In Britain is to buy something almost Asda, there will be Tesco or Sainsbury Morrison, the maximum intended to should be Tesco. They had ability to exercise significant power in their goods and services purchasing. There is no single theory of how firms determine price and output under conditions of oligopoly. Oligopoly is a situation of limited competition, in which a market is shared by a small group of producers. Oligopoly usually exhibits the following features: product branding, entry barriers, interdependent decision-making and non-price competition. (Anderton et al, 2008:322). A few major competitors in the market are one of the factors in Oligopoly. This is obviously shown in the UK supermarket industry. Because the three main companies which are Tesco, Sansbury's and Asda, even though many smaller companies are also in the market (Thestudentroom, 2010). There are discussions whether this market structure creates a situation that is the benefit of consumers.
This situation is not only beneficial to consumers, but there are also some drawbacks. Firstly, the discussion will be focus on the advantages. Many products are substitutes which are produced identical and homogeneous in oligopolistic markets. The companies are forced to sell the goods at a single market price which are undifferentiated; causing the consumers can choose where to buy the products. For example, one firm may lead to a reaction by the competition firm (Nelsonthornes, 2010). A case by Firstandbest (2003), a large supermarket chain in terms of market share was announced, which is that Morrison shared offer for Safeway. As the reaction to the announcement, all the other supermarkets chain soon.
The market situation which is a small number of selling companies that sell control of a specific commodity or service, therefore it can control the market price of the market supply. An oligopoly can perfect - all of the company to produce the same goods or services. Each company has different identities, but essentially the same way that other companies in an oligopolistic also know its market share of the product or service, because it produces no change or market share price by a company's sales are reflected in the others, often is a highly cooperative company; every business must make its price and output response decided to other companies ' trades that oligopoly pricing, once established, rigid. There is a benefit, to encourage non-price competition, through advertising, packaging and service of resource allocation, general non-production of the form. (tutor2u, 2010)
Tesco as Britain's biggest supermarket retailer, it is also the most retailer's storefront distribution. It has been actively involved in promoting the convenience store market, and non-interference in its large stores of food marketing is the future annexation of the market by the boots and Marks & Spencer occupies a dominant position. (News BBC, 2005)
According to UK's grocery market share figure, Tesco has possess good market advantages in the British retail market, by 27.1%; while, Asda and Sainsbury were almost the same market share; Other brands of retail segmentation decimal. It is mean that in the same retail market, Tesco would get maximum profit; contrary to other companies for profit can use all sorts of methods, such as promotions to attract customers, all kinds of preferential price tactics. Therefore, Consumers is the biggest profit in such a market structure.
UK's grocery market share figure (Sept 2003 rankings, Source: The Guardian)
Tesco
27.1%
Asda
16.9%
Sainsbury
16.1%
Morrison/Safeway
12.4%
On the other hand, there are still many disadvantages about this circumstance. One key aspect of oligopolistic market structure is that these markets are barriers to entry for other firms (Anderton et al, 2008:322). The oligopolists stop new competitors from entering the market means that new stores are becoming less (Ivythesis, 2010). Therefore, consumers have less choice. Furthermore, considering about the oligopolistic environment, lack of competition will result in less efficient social output of production (Ivythesis, 2010). This will be the main cause of that consumers will buy the bastard goods, even the situation will be appeared which the supply is not adequate to the demand.
All in all, oligopoly market structure beneficiary is consumer. This is the advantages and disadvantages coexist. However, the benefits of oligopoly to the consumers are just based on competition and non-collusive. The oligopoly must be independence, each of the firms want to be possessed of more market share. In the market structure，consumers play an important role in the company, so will the use of various methods, and to attract the attention of consumers to buy their products to consumers, derive profits. Oligopoly characteristic that help further stabilize the market, but also exists unsteady factors, so consumer plays the stability of the oligarchic oligopoly This means that mutual restrictions.
