Oligopoly Market Analysis

This report analyzes the oligopoly market structure, focusing on Sainsbury's as a case study. It discusses the characteristics of oligopoly, including few sellers, interdependence, advertising strategies, and competition. The report highlights the advantages and disadvantages of the oligopoly market for customers and employees, emphasizing Sainsbury's market position and competitive strategies. It concludes that Sainsbury's effectively navigates the oligopoly landscape, achieving significant market share and profitability through strategic pricing and product offerings.

Global Competitive
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
The Oligopoly market is described as those market conditions where there are few sellers
who are selling differentiated or homogeneous goods. The firms who are selling their products
are having large market shares. The oligopoly market is similar to those of monopoly market and
in that case only one firm is selling their products (Algesheimer, Dholakia and Gurău, 2011). In
this market there is no limit on the number of sellers who will be selling goods at market place
but the number of firms operating should be low that the actions of one business are having
impact on others business operations.
1) Characteristics of Oligopoly Market
Few Sellers: There are less sellers but customers are large in number who are selling
products. As the market place is dominated by few sellers so they are having total; control over
the prices of products which they are selling to their customers.
Interdependence: This is most vital feature of Oligopoly market as the sellers have to
focused on the pricing strategy which are adopted by other rivalry. There is high competition
among the sellers because if one firm change the price of their products then other firms are
having high impact from their pricing strategy and they had to implement different price
strategy. Thus there is high interdependence among the sellers in relation to price of products.
Advertising: Under the situation of Oligopoly market each firm are giving advertisement
of their goods on regular basis as it is beneficial for them in order to attract customers who will
enhance their overall sales and profitability ratios. This is an important factor for firms because if
they are not spending money on advertisement then it will not result in attracting customers and
they will buy products from their rivalry firms. So firms wants to win the race so they are
spending large amount of money on advertisements of products (Benton and Redclift, 2013).
Competition: There is higher competition at market place because there are only few
sellers who are selling their products and there are large number of buyers. If there is any action
taken by one firms then it will have impact on their rivalry business. Thus each seller is keeping
their eyes on rivalry firms and they are ever ready for the counter attack.
Entry and exit barriers: The firms who wish to enter into oligopoly market can easily
take entry but they had to face some barriers which taking entry. The restrictions can be related
to Licensing policy which are adopted by government, economies of scales, large capital
requirement, new and innovative use of technologies etc. There can be case at time when
1

government regulations are favouring already existing firms thus these can create difficulties for
the new firms who want to carry out their business operations.
Lack of Uniformity: There is no uniformity among the firms who are selling their goods
at oligopoly market as all are having different size because some are having their operation's on
large scales.
As there are few firms who are performing business operations any action taken by firms
are having impact on the rivalry business thus each firms are having responsibilities in order to
keep an eye on their rivalry activities and accordingly they should plan for their advertisement
strategies.
3) The advantages of Oligopoly market for customers and employees are described as:
Higher profitability: As there are few sellers at market place so firms can earn higher
profitability because the competition is lower at the market place. The goods which are sold by
oligopoly market are required by large number of populations as they are different from other
markets.
Simple choices: As there are few firms who are involved in selling goods thus customers
can make easy comparison about the products which are offered by firms as whose is best and
better quality (Hill and Hernández-Requejo, 2011). In other market conditions these task are
different as they are not able to make comparison about the products from rivalry business
because there is higher competition.
Competitive Price: As the customers are able to make easy comparison between the
product prices which are sold by suppliers thus they had to be more focused on the pricing
strategies which are adopted so it will not affect their sales and profitability ratios.
Better information and Goods: As there is higher price competition at oligopoly
market along with this there is also focus on product characteristic and features. In order to gain
competitive advantage each firms are focused towards applying new and innovative features in
their products. This is also linked with the amount spend by firms on advertising so that
customers will be informed about the new and innovative features in their products.
4) The disadvantages of Oligopoly market are evaluated as:
Less Choices to customers: In different situations making a choice among the best and
effective brands is related with getting the best output. This states that customers are not having
2

