Consumers would lose-out from increased competition in the short-run, however in the long-run consumers would ultimately benefit from increased competition. High levels of competition prevent businesses from abusing their market power, such as setting prices above or below what a perfectly competitive market would dictate to be at equilibrium and also encourages businesses to be innovative instead of becoming complacent, relying on consumer’s lack of choices. In the case of Woolworths and Coles, both businesses are being investigated by the Australian Competition and Consumer Commission (ACCC) for abusing their market power by intimidating suppliers to reduce the price of products so they can buy them for cheap. Due to Woolworths and Coles …show more content…
controlling approximately 70% of the market, both businesses have large control over suppliers, allowing them to enforce below-market prices on suppliers with the knowledge that suppliers can’t negotiate fair prices due to the lack of competition to sell their products to. This results in Woolworths and Coles able to sell products to consumers at low prices compared to smaller retailers that cannot exert the same degree of market power. As a result, consumers will benefit from prices across a wide range of products from Woolworths and Coles, allowing products to be purchased at a lower price level than what market forces would dictate to be market equilibrium. On the other hand, there are far more negative impacts in the long-term that greatly outweigh the short-term benefits for consumers.
According to businesses who supply to Woolworths and Coles, for Woolworths and Coles to be able to sell products at low prices, they would exert their market power on suppliers whose majority of products were sold to them and were dependant on them to operate. The suppliers were pressured to reduce their prices or threatened be released as a supplier. This effectively forced suppliers to drop prices or lose their largest source of revenue and potentially result in closing down. The long-term implications of this would be that as suppliers are unable to sustain their business due to price cuts, they would close down and result in many brands ceasing to exist. This would greatly impact consumers as it would reduce the range of products and limit consumer choice. The low prices also create a high barrier to entry for new businesses and effectively run smaller retailers out of business, further reducing the already low level of competition. This would additionally negatively impact consumers because as the level of competition decreases, prices for consumers would rise due to the lack of
competition. Therefore, if there were increased competition, the opposite would occur as Woolworths and Coles would not have the same degree of market power. In the short term as new competition enters the market, Woolworths and Coles would not be able to intimidate suppliers to reduce prices and consumers would effectively lose-out on cheaper prices. However, in the long-term, due to suppliers selling the same products to multiple businesses, the products would decrease in price as there is little product differentiation across different retailers. This would effectively force retailers like Woolworths or Coles to innovate and differentiate their products from competitors to make a profit, unlike the current situation where, as noted by Samuel (2013), the two supermarket giants are copy each other’s strategies and decisions, neither one willing risk differentiating itself when the lack of competition doesn’t punish this behaviour. When business innovate and differentiate their products it provides a benefit to consumers as it creates more choices for consumers that could potentially suit their needs better. While consumers would lose-out in the short term from increased competition, the benefits provided in the long-term greatly outweigh any loss overall. Increased competition encourages innovation from businesses and benefits consumers in more ways than limited competition.
The success of Wal-Mart is so great, that many people believe that Wal-Mart is becoming a monopsony . Suppliers are forced to deal with Wal-Mart because of the large percentage of sales at Wal-Mart cash registers. As such, Wal-Mart also has the ability to dictate prices of the goods it receives from the suppliers. Every day, more and more retail stores close their doors for good because Wal-Mart controls such a huge margin of the retail sector.
I believe that we have too many monopolies in Canada because monopolies give the consumer less choice, lower quality service, and products and services can be more costly to the consumer. In my opinion, a market-based economy with fewer monopolies will benefit the consumer because companies will compete to give you the best deal possible to retain your business. In this environment the consumer will benefit most as a consumer, I
Best Buy operates in an oligopolistic market where there are significant barriers to entry and few large firms dominate the market by selling identical goods. Best Buy is a non-collusive oligopolist, existing in a strategic environment where firms do not cooperate, yet are interdependent due to the fact that a firm’s action affects the market. Recently, Best Buy experienced an increase in demand, increasing its revenues and profits.
When these large companies have too much power, they are able to completely run the market based on their own agendas. Should smaller companies still exist, the larger firms are able to lower prices and absorb the loss from it, where the other company would inevitably fail to compete with the low prices of the firm. Firms like Carnegie Steel and Standard Oil rightfully took advantage of the US free market at the time, but once word of their predatory practices became publically known, these companies received penalties from the federal government. In 1890, the Sherman Antitrust Act was the first mass legislation passed to address oppressive business practices and monopolies. This act was in response to the aggressive business tactics.
