers.

Another disadvantage of oligopoly is the big companies may conspire as a trust to do some policy to the goods together for deriving more unnatural net income. This is known as conniving oligopoly ( Anderton, 2008: p323 ) . For case, the large houses may conspire together to raise the monetary value below the belt. Therefore, they can acquire more net income due to the rise in monetary value by the oligopoly. This is bad for consumer because they have to pay more to the goods which may be non the standard monetary value.

To reason, oligopoly is really common in the market 0all over the universe. Through analyzed with features of oligopoly, kinked demand curve and the rules of oligopoly, from the instance of the supermarket industry in the UK, it brings the benefits to the consumers in lower monetary value, avoid waste, new engineering, better service and diminish the uncertainness in the markets. However, there are still some possible jobs in oligopoly. Among perfect competition, monopoly and oligopoly, there is non any criterions about which 1 is better. All of them have advantages and disadvantages. The state of affairs in the supermarket industry in the UK is demoing oligopoly is still suited now. However, the authorities and the market should pay attending to the jobs about less competitory and monetary value illicitly rise.

Mention Section

Anderton, A. ( 2008 ) .Economics ( 5th Edition ) Harlow: Pearson Education

THE UK SUPERMARKET [ Online ] First 1500 of UK supermarkets-oligopolistic competition: 123helpme

Available at: hypertext transfer protocol: //www.123helpme.com/preview.asp? id=97935

[ Access day of the month: 2010.1.31 ]

Fletcher, R. ( 2003 ) [ Online ] Tesco and Asda launch new monetary value war: Telegraph

Available at: hypertext transfer protocol: //www.telegraph.co.uk/finance/2838462/Tesco-and-Asda-launch-new-price-war.html

[ Access day of the month: 2010.1.31 ]

Ireland, D. ( 2007 ) [ Online ] Identify the assorted challenges and chances bing in the UK supermarket industry: bnet

Available at: hypertext transfer protocol: //findarticles.com/p/articles/mi_m0EIN/is_2007_May_21/ai_n19154961/

[ Access day of the month: 2010.1.31 ]

MORRISON ‘S ACQUIRES SAFEWAY ( 2003 ) [ Online ] Morrison ‘s acquires Safeway: Arla

Available at: hypertext transfer protocol: //www.arla.com/press/archive/morrison-acquires-safeway-/

[ Access day of the month: 2010.1.31 ]