Uk Supermarket Price Competition And Non Price Competition Economics Essay

Uk Super merchandise Price Competition And Non Price Competition Economics EssayThe British supermarket is dominated by four main suppliers, Tesco, Sainsbury, Asda and Morrison which formed a round retail market train in the UK for several years. This is called oligopoly market Oligopoly Watch, 2003. According to 123helpme.com (2009), an oligopoly is a market controlled by a few number of bulky firms which ar interdependent. First of all, four main groceries in the UK have high degree of concentration. For example, in 2003, four supermarkets together have approximately three fourths market section in the retailers market which can be seen in the diagram. Oligopoly Watch, 2003. Moreover, based on the huge political economy of scale and enable lower the hurt to consumers, the barriers to entry for opposite suppliers in the market are high. It is believed by Climate Change Crop (2006), consumer research told them that charge, quality and convenience were the key criteria for the mass of shoppers. Therefore, the UK leading firms in supermarket chain begin the high competitions in price rivalry and non-price strategies. This essay will concentrate on analyzing both price competition and non-price competition among Tesco, Sainsbury, Asda and Morrison, and then evaluates the advantages and disadvantages for the customers. marketplace market piece of landTesco 27.1%Asda 16.9%Sainsbury 16.1%Morrison/Safeway 12.4%Sept 2003 rankings, Source The GuardianConsumers have benefits for saving money beca wont of immense high competition and low-price strategy among the main retailers in the UK. Those oligopoly firms much(prenominal) as Tesco, Sainsbury, Asda and Morrison are interdependence. It can be easy to lead to price rigidity among major UK supermarkets which assumes that oligopoly market have cooperation in setting stable price in similar products. In addition, if one firm increases its price while other(a)(a) companies stay constantly, the firm who increase t he price will lose market share beca wasting disease consumers do not want to purchase high price if they can as well buy in original price in other groceries. This is called kinked beseech curve theory. Revision Guru, 2010. As can be seen in the following diagram, P equals to price. Q equals to quantity. MC equals to marginal cost and MR is for marginal revenue. Demand curve is to a greater extent elastic for a price rise than for a price fall. MC1 then a rise in costs to MC2 would result in stable price.Kinked demand curve theory Revision Guru, 2010Furthermore, it is reported by 123helpme.com (2009) that an action of one firm contributes to the change of other competitors. For example, rivals will be compelled to prevent to loss market share if a retailer lower its price. In UK supermarket chain, apart from Sainsbury which focus on produce quality and outstanding honour to meet consumers need, other three retailers allow in Asda, Tesco and Morrisons are mostly low-priced based . To be more specific, Asda offers the cheapest price of the three companies Thinking Made Essay, 2009. Consequently, an ardent competition happens as a result of lowering price of those three rivals. Consumers are in favour of choosing the cheapest one to buy beca utilise they can save money. However, when competitors stay their products in high price, customers should have a positive feeling in charging more money.Both branded and qualitative products can avenge consumers needs but should be paid in higher price than unbranded products. Owing to the effectiveness of the advertising and marketing which made by large firms, customers are willing to pay more money to buy branded products to satisfy their psychological needs. The Leading firms in the UK supermarket tend to produce branded products to attract more attentions from consumers and then increase sales. Morrisons, for instance, has eight different categories for food selling which dwell of The Best a premium range Eat Sma rt, a healthy range Bettabuy, economy products Organic and the free-range Free From collection Whitwell, 2006. These strategies are also barriers to those companies which want to come into the market. As a result, more consumers make their first choice to the branded products. If the companies want to obtain more market share among those competitors, they must also produce products which are in good quality. Therefore, the fixed and variable cost cause the mark-up of the qualitative and branded products higher than other plain products. horizontal though consumers spend more money to buy these products, they also obtained the quality guarantee of the production Tutor 2u, 2010Other price competition such as drop by these UK groceries results in more money cost by consumers. In oligopolistic market, because major firms want to maximise their profit, they would get together and make a same(p) agreement on product quantity or price which means collusion S-cool.co.uk (2010). According to Oligopoly Watch (2003), Asda, Tesco and Morrisons built their reputations as discount chains to score market share quickly, this lead to the decline of Sainsbury which has been the biggest retailers since 1995. However, those three large supermarket chains hope their discount can stimulate their consumers spend more money on other profitable products. This price strategy leads to the revenue of the chain increase sharply. The whole things cost costumers much more money than they spend as customary because of the discount on cheap products.Though the price strategies help a lot on increasing consumers expenditure and reputation, non- price competitions which concentrate on other strategies for rising market occupancy are also an essential part of attracting more purchasers. Consumers have power to change the shopping place if they do not think the service and quality of the original retailers satisfy them biz/ed, 2005. Non-price competitions comprise numerous strategies such a s mass media advertising and marketing, home delivery systems, innovative use of technology and internet shopping for consumers Tutor 2u, 2010. According to Thinking Made Essay (2009), the proportion that make consumers switch to other brands are correspondingly low. The leading UK supermarkets use non-price competitions to hope customers finish shopping and continue to purchase in the next time. Therefore, each of them focus on good service to shopping people because consumers whitethorn alter their choice to other grocery if they consider the one they buy usually do not content them.In summary, Tesco, Sainsbury, Asda and Morrison use different price strategies such as price stability and discount and non-price competition such as service. Consumers in the UK retailer chain have both positive and prohibit aspects. Owing to the interdependence of oligopoly, Tesco, Sainsbury, Asda and Morrison use price rigidity to control the market. Consumers have benefits for low-price strategy. Furthermore, the retailers use loss leader strategy concentrate on good value but high price to consumers who may spend more money on those qualitative products. Whats more, customers can choose the best service supermarket because every groceries use non-price strategies to attract consumers attention. Nevertheless, price competition such as discount may cost more money in other profitable things.References SectionBiz/ed.co.uk (2005) Supermarkets and Oligopolieshttp//www.bized.co.uk/dataserv/chron/news/2449.htmClimate Change Crop (2006)UK supermarkets Waking up to sustainability marketinghttp//www.climatechangecorp.com/content.asp?ContentID=4503Oligopoly Watch (2003) British groceryoligopolyhttp//www.oligopolywatch.com/2003/10/13.htmlRevision Guru.co.uk (2010) Oligopolyhttp//www.revisionguru.co.uk/economics/oligopoly.htmS-cool.co.uk (2010) Other features of oligopolyhttp//www.s-cool.co.uk/alevel/economics/market-structure-2/the-kinked-demand-curve-model.htmlThinking Made Essay, 20 09 Strategic Analysis of Morrison, Asda and Tescohttp//ivythesis.typepad.com/term_paper_topics/2009/07/strategic-analysis-of-morrison-asda-and-tesco.htmlTutor 2u.net (2009) Oligopolyhttp//tutor2u.net/economics/content/topics/monopoly/oligopoly_notes.htmWhitwell Stuart, 2006 Stretch potential the supermarket brandshttp//www.intangiblebusiness.com/Brand-services/Marketing-services/News/Stretch-potential-the-supermarket-brands390.html123helpme.com (2009) First 1500 characters of UK supermarkets Oligopolistic competitionhttp//www.123helpme.com/preview.asp?id=97935