Oligopoly Market Analysis: Competition, Impact on Local Stores

This report provides a comprehensive analysis of the oligopoly market structure, defining it and comparing it with collusive oligopoly, monopoly, and perfect competition. It examines the impact of large supermarkets on local stores, including a table comparing food prices across different stores like Tesco, Asda, and local independent stores. The report also discusses total shopping cost comparisons, competitiveness, and segmentation within the food market. The analysis highlights how large businesses can affect local firms, influencing their growth and expansion. The report concludes by summarizing key findings related to market dynamics and competitive strategies, offering valuable insights into the business economics of the food industry.

BUSINESS
ECONOMICS

Table of Contents
1 INTRODUCTION .......................................................................................................................3
Definition and explanation of oligopoly:.........................................................................................3
Comparison of oligopoly and collusive oligopoly......................................................................3
Oligopoly and monopoly:...........................................................................................................4
Oligopoly and perfect competition:............................................................................................5
Impact of large supermarkets on local stores:.................................................................................6
Table of Comparison of the prices of food in different stores....................................................7
Total shopping costs comparison:...............................................................................................8
Competitiveness and segmentation on the food market..............................................................9
Segmentation on the food market.............................................................................................10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12
Books and journals:...................................................................................................................12

1 INTRODUCTION
Business economics shows the relevant what the business achieve in the economy and
how it grows. These data require to make comparison of different firms in terms of their
profitability, consumer buying power, and competition of other firms. Large business impact on
other local business and become hurdle of their growth. This report is going to define the concept
of oligopoly also, shows its comparison with monopolistic market. There are various market in
which a firms operates its function which decides their structure. Also, it significantly describe
how large firms impact on local firms growth and expansion (Bodislav, Bran, and Popescu,
2018).
Definition and explanation of oligopoly:
Oligopoly is a market structure or group of market which grab huge market share where
it operates their business. The organisation into oligopoly market are market dominator because
of their scare and limited product resources. These firms have their own right to set their price
without interference of market forces through which they could make price differentiation from
different customers. These forms are said to be independent which make their own price,
products and marketing strategy. The only competition these firms faces are their rival firms
which had operated from long term and provide similar product or services. New entry of firms
are not easy as these require high capital contribution and technologies in order to grab scare
resources which results to be costly. Due to these elements of oligopoly market, many local
firms suffer and face high challenges in market which creates hurdles for their expansion and
survival.
Comparison of oligopoly and collusive oligopoly.
Basis
meaning
Oligopoly
under these firms, they want to
attain huge market share and
ready to exploit market with
their monopolistic product.
Collusive oligopoly
under this type of oligopoly,
these firms are ready to join
hands together to make
together profit rather than

firms behave
They more focus on
competition and set price
corresponding to rival firms
(Boonvut,
S.A.R.A.T.C.H.A.N.U.T.,
2017).
Under these firms, monopoly
regulates, which result in high
price and less substitute
product. Consumer has left
with no other option except to
buy from these firms.
individual profit. These firms
do no compete with rival firms
under these firms, they are
more focus on selling products
to maintain industry profit and
make the competition less.
Oligopoly and monopoly:
basis Oligopoly Monopoly
Meaning
competitors actions.
Oligopoly refers to quite
similar products but with less
price from competitors firms.
These firms require high
investment as the goods are
relevantly quality based.
Under these firms, competitors
take on spot actions when one
firm changes its price, the
other firms will follow the
same to maintain their
presence and competition.
These firms enjoy monopoly
in terms of product as no close
substitutes are available in this
market. Which make them
price maker and consumer get
exploit due to price
differentiation.
Under this approach,
monopolies have less or no
competition as they does not
provide substitute goods which
make them the price they want

Legal influence.
Barrier of entry
Oligopoly market have less
legal influence on the firms as
these firms deals in mostly
consumer or perishable goods
which are beneficial for
society (Boyce, and Ville,
2017).
These firms have large have or
moderate restriction on new
entrance, only because it
require large investment and
competency for survival.
to charge.
Monopolistic firms have large
government control in order to
ensure society benefits from
their serving.
These firms have restriction on
new entrance as these firm s
have patent control over their
products and operations.
Oligopoly and perfect competition:
basis Oligopoly Perfect competition
Meaning These firms are deal with less
similar products and are
independently perform in
market (Cantwell, 2017). In
which prices are set freely and
competitors make move after
their performance.
In this competition. These
firms do not work
independently and have
industry control over the
prices. Also need to face high
competition because of firms
selling similar product into
same market.

