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Monopolistic competition in the retail grocery business
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Market Shares of the largest retailers in the UK with special emphasis to Sainsbury’s
In the normal and general parlance, the retail chains general have their focus on specific
market or segments as the case may be. The middle segment, as an example, is mostly
targeted by Tesco providing those products which can be considered to be both upscale as
well as economic in nature. But if we consider the position of Sainsbury, it occupies a slightly
higher position compared to Tesco with Walmart of Asda having a lower level market share.
The different issues pertaining to competition and concerns which are related to monopoly in
the grocery market of UK have become prominent post the years of 2006 with the gradual
referral of the grocery market into the
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A close look towards the enquiry set up by the competition commission , a proactive form of
supermarket was sought by this group so as to investigate situations of abuse or even rule
them out from the supermarket power keepers. If we consider the share of retail environment
of the top super markets we would find that Tesco has a maximal share of about 20.8%,
Morrisons have a share of 10.9% which is closely followed by Sainsbury which has a total
share of about 10.6% and next in competition happens to be Walmart/ASDA having 9.5%
share respectively.
In an update, the coalition government in the UK had agreed to put forward plans so as to
create intermediaries of supermarket so as to monitor the kinds of relationships which exist
between a retailer and a producer. The main objective of this adjudicator is to address the
different dimensions of the complaints being lodged by the farmers and suppliers as a
measure to ensure that the supermarkets do not use their power in an undue manner.
J Sainsbury's aims and objectives Their business is now focused very much on Sainsbury’s Supermarkets and Sainsbury’s Bank following the sale of Shaw’s
The retail grocery industry consists of the following strategic groups: grocery chains, small and large discount grocery (e.g. Dollar Stores and Walmart), wholesalers, and fresh-focused and specialty markets. Trader Joe’s could be categorized as a specialty fresh-focused store and it is often compared to Whole Foods, another organic store, defining it as its key competitor. Yet, it still competes with the large grocery retailers and now, Amazon grocery services.
In order to right the ship that is America’s food industry, we need to recognize the monopolies in the U.S food industry. These massive food conglomerates must be broken up in order to create competition in the market. This will allow the completion to dictate the market. More companies means more competition, and when companies compete, the consumer wins.
A monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. A monopoly sells a good for which there is no close substitute. The absence of substitutes makes the demand for the good relatively inelastic thereby enabling monopolies to extract positive profits. It is this monopolizing of drug and process patents that has consumer advocates up in arms. The granting of exclusive rights to pharmacuetical companies over clinical a...
Sainsbury’s (2014) states they put their “customers at the heart of everything we do and have invested in our stores, our colleagues and our channels to deliver the best possible shopping experience. Our strong culture and values are part of our identity and integral to our success.” Sainsbury’s brand is established upon providing quality at fair prices, the importance of fresh, healthy, safe and tasty food is put very high at Sainsbury’s. Sainsbury’s also offer a range of up to 30,000 products such as household products, food, grocery, and even its own products.
The rivalry aspect of Porter’s Five Forces that influence’s the grocery industry finds that there is a high degree of competition for consumer’s business among the dominate retailers as well as those companies trying to take any share of the market they can get. The large retailers engage in intense competition among each other as well as other stores that are competing for sales. Price wars drive down the profit margins for individual items and new and improved store design to bring in customers increases fixed cost. Improved distribution lines affect distribution and storage cost is competitive adjustments that the major retailers use to stave off the increasing competition. The last area of rivalry that the major companies use is the relationships they have with their suppliers to sign exclusive deals or lower cost than those prices paid by competing firms. As more retailers such as Wal-Mart and Target add groceries to their sales floor the competition increases as well as the stores that offer individual grocery items in their stores such as Dollar General, Walgreens and CVS. The grocery rival...
The competitive pressures that Oliver’s Market must be prepared to deal with are the pressure associated with the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry and the pressure associated with the threat of new entrants into the market. They must be prepared to face with the rival stores, Trader Joe’s, Costco, and Whole Foods who had recently entered in the sales territory with brand new stores and so far Wal-Mart and Target also had announced plans to develop regional supercenter, that is, large –format discount center into their territory.
Big rivals such as Tesco and Morrisons started to compete in price by shrinking packages, introducing cheaper equivalent products, or using cheaper ingredients. Although these strategies cause a sluggish revenue increase, it works on boosting sales and market shares. For example, Tesco’s sale grew by 2.2 percent during July to September. Apart from the traditional retailers, Aldi who applies a similar discounter model is also a strong competitor. In 16th July, the market share of Aldi was 6.2% while Lidl occupied 4.6% of the market (Gale,2016) Compared to Lidl, Aldi has a more dominant market position and better corporate with local farmers. To stand out from these rivals, Lidl still has a long way to go.
Lidl is a food retailer with its roots in the 20th century, being founded in Germany and expanding to the UK in the early 1990s – with amazing growth in the 21st century, a century of change. Since being founded and also in future, revolutionary leadership and exceptionally organised management are grown though in the fundament of Lidl’s success and have encouraged one of Germany’s biggest grocery market share holders to have reached 4.6% of the market share in the UK in September 2016, with some of its competitors being the German food retailer Aldi, but also the British “Big Four” food retailers Tesco, Sainsbury’s, Asda and Morrisons. According to Hett of n-tv (2016), the “German Discounters are conquering foreign countries”,
Tesco has been particularly successful because of its powerful brand. It has a reputation for value, low prices and for being customer focused. Its brand and associations have helped the company to expand into new sectors and markets. Tesco has also been strong in public relations, advertising and building profile in catchment areas on a local level. This local approach to marketing appears to be a key driver for success. Tesco has a good range of products, including own label products. It seeks to provide excellent customer service, and ensure high levels of customer satisfaction.
Imlay, T. (2006). Challenges in today’s u.s. supermarket industry. Microsoft Retail and Hospitality, Retrieved from http://msdn.microsoft.com/en-us/library/aa479076.aspx
Sainsbury’s is in the market of an oligopoly and few big firms run this kind of market. One of the objectives of Sainsbury’s is to gain market share. Sainsbury’s will be looking to beat competitors. To beat competitors Sainsbury’s will need to research and see what business activity they do compare to Sainsbury’s. If they research they can think of way to beat competitors in the market.
Challenges in Today's U.S. Supermarket Industry. 2014. Challenges in Today's U.S. Supermarket Industry. [ONLINE] Available at:http://msdn.microsoft.com/en-us/library/aa479076.aspx. [Accessed 31 March 2014].
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...