much choices for the products which are demanded by them so they have to buy those products
only which are available at Oligopoly market.
The smaller entities are not able to make strong places at market: If any firms who are
having their operations at smaller scales want to enter these markets then it become very difficult
for them to take entry as they are not having innovative and creative ideas for their products and
their operations are strongly controlled by the present rivalries who are involved in business
operations.
Fixed pricing policy: As there is higher competition among all the firms who are selling
their products so they keep the prices of products fixed which they had to sell to their customers.
This is applied because the firms and rivalries have agreed to fix the prices of their products
which they had to sell to their customers. There are limit designed for setting the prices of
products and it cannot be lower then the set price thus the customers are also not cheated and
suppliers cannot cheat the customers by asking higher prices for the products.
No fear of Competition: At times the firms are involved in selling their goods at
Oligopoly market they are happily settled at these places by selling their products. The
profitability factors which are achieved by them and the work guarantee are beneficial for them.
Thus there is no requirement for the firms in order to develop creative and innovative ideas by
which they will attract customers and enhance their overall sales ratios (Lee, Olson and Trimi,
2012).
It eliminates motivational factor: All the firms who are selling goods at Oligopoly
market are happy with their operations as they are earning high profitability. Thus there is no
special need in order to expand their overall business operations by generating new and
innovative ideas.
5) Sainsbury's are the second largest chain of retail market in UK and they are having overall
16.9% shares in the supermarkets at United Kingdom. These firms started their operations in
1992 and they were offering home delivery for the sales of retail products in order to make sales
process convenient. They have increased their overall sales ratios as they are selling products
according to needs and demands of customers. They have achieved strong positions at market
places thus they are able to earn high profitability and sales. They are not having their main focus
on supermarkets like that which are adopted by Tesco and Asda thus they are not having
negative impacts form their business operations. There sales had grown by 17% thus they are
3

able to expand their business operations all around the globe. Sainsbury's have achieved rewards
for the investment which they have implemented in their procurement systems and also supply
chain programmes. They have developed strong and effective relationship with farmers as they
are able to grow up their overall sales and profitability ratios. They have an innovative ideas by
which they can develop plans in order to expand their business operations so they can achieve
growth and development in their business operations. They have organised various plans in order
to enhance their overall market shares thus earning higher profit shares. They have developed
long term plans and policies in order to make their operations sustain for long time at market
places. The values which have developed by these firms are useful in order to make their supply
process more effective and they can easily achieve growth and success in their operations of
selling retail products.
As the largest retailers in UK they are striving in order to make their business operations
more successful as they are giving experiences to customers so they will visit their shops again
and they will enhance their overall sales and profitability ratios. They have given their views that
business is not only the place where they had to sell their products but people are also having
good experiences while they are working there and earning money. There main aims are linked
with offering products to customers at economical prices so customers can easily purchase them
and they will also have a positive impact on environment (Lewis and et. al., 2017). At
Sainsbury's the respect of environmental factor are more concerned thus there process are not
related with earning high profits but they are also concerned about the use of resources so they
will not be depleted. They are making their stores develop good images in their minds so they
can easily perform all their business activities. There stores locations are at different places and
they are focusing on expanding their operations globally so they will earn higher growth and
profitability
6) The firms are classified under Oligopoly market as they have controlled all the major retailing
operations in UK and they are having all the characteristics of Oligopoly market and they are
running their operations with other rivalries such as ASDA, Tesco etc. They are not making
entry possible for other small business because they have captured large market shares. The
Oligopoly market is one which is having large number of buyers who will be consuming their
products but there are only few sellers. Sainsbury's are successful in their business operations as
they are having only few rivalry who are involved in selling similar type of products to their
4

customers. They have established strong images at market places thus there is no need for them
to develop innovative ideas for selling their products. They have achieved market shares of
16.9% thus they are able to easily expand their overall business operations and attain higher
growth and profitability ratios. As the firms are successful in establishing strong market shares
so they are able to achieve successful in expanding their operations all around. This is valuable
factor in order to gain loyal customers who will not be buying products from their rivalry
business. Their profitability ratios will also be enhanced and they will easily achieve success in
their operations (Marchi, Maria and Micelli, 2013).
7) The main competitors of Sainsbury's are Tesco, Waitrose, Asda, Mark & Spencer among all
these Sainsbury's was have achieved success in order to achieve high shares at market places.
All these firms are working together and they have established 80% of the total market shares
and this has helped them to achieve success in their operations.
8) There is high development noticed in growth of products as there is high competition from
their rivalry firms so they are making plans in order to establish strong images at market places
by selling products according to needs and wants of customers. There total growth had increased
by 7% and they are mostly focusing on opening their new retail outlets thus they can achieve
success in their business activities. There main aims are linked with offering quality products to
all their potential customers so they can create an environment where all employees will be
successfully executing their business operation's and they will not face any type of difficulties.
They have made innovations in their products as they are offering differentiated food products
which includes sweet potatoes, butternut squash etc. They have opened large number of retail
Agros stores in the supermarket in order to achieve success in their operations. Sinsbury's are
facing new and innovative challenges as they are mainly focusing on increasing customers
footfalls thus there overall sales and profitability ratios can be greatly enhanced. As there market
was growing so they have noticed fall in their prices thus they had to face difficulties as they
were not able to easily cope up with these problems (Mpoyi, 2012).
9) The revenues of Sainsbury's are £23.506 billion according to data which was collected in
(2016). This is an important and most valuable factors for firms as they are able to enhance their
overall profitability thus achieving success in their operations.
10) Sainsburry's pricing strategy are based on valuing the money of customers and offer them
value added products. This is an important factor for firms so they can easily enhance their sales
5

