Economic Analysis of an Oligopoly Market Structure

Coles Myer Limited (CML) and Woolworths Limited (WOW) are two major Australian companies with extensive retail interest and listed on the Australian Stock Exchange. They are Australian public companies which operate a number of retail chains.

1. Introduction The intended purpose of this report is to outline the nature of the Australian retail market, specifically the retail food sector. This report will then discuss the role of market segmentation and how it has resulted in the emergence of new retail channels available to consumers. The emergence of ALDI as a new retail channel will be the focal point of the report along with a brief overview of other new-coming organizations such as Costco. Through the use of current journal articles, books, internet sites and government publications, this report will outline the benefits of the new retail channels available to consumers, especially in regards to saving on common expenses. This report will also discuss the possible room for

There is intense rivalry among grocery stores In Australia. As more stores open up regularly, rivalry determinants has taken in the form of price competition which is undoubtedly the primary form of competition in this industry where stores are undercutting each other with perks like promotions, points collecting system and the most commonly seen is by giving generous discounts to consumers with membership or reward cards.

The UK supermarket industry is a very competitive and profitable industry. It is made up of four main players with significant share of the market, and then various smaller companies who focus on smaller niches in the market such as the bottom of the market discounters and the top of the line speciality stores. It is an interesting market and this report evaluates the attractiveness of the industry using Porter’s five forces model with an insight into how market nicher Waitrose sustains a competitive advantage. Next this report looks at how major player Sainsbury’s successfully competes against its rivals using differentiation strategies, and analyses current consumer trends and problems can effect this industry.

Coles also defines the maximum and the minimum number of product brands to sell on their shelves. If the number

If focusing on the retail industry it involved, such as Coles supermarket, the main competition comes from its countpart, Woolworth. Coles and Safeway are the two main retailors in Australia as analysed by Inside Retailing organisation in Australia. Australia’s retail industry has developed to become a leading industry in the national market as well as in the world market. As this article indicates, all entities in the retail industry confront pierce competition. Also cited in the article, a 1966 issue of trade magazine Inside the Food Industry observed that: Woolworths and Coles are now nearing 10% of total Australian retail sales. They are opening more stores than anyone else. Up until now, this figure can be much bigger than 10 percent; and the competition between retailers is increasingly intense.

Cole expects to establish more and bigger stores and supermarkets in order to improve its competitive edge among its leading competitors such asWoolworths. According to the situation analysis, the “down down” price strategy appears to stay since for many years, it has acted as its competitive edge. Hence, the low price strategy will assist the company in competing for the customers ( Mckeown, 2012).

New South Wales, Victoria and Queensland are the regions contributing over 75% of the 18.9 billion industry revenue. Westfarmers (Target and Kmart) and Woolworths (BigW) are the two largest companies competing on low-cost strategies (Porter, 1980). Myers and David Jones, holding 15.3% and 10.5% market shares respectively (Figure 1), compete on differentiated strategies targeting the upper consumer market (Porter, 1980). Over 10% of the total working population are employed in this industry (Productivity Commission, 2011).

For this capability, strong financial support and effective saving processes as fundamental resources enable Woolworths Ltd to provide products at relatively lower prices. The effective saving processes include the global sourcing process and direct store deliveries also play an important role to achieve competitive prices by reducing inventory costs and operating costs. Besides, the long term and good relationships with suppliers makes Woolworths get this capability to get lower cost products. Then combining the online network and existing delivery system makes customers purchase more conveniently. Last, Woolworths Ltd is also engaging in product expansion in different industries.

1. Place: Woolworths is at much fewer places than Coles thereby not preferred as much as Coles.

4. Product Variety: It’s not a ‘Super’ market with a suitable range of products to choose from, Coles & Woolworths prove they’re super indeed with 5 stars each for product variety. IGA with 4 stars while Aldi received 3.

The Australian Supermarket Industry is the very hot topic that’s why very interesting topic now days. The Australian supermarket and grocery stores have a very severe competition in Australia mainly because of organizations competing in this mature industry are going towards cost reduction initiatives with competing advantage rather than product differentiation strategies, In other words business in this industry increase market share by charging lower prices while making reasonably fair profit. The growing popularity of ALDI – German based company of introducing its own label goods (products manufactured and sold under the retailers own brand) with low cost has forced the two giants –Woolworths and Coles to cut price

The UK supermarket industry resembles an oligopolistic industry, with several characteristics. Oligopolistic markets tend to be characterised by high concentration ratios, barriers to entry and…Since the turn of the century, the industry has been scrutinised by both the Office of Fair Trading and has been referred to the Competition Commission on two occasions. (Seely, 2012)

The big retail stores have the advantage of making the highest possible margin as they buy in bulk from the suppliers and hence they can afford to play with their prices.

In contrast the bargaining power of suppliers is fairly high, predominately due to the weight of suppliers market share, for example Inghams supplies thirty per cent of all Australians poultry.