Australia's Supermarket and Telecommunication Sectors

AUSTRALIA’S SUPERMARKET AND TELECOMMUNICATION SECTORS 1
AUSTRALIA’S SUPERMARKET AND TELECOMMUNICATION SECTORS
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Article Overview
The article “The companies that make big profits even when customers shop around” by
Jason Murphy on December 18th, 2017 talks about how big companies exploit consumers through
higher prices. There is competition in some industries like agriculture and building, and the
consumers get products at fair prices. However, other sectors like supermarket and
telecommunication have less competition, and thus consumers are exposed to higher prices. In
Australia, the four leading supermarkets, Woolworths, IGA, Coles, and Aldi, control 90% of the
market share (Murphy, 2017). In telecommunication industry, Telstra enjoys monopoly mainly
on the infrastructure. Companies in these industries earn supernormal profits.
Limited competition in these industries is not only of interest to the consumers but also to
the government. Inadequate competition in telecommunication and supermarket industries means
that the consumers incur more on commodities. On the other hand, the leadership has the
responsibility of ensuring that the players in these industries do not abuse their powers.
Economic Analysis
Oligopoly in Supermarket Sector
A Few Firms and Interdependence
Australian supermarket sector has a few sellers. Some of the companies in this industry
include Coles Aldi, IGA, and Woolworths. While the sellers are few, there are many customers
in this sector. Moreover, interdependence among companies is an essential feature of oligopoly
market structure. The market players are cautious of the actions taken by competitors. In case a
company makes changes in prices or promotional scheme, other businesses have to respond to

AUSTRALIA’S SUPERMARKET AND TELECOMMUNICATION SECTORS 3
the changes to protect the market share and remain relevant in the industry (Hubbard et al., 2016,
p.56). In Australian supermarket sector, the firms are highly cautious of the actions of their
rivals. For example, when Coles cuts its price, Woolworths and other firms respond by reducing
their prices with the aim of retaining their market share (Mitchell, 2017). Recently, when
Woolworths abandoned the price-based marketing, Coles has also ceased the same practice.
These firms are now focusing on aspects of social programs, service quality and connecting with
the community to win the clients.
Woolworths
36%
Coles
33%
Aldi
13%
IGA
9%
Other supermarkets
9%
Market Share
Source: Roy Morgan Research, 2017.
Advertising
In oligopoly industry, each company advertises products on a regular basis with the
intention of attracting new clients as well as retaining the existing customers (Frank, 2015, p.68).
In Australia, supermarkets use a considerable amount of their resources to advertise their goods.
Magazines, television, radio, direct mail are common channels these companies use to make their
products known to the purchasers (Heffernan, 2016). Currently, Coles is using classic advertising