ratios and earn higher profitability by retaining loyal customers who will not buy products from
their rivalry business. The firms have adopted competitive pricing strategies in relation to price
cutting policy as the firms are achieving higher shares at market places but this linked with short
term plans and policies. Sainsbury's are making use of price discrimination policy according to
the position of products at market places thus they have made plans in order to adopt premium or
economical pricing strategy in order to achieve strong positions at market places. Their products
of kids and basic ranges are having lower prices but there quality is excellent thus the values of
customers are highly important. This is the best pricing strategies which are adopted by
Sainsbury's.
11) The cost factor is related with the those factor at which the products are being manufactured
in order to sell them to their final customers. The cost of the products should be economical so
they can be easily be offered to customers and in turn customers can purchase them. The main
cost are related with purchasing raw materials for manufacturing food products and these can be
offered to their potential customers (Shulman, Coughlan and Savaskan, 2011).
12) They have achieved competitive positions as they are offering discounts and promotions on
their products in order to gain attention of customers so they can easily buy their products thus
their overall sales and profitability ratios will be greatly enhanced. They are keeping economical
prices of products thus people can easily purchase them according to their budgets.
13) The main customers who are consuming their products are married women as they are
mostly buying the household products and according to the survey reports it has been analysed
that people between the age group of 22 to 40 years are mostly consuming their products.
CONCLUSION
From the above report it is concluded that Oligopoly are those market which are having
few sellers but the buyers are large in number who will be using their products. Sainsbury's have
all the characteristics of Oligopoly market and they have adopted economical price policies in
order to sell their products to customers. Firms can attain high profitability ratios if there market
growth and profitability factors are enhanced.
6

REFERENCES
Books and journals
Algesheimer, R., Dholakia, U. M. and Gurău, C., 2011. Virtual team performance in a highly
competitive environment. Group & Organization Management. 36(2). pp.161-190.
Benton, T. and Redclift, M., 2013. Social theory and the global environment. Routledge.
Hill, C. W. and Hernández-Requejo, W., 2011. Global business today. McGraw-Hill/Irwin.
Lee, S. M., Olson, D. L. and Trimi, S., 2012. Co-innovation: convergenomics, collaboration, and
co-creation for organizational values. Management Decision. 50(5). pp.817-831.
Lewis, H. and et.al., 2017. Design+ environment: a global guide to designing greener goods.
Routledge.
Marchi, V. D., Maria, E. D. and Micelli, S., 2013. Environmental strategies, upgrading and
competitive advantage in global value chains. Business strategy and the environment.
22(1). pp.62-72.
Mpoyi, R. T., 2012. The Impact of the" BRIC Thesis" and the Rise of Emerging Economies on
Global Competitive Advantage: Will There Be a Shift from West to East?. The Journal of
Applied Business and Economics. 13(3). p.36.
Schuler, R. S., Jackson, S. E. and Tarique, I., 2011. Global talent management and global talent
challenges: Strategic opportunities for IHRM. Journal of World Business. 46(4). pp.506-
516.
Shulman, J. D., Coughlan, A. T. and Savaskan, R. C., 2011. Managing consumer returns in a
competitive environment. Management Science. 57(2). pp.347-362.
Sierzchula, W. and et. al., 2012. The competitive environment of electric vehicles: An analysis of
prototype and production models. Environmental Innovation and Societal Transitions. 2.
pp.49-65.
Tate, W. L. and et. al., 2014. Global competitive conditions driving the manufacturing location
decision. Business Horizons. 57(3). pp.381-390.
Yang, T. and Zhao, S., 2014. CEO duality and firm performance: Evidence from an exogenous
shock to the competitive environment. Journal of Banking & Finance. 49. pp.534-552.
7