The paper “ Supermarkets and Agri-Food Supply Chains -Transformations in the Production and Consumption of Foods” is an inspiring example of the case study on business. The grocery market in Australia doesn’ t appear to be perfectly competitive one instead the market appears an oligopolistic form of market structure. The prime requirement for a perfectly competitive market is that all the players in the market should have equal market share and should be relatively low. Instead, it is seen that the Australian grocery market is mainly controlled by Coles and Woolworths accounted for about 70% of packaged grocery sales and 50% of fresh food product sales in Australia.
The fact that the other players in the market have very little share and the major share is being held by Coles & Woolworths it results in making the market move away from a perfectly competitive market. Due to the large market share being held by two major players the competition level is high and the bigger players look towards dominating the market and dictate the price that has to be charged. This results in the market moving away from the requirements of being a price taker to one which is more of a price giver.
The qualities demonstrated don’ t match the criteria that are required for a competitive market and results in the domination of a few players in the market. Further, the strategy taken by one firm is replicated by the other which results in the interdependence between firms. This can be seen by the fact that Woolworth started the “ rollback program” (Myers, 2010) where customers were given some products at prices lower than they are usually offered which was copier by Cole’ s group by starting “ price reward program” (Myers, 2010).
This makes the firm follow each other and look towards acting in a manner that will ensure that the strategy of the firm is dependent on others. This results in increasing interdependence and is one of the characteristics which an oligopolistic market demonstrates making the grocery market to be far away from those of a perfectly competitive one. Another important characteristic of a perfectly competitive market structure is the freedom of entry and exit. This situation is not quite prevalent in the Australian grocery market because of the fact that the major control lies in the hands of a few players.
Burch, D. & Lawrence, G. 2007. Supermarkets and agri-food supply chains: transformations in the production and consumption of foods. Edward Elgar Publishing
Council of Australian Food Technology Associations, 2007, Food Australia. official journal of CAFTA and AIFST, Volume 59, Council of Australian Food Technology Associations
Carman, H. F. and R. J. Sexton. 2005. Supermarket Fluid Milk Pricing Practices in the Western United States. Agribusiness 21 (4), 509-530
Cotterill, R.W. 2006. Antitrust Analysis of Supermarkets: Global Concerns Playing Out in Local Markets. Australian Journal of Agricultural and Resource Economics 50 (1), 17-32
Meyers, M. 2010. Grocery shopping patterns in Melbourne, Australia”, Allied Academies International Conference: Proceedings of the Academy of Marketing Studies, 15 (1)
Perloff, J. 2008. Microeconomics Theory & Applications with Calculus. pg 445, Pearson
Peltzman, S. 2000. Prices Rise Faster than They Fall. Journal of Political Economy 108 (3), 466-502
Richards, T. and P. Patterson. 2003. Competition in Fresh Produce Markets: An Empirical Analysis of Channel Performance. USDA, ERS