Entry and exit
geographical context
monopoly
Under this firm, entry and exit
of the firms are quite typical
due to its small number of
sellers and high maintenance
capital.
These firms have small and
concise geographic area for
example cars, supermarkets.
These firms enjoy quite
monopoly because of less
firms into same market.
Under this competition, firms
are free to enter and exit from
the market as they does not
require large capital and do not
have any parental control.
These firms have large
geographic area as these firms
have similar products at
similar prices. The best
example of these firms are
food restaurants, stalls and etc.
these firms have no monopoly
control as they sell same
products to same customers.
No customers will suffer from
exploitation because set
industry prices.
Impact of large supermarkets on local stores:
Every business settle for selling product and services in order to maximize profit and
long term growth. In this leading market, it is not necessary that every firm would succeed in

market and achieve good profit because it require more of capital and quality product (Croitoru,
2017).
The business which produce as per the market demands and consumer satisfaction have more
chances to achieve its objective and survival for long time. Consumers are more demanding and
want always money worth satisfaction due to which local and small firms would face great
impact on of large firms in terms of profit, technologies, competition, and quality. Large
supermarkets provide all the products under one roof which makes a customer lazy to shop from
somewhere else also, by providing exiting offers and great deals so that consumer gets attracted
and ready to shift their demands on supermarkets. Local shops does not have huge cost margins
and financial growth through which it can only focus on product distribution rather than offering
and schemes (DeSalvo, Limehouse, and Klimek, 2016).
In order to acquire large market share, local shops would adopt good business strategies
and develop new ideas. Financial requirement can be fulfil by financial institutions also, they
provide good advises for making investment in technologies and product segments. These factors
could be beneficial for LGCO. By focusing on more of customers services and offers to attract
large customers.
Table of Comparison of the prices of food in different stores.
Below is the table that are offered by grocery stores of UK. The largest players and the
prices at which they are offering different products and mentioned. The prices are also compared
with a loyal independent store in UK that is Budgens Stores Ltd which is a chain of grocery
stores, and was established in 1962 (Dominici, Del Giudice, and Lombardi, 2018).
Product
Details TESCO
Waitr
oe Morrisns Sainsbur's Asda Aldi
Local
independent
shop i.e
Budgens
Uncle Bens
Sweet &
Sour sauce 2.1 2.1 2 2.1 2.1 1.17 1.49
4 tins Tuna
Chunks in
brine 1.5 1.49 1.5 1.5 1.87 1.45 1.69

1L Still
Strawberry
Sugar Free
Fruit
Flavoured
Spring
Water 3 2.89 2.99 2.85 2.96 2.84 2.79
2 Balsam
Man-size
Compact
Tissues 5.4 5.37 5.76 5.87 6.4 4.9 4.65
1 x White
Tissue
Rolls 12pk 4 3.99 3.68 3.85 3.88 3.55 3.48
1Ready
Baked
Jacket
potatoes 2 2 1.99 2 2 1.98 1.85
1 250g beef
mince meat 4 3.88 3.69 3.45 3.88 3.98 3.55
1 Müller
Light
Strawberry
Yogurt 6 0.59 0.56 0.55 0.54 0.59 5.05
1 Baked
beans 6
Pack 3 2.99 2.98 2.96 2.99 3 2.23
1 Whole-
meal Loaf 0.85 0.75 0.79 0.77 0.88 0.85 0.5
1L Almond
Milk –
Without
Sugar 1.5 1.49 1.44 1.5 1.45 1.54 1
1 Bag of
Salmon
Fillets 4 3.85 3.99 3.85 3.65 3.25 1.77
6 pack
medium
oranges 1.5 1.44 1.39 1.5 1 1.46 1
Total 33.45 32.83 32.76 32.75 33.05 30.56 32.5
Total shopping costs comparison:
Shopping Cost: The total money spent by n individual for purchasing goods and services is
called the shopping cost. Above is the list of goods along with the rate at which they are offered