Australia’s grocery giants go head-to-head before a panel of industry judges to determine which supermarket is winning the marketing war. Coles, is one of the giants in Australian supermarkets industry, which always compete price of products with its main competitor, Woolworth. In 2012, the market of supermarket had grown compare to 2011, while customers go to supermarket two to three time a week in average (Kruger, 2012). Coles and Woolworths hold 56% of the Australian grocery market. The concentration of competition has made the rivalry palpable. Meanwhile, Coles aims to continue a price war it kicked off in 2011, recently Coles is confirmed that it is continually close the gap with Woolworths. Other than the supermarket business, Coles also operates liquor, online, fuel and convenience store. In 2012, the food and liquor market shares in price of Coles and Woolworth are 30% and 42% relatively. Compared to 2011, Coles has an increased in sales growth and business growth in most of their business line in 2012. Richard Goyder, Chief executive of Coles, said Coles will continue to have a very strong focus on delivering value for its customers and persistently put effort on price, as long as the company can get more customers, and sell more product, get efficiencies in business and also through the supply chain (Courtney, 2013).
The major findings of this report indicate that throughout the United States, Wal-Mart employees are being deprived of the wages they are entitled to. It has been reported from state to state all over the United States, that many employees are working overtime without being paid. According to the Beyond “Higher Expectations”: Wal-Marts Real Cost” journal article, it was stated that, “Working off the clock and through meal breaks is widely reported among employees and as of 2005, Wal-Mart faces 44 class action lawsuits in 31 states over wage and hour abuses... It has also been stated that a California jury ruled that Wal-Mart illegally deprived over 100,000 California workers of their lunch breaks”(Figueroa). It is a common problem in every Wal-Mart no matter what part of the country it is in, there always seems to be unpaid wages to its employees who are forced to work off the clock and if they refused they are threatened in losing their jobs and being replaced by someone else. According to the Documentary Film by Robert Greenwald, Wal-Mart: The High Cost of Low Price, Shane Youtz, a former Wal-Mart employee, Said he was often asked to “work of the clock or else they would threaten you by losing your job”(Greenwald). Edith Arana, also a Wal-Mart employee stated that, “ If you had only thirty minutes left on your eight hour shift, and you haven't finished putting away stacks of clothing, they would tell you that you couldn't leave until you finished it even if it meant working off the clock”(Greenwald).
Oligopolies present kinked demand curves. These curves are downward-sloping, similar to traditional ones. However, they are distinguished by a convex bend at a discontinuity. This change in elasticity shows that price rises will not be match by competitors, yet prices reductions will (B&W). Therefore, firms will tend not to raise prices because a small increase will lose customers...
Can you imagine the world with a limited amount of choices when it comes to purchasing different products and services? How does perfect competition and monopolistic competition differ and effect our buying power? As stated by Investopedia (2016), “Perfect competition is the opposite of a monopoly, in which only a single firm supplies a particular good or service, and that firm can charge whatever price it wants because consumers have no alternatives and it is difficult for would-be competitors to enter the marketplace (para 1)”.
From the past we’ve seen that a for-profit economy has benefits and disadvantages. The benefits are attracting people and the disadvantages are departing them away from this type of economy. One of the benefits of this economy is competition between companies. Should we have competition between companies? I think we should because it helps our economy by having lower prices, more companies to choose from and etc. Who would like to be stuck with only one company to choose from? Probably no one because you can’t get what you want, instead you have to get what you are offered. A competitive economy, such as the capitalist market, gives us free will to manage our money and goods. Competition is a convincing fact so that the capitalist market to be in everyone’s interest, but let’s see if a disadvantage would make the for-profit economy in everybody’s interest!
The food and staples retailing is an increasingly competitive industry. The market giants (competitors) are Coles (owned by Wesfarmers) which has 741 stores across Australia and plans to add 70 m...
If a large firm (like Coles/Woolworths) can drive competitors out of business through aggressive price cutting, then consumers are left with fewer choices in the end. The remaining firms gain more pricing power over time, since there is no longer an established set of competitors.
A competitive market is one where there are numerous producers that compete with one another in hopes to provide goods and services, we, as consumers, want and need. In other words, not one single producer can dictate the market. Also, like producers, not
With there being several firms for 3 of the markets, the consumer benefits as they can find the cheapest producer, resulting in the producer being at a disadvantage as they could loose business. In a perfect competition market, the firm is unable to choose the price whereas in an oligopoly the price is chosen by the firm this is beneficial for the producer as it increases their profit margins. However, this is harmful for consumers as they will have to pay the higher prices.
There is increased competition- This is a consequence of capitalism. Increased competition leads to improvement in terms of quality and efficiency of production. It also leads to low prices of products in the market, as producers want to have a larger share of the consumer market. In a capitalistic perspective, businesses that produce high quality products at a low price enjoy a larger market share.
...n the companies will have to decrease the price otherwise the product will not be sold at higher prices and the revenue would not be as large as companies would like to.