Uk Oligopoly Supermarket Industry Advantages And Disadvantages Economics Essay
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Published: Mon, 5 Dec 2016
Oligopoly is significant phenomena in this commercialized society. With its merits it dawns on the public and evitable drawbacks, oligopoly has aroused controversial debates recently. The British supermarket industry is a typical example of it. The oligopoly market has some characteristics. Also, the kinked demanded is important theory in oligopoly market. And this report is aiming at discussing the favorable and negative factors of oligopoly for consumers with a background of the British market.
Definition of oligopoly is can be slightly different in various situations. When discussing the British market, it is refers to few competitive corporations’ interdependency with each other in an industry given by Anderton (2008) sounds more favorable. This indicates that the British supermarket industry is oligopoly market because it shows high interdependency within several strong companies .(Anderton.A, 2008) There are several characteristics of oligopoly can be observed under this competitive circumstance, which contribute to its unique status in the economic area. As Gillespie. A(2008) says ” Firstly, an oligopoly market should consist of several strong companies, who enjoy a big share of the market; this is the very difference lays between oligopoly and monopolization, which is single producer in an industry. Secondly, the possibility for other less-competitive companies to take a standing point in the market is faint; it is not difficult to imagine that with the competitions of these big firms, other outsiders are difficulty to share market. Finally, within the union, these big firms are highly interdependent; for example, decisions made by any member are unavoidably cause immense effects on the whole union. Furthermore, the MBALib (2010) reported that Kinked Demand refers to the cases that if one company increases the price, other company would still keep the price stability. The consumer tends to other company’s products; hence, to the company which increases the price, the demand curve could fall down; on the contrary, if one company decreases the price, others would decrease the price for avoiding losing the percentage of the market; for this reason, the demand is inelasticity. Moreover, the Price War would cause for the corporations fall their price. This would cause high risk problem. If the price war happened, the company could lose large money as they choose the wrong game theory. Also, some company would cause serious survival problems. Because of the dangerous of competition, the oligopoly companies are more likely to focus on Non-price competition, for example, advertising, branding development, and collusion. (Anderton, 2008) As Gillespie. A(2008) suggest that ,Non-price competitions will lead to the market mix. When a company decides to get involved in a market mix, it will promote products with creative advertisement, select suitable places for sales and set satisfactory prices to attract target consumer groups. Although the methods of promotion, branding development, and collusion are three ways to help a oligopoly firm turn to be monopoly company for earning more profit, these ways could not determinate the price leave in oligopoly market. The Price Rigidity is another principle of oligopoly market .To keep the stable price is a safety way to star oligopoly business. If the prices change in the market, the companies trend to change the same rates of the price. In addition, Collusion is another significant element of oligopoly. This element as a useful method of firms in oligopoly which can help the company to achieve greater profit than they do not cooperate. In addition, the companies can control the industry by colluding the output of the products and set the price”. (Anderton, 2008)
Recently, whether the oligopoly market has more beneficial for consumer or not has been a discussion brought into public attention. Both sides of the arguments are well-supported with convincing evidences.
One significant disadvantage is that the oligopoly company set high price by colluding each other. For this reason, the oligopoly company owns a large percent of goods in industry. They can collude each other to set a higher price to make profit. For set higher price to sell goods for making profit, the supermarkets may restrict the output to increase the price in special holiday. The consumers have to accept this price because they can not buy the goods from other stores.
Another negative side is that colluding the price has made bad influences for poor buyer improving the standard of living. The supermarkets set higher price to sell goods may cause bad influence to the consumers who are in low income. These consumers may difficult to buy goods because of high price. They have to buy some inferior goods to support their daily life. Hence, the oligopoly supermarkets may have bad influence on improving the life quality of the consumers.
Despite the disadvantages above, for consumers, there are some positive sides under oligopoly supermarket. The merits of an oligopoly supermarket for consumers have several points. To begin with, the consumer can enjoy the high quality and friendly-use products. Because the oligopoly focuses on non-price competition, more companies want to appeal buyer by producing advanced and personalized product. For this reason, to develop or invent the product, the oligopoly companies are more willing to put money to study. The consumer can use comfortable and durability product under oligopoly market.
In addition, the consumer would enjoy the warm and thoughtful service in the oligopoly supermarket industry. The oligopoly companies are not only appeal consumer by producing advanced product, but also attract buyer by developing relationship with them. In the supermarket industry, the corporation may focus on customer services. Tesco, for instance, provides gas service and insurance services to consumer. The aim of Tesco is hope consumer build good impressive, moreover, attract more consumers by good service.
Thirdly, consumer would benefit from short-run price war. According QQ (2019) reported, On1st/Jan/2010 in supermarket industry of UK, the price war had begun. In the supermarket industry, if one corporation fall the price down, other supermarkets would decrease the price for fearing lost buyer. Hence, the price war would begin. Because of the price war, consumer can buy goods in lower price.
After the long time discussion, we can draw to the conclusions that the supermarket industry in United Kingdom is oligopoly market. Furthermore, for consumer has merits and negative sides. I prefer oligopoly because the oligopoly company has ability to develop product and advance the promotion and service industry The negative sides of oligopoly industry can not be avoided. Concerning this reason, we should support the government set laws to reduce the damages of disadvantages. These polices such as control the price which not only can help supermarket earn profit, but also can provide supermarket to set very high price give stress to consumers.
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