It has been said that the UK supermarket sector is an oligopoly Essay

It has been said that the UK supermarket sector is an oligopoly - Essay Example ...................................... Conclusion............................................................................................................ References It has been said that the UK supermarket sector is an oligopoly Introduction The UK supermarket sector is most definitely properly defined as an oligopoly based on the market structure that guides its business principles, the relevance of the consumer in building business strategy, the level of interdependence between competing supermarket companies, and the sector’s influence in pricing and supply within its market. An oligopoly is defined as â€Å"a market dominated by a small number of participants who are able to collectively exert control over supply and market prices† (investorwords.com, 2011, p.1). It is the interdependency between the few firms, such as Morrison’s and Aldi, that makes this market sector an oligopoly in relation to marketing efforts and pricing structures that drive strateg ic intentions. This paper describes the market characteristics of the supermarket sector in the UK that label these businesses as part of an oligopoly. The market structure All of the major supermarket competitors in the UK maintain a high degree of market share in the foods industry and are affected little by smaller competitors in terms of profitability. An oligopoly is able to affect the market by maintaining this high market share and control by being able to influence pricing negotiations with suppliers who rely on their continued successes in order to, themselves, remain profitable. This is what characterizes an oligopoly when a market is dominated by only a handful of large-scale competitors. In this structure, firms can have either differentiated or non-differentiated products offered to consumers where advertising and marketing objectives characterize one of the most important features related to business strategy and competitive behaviours (Boyes & Melvin, 2005). Why is th is? Supermarkets rely on consumer attitudes and behaviours to ensure they remain profitable which are always subject to fluctuating demand schedules and eating habits. Also based on price, consumers will choose one competitor over another in this market structure which drives the necessity for more innovation in marketing and the routine environmental and competitive analyses required to remain successful and profitable. Under macroeconomic theory, an oligopoly is considered to be the most realistic market structure since there are a diverse range of externalities and internal business behaviours that impact whether the firms gain higher volumes of market share in a local or international region (Boyes & Melvin). These supermarkets in their oligopoly maintain a downward-sloping demand curve where the shape of the curve is directly related to consumer behaviour patterns and the behaviours of competition in relation to strategy, marketing and advertising. This is why the supermarket s ector in the UK is considered the most realistic of market structures as the importance of competitive behaviours and marketing are in-line with contemporary business practices with most non-supermarket organisations. Because of their dominance in this market sector, suppliers are made weak when considering consumer-based commodity products (quickmba.com, 2011) as they rely directly on the purchasing power of the supermarkets to maintain their production levels, adequate staffing and overall operational strategies related to the intent of building higher profitability. This gives