There are mainly five key players in the supermarket industry- Tesco, Asda, Sainbury, Safeway and Morrisons (ChinaCCM). Thus, the supermarket industry in the UK could be described as an Oligopoly Market. Oligopolies lie between the definitions of perfect competition and pure monopoly. Firstly, there are several sellers but only a few big companies who have a large market share in the industry. In the UK, the five big supermarkets totally have 3/4th of the market share (123help me! com). Secondly, barriers to entry in the supermarket industry in the UK are high. Since the big firms have a great economic of scale in this area and sell products in a low price, hence they are competitive. Tesco is always ahead of all, Asda has been trying to close the gap, and Morrisons is struggling with its acquisition of Safeway. Finally, the firms in the industry are interdependent (Bized,a). The Kinked Demand Curve (Peoi) as figure 3 above is mainly made of two segments. The line on the up is highly elastic which will occur when the firm is losing its market share; the lower one is inelastic, which means no firm can gain more market share. Oligopoly market, which can be seen as advantages for consumers because of its similar and stable prices, the products are highly differentiation as well. Besides, there is a main disadvantage which is caused by the collusion. Figure 1: UK Market Share (Single Marketing Ltd, 2009)
Figure 2: Supermarket Share (TNS, 2008)
Figure 3: Oligopoly kinked demand (Peoi, 2002)
There are some advantages for consumers to buy in an oligopoly supermarket. The price is always similar among firms, supermarkets will not change price frequently, as well as homogenous products to purchase.
Firstly, supermarkets have to sell price in similar prices or even the same price. Since the firms are...
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