by adding the total cost the shopping cost is taken out (Gelderblom, and Trivellato, 2019). The
total shopping cost can be compared easily in relation to comparison of individual item. It is
better to take out the total cost and then compare each company.
TESCO being the third largest in revenue provides value for products and has the highest
cost of shopping in comparison to other companies as the products provided by TESCO are of
high quality they care of quality of products while purchasing the raw materials. The other
companies sell products at some difference in prices and don't compromise in quality. All the
companies mentioned above are direct competitors of each other and deal in same products. The
environment impacts them same as they all belong to retail industry. Also, a loyal store is also
compared and notices that it provides at the prices low than these big companies.
The store has to build a image in the market and compete with these big organisation so it
has to provide the value of goods and lower the price. But the store does not compromise in
quality to satisfy the customers (Gostin, L.O. and Wiley, 2020).
The total shopping cost by adding all the given products is somewhere or other
approximately same. The TESCO sells at 33.45 as a total of all products and is highest in the
comparison followed by Asda that sells the same products at 33.05 and is one of the major
competitor of TESCO and has somewhere same prices or below than the company. Waitroe then
sells the total products at 32.83 and a slight difference is seen in prices of Morrisns and Sans
berry. The local stores prices are relatively low as they purchase the materials from local places
and to gain competitive advantage. The prices of companies are discussed the thing is if the
customer will not get the product at a store that it can switch to other brands as there are direct
competitors of these that manufacture the substitute products. Substitute goods means that satisfy
the same need and can be used as replacement of the product. The companies should promote
there product in the market and create a image in minds of customers so that the customers are
aware about the brand and don't switch. It is important to provide quality services to customers to
gain customer loyalty. As the loyal customers don't switch and prefer that brand only. Also tge
companies should increase the accessibility of its goods and services so as they can be reached
by every customer. By offering discounts the companies can attract the customers towards the
products.

The comparison shows that TESCO sells at the highest cost and its direct competitors
sells at slightly less prices to attract more customers and gain market share. And the lowest price
is given by the Budgens.
Competitiveness and segmentation on the food market
The market now a days is becoming competitive and so is food market of UK. The
grocery industry is becoming competitive from past few years and the players are trying to reach
at the first position. They are making strategies and planning to gain competitive advantage in
the market as the competition is increasing at a fast pace. The companies are offering discounts
and giving offers to get a position that can not be shaken in the market. The grocery industry is a
good example of Oligopoly becoming more competitive. Market share captured by TESCO is
highest that is 27.4% and then Asda has 15..4% which is followed by Sainsbury that is 15.3%.
The industry fairly contestable as there are few barriers to entry and also small retail
stores and local stores can be established and work in the industry. Economies of scale is there
but not as such as these big players exploit that (James, 2017). The companies are gaining good
profit in the industry so the competition is increasing. The increasing customer is good for
customers as they are getting many options and also companies are offering discounts and offers
to attract them. The choice is increasing and small players have also established that are
providing the goods at -prices low than these big players. It is a task for companies to attract and
retain customers and gain the advantage. They have to retain their brand name and and serve
more customers to increase their revenue. Fair competition is good and important for
organisation to work with more dedication.
Segmentation on the food market
Segmentation is the process of dividing the homogeneous population in heterogeneous groups
and serve them according to their needs and wants. The segments are small groups that have
common likes and dislikes. The grocery industry is a big industry and it is important to group the
customers to serve them better and fulfil their needs with what they want. It is important to
segment the customers in proper way for success of the companies (Lloyd-Jones, and Lewis,
2017). The basis by which companies segment their good and services in food market are as
follows:

1. Age: This factor groups the people that generally have same likes and dislikes. The retail
industry makes products by segregating according to age an group them as 18 to 60 years
and those above 60 years. This helps the companies to satisfy their needs and wants.
2. Income group: The people with same income group prefer the same product so one of the
basis of segmentation is income group. The categorisation is done sa middle class and
high class people.
It is important to understand the needs and w2ants of customers and serve them accordance of
the segment they belong to and it is easy for company to manufacture and promote the product
and boost its sales in the market (Meyer, 2017).
CONCLUSION
from the economic report of business practises into different structures and competitions,
it has identified and well concluded the impact of their presence into leading market. A business
need to identify an appropriate structures of its business firms which leads them more benefits
and less competitions in order to survive and achieve goal. From the above comparison, it is
concluded that oligopoly firm is reaching heights in competition which enamours benefits of
price control, restriction on entry, huge capital investment and large customer base also with
moderate legal control. Whereas, monopoly also enjoy desirable profits and brand reputation.
But has huge legal control due to which it could not achieve the targets the way they want. Apart
from this perfect competition is on downwards side of growth because of similarity products and
prices, small activity of changes in price, leads to customer dissatisfaction. The impact of
supermarket highlighted the fact that in order to grow in this complex market, local firms has
serious need to adapt advanced mechanism and quality services. This report has shown the
comparison or large supermarket pricing policies which affects buying power of individuals
which shows TESCO has becoming the market king because of its brand name and good quality
product and other firms are are putting their efforts to lay down the competition with TESCO.
On the last, marketing segments play vital role for targeting the large market to reach wide and
number of customers.

REFERENCES
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