Monopoly in the Groceries Market in the U.K
Introduction and conclusion
Monopoly in the market is a type of market where there is a specific supplier of goods and services. They can easily influence the prices of goods and services to maximize their profit. In a monopolistic market, there are high barriers to market entry, the monopolistic form drew their profits from the advantage they accrue from the economies of scale, technological advancements, no available of substitutes in the market and control of the available natural resources. In the U.K grocery market, there are a number of market players who sell their products and services within the market (Kumar, 2017). The following is a graphical presentation of a monopoly.
Fig 1. Adapted From: Kumar (2017).
Basically, for a monopolistic market structure, there is only one major player who is in charge of the price differentials within that market. The different players in the grocery market are; Asda, Co-op, Tesco, Local Store, Marks and Spencer, and Sainsbury’s. Despite the many players involve in the same grocery market, there are claims that the market is majorly monopolistic, and how does this come about? According to Simms (2007), there are claims that Tesco has done everything possible that warrants them being called the monopolistic firm. From failing to adequately provide for a friendly environment where the local producer is fairly paid commensurate to what the retailers make on their store floors. However, this claim has been thwarted by Tesco retailers who believe they offer competitive packages to the local producers and that the local consumers are at will to choose from which retailing store they should buy from. According to Rowley (2006), it is high time the definition of monopoly is reconsidered to being out the 21st-century market place. A concept of super poly is brought about to focus on the development of monopoly in a market structure where there are high consumer choice and high networked knowledge-based advantage.
In conclusion, considering the findings of the above research, a considerable number of consumers have their preferred supermarkets to buy from. Going by the definition of a monopoly where only one firm is responsible for the production of goods and services, has the authority to dictate prices and enjoys economies of scale, it can be noted that the U.K grocery market is not a monopoly, but a monopolistic competitive market (Kramer, 2019). A monopolistic market is where every seller has a right to convince a consumer to purchase their goods and services. But a monopoly is entirely vested in one firm.
Monopoly is defined in reference to the grocery market in the U.K and a case of Tesco, a U.K supermarket chain, is put in place to help give further illumination in regards to this topic. Discussion ensues of the over- dominance of the market. Therefore to get a feeling of the topic, the study conducted a quantitative survey to ascertain to the claims of monopoly in the U.K grocery market. Twelve participants were randomly selected to participate in an interview. After they participate, the data collected was analyzed and the results obtained to help clarify the issue. The survey materials we’re prepared to have an understanding of the people’s perception when it comes to monopolies on people and the market in the U.K. The questionnaire contains four questions, out of which three are closed-ended and one is open-ended. The first question asked the respondents to either choose up to two choices of the supermarket they usually go to, factors that will affect their choice of a supermarket, their spending in a supermarket in a week and lastly what they thought about the smaller supermarkets in the market in comparison to the big ones.
From the data collected, all the twelve participants completed their questionnaire, although some never marked more than two responses in question one. Considering the data outcome;
Question one: which supermarkets do you usually go to?
Here out of the 12 respondents,
Asda – 3
Co-op – 5
Tesco – 7
Local Store – 1
Marks and Spencer – 2
Sainsbury’s – 3
The below figure is a representation of the preferred retail outlet by the respondents
2. Factors to influence the choice of a supermarket
The geographical location had the most score as the influencing factor one with 10 respondents out of 12.
Price came in as the second-best influencer when it came to choosing a supermarket.
Quality was the third influencer and
The brand was the fourth influencer and another option was at the fifth position.
3. How do you spend in a supermarket within a week?
A. 0-5£ – 0
B. 5-10£ -1
C. 10-20£ – 4
D. 20-30£ – 4
E. More than 50£ – 3
The figure below is a representation of respondents spending in a week in a supermarket
4. The fourth question was an open-ended question comparing the small retail businesses to the bigger supermarkets. Various answers were received, ranging from convenience, supporting local production, good location, opening hours, and pricing.
From the findings, it is evident that there are supermarkets that dominate over others, for instance, concerning the choice of the supermarket, is a multiple-choice question out of possible 24 outcomes, Tesco scored the highest with 7 respondents saying they would prefer going to Tesco, Co-op came in second scoring 5 entries, there was a tie between Sainsbury and Asda at 3 each, Marks and Spencer had 2 rooting for it while only one admitted to going to local store.
The above results show that indeed there are sharp preferences of the grocery market and despite some mentioning the advantages that come with the local stores; it never received many customers from the findings. Tesco is, therefore, the preferred retail outlet by the majority.
When it comes to factors that would influence the choice of a supermarket, the majority said that geographical location is the first factor to consider, although despite local outlets being near most consumers they never said it was their preference. Apart from the location, there was a mention of price as the second most influencer, also some respondents mentioned that the prices at the local stores are slightly high compared to the bigger supermarkets, therefore, this could be a reason why it was not selected by a majority of the respondents. Quality and brand however seen to be intertwined were considered to be the third and fourth factors respectively.
In terms of spending, there were mixed up reactions as 4 respondents indicated they spend between £10-20 and another 4 also said they spend between £20-30. A considerable number of 3 respondents said they spend over £50.
On comparing the local stores with big supermarkets, a variety of responses were received with the geographical location being a leading response to why the local stores were considered. Apart from the location, others mentioned the role they play in promoting local producers, convenience when it came to the opening and closing hours. Pricing was mentioned to explore the buyers more compared to the big retail supermarkets.
Simms A. (2010). Tescopoly: Has Tesco become a Monopoly? Channel 4 News
Rowley J. (2009). Superpoly: Monopoly in the twenty-first century. July 17, 2009
Kramer L. (2019). What are some examples of the monopolistic market? Updated July 14, 2019
Kumar M. J. (2017). Monopoly: Meaning, Definitions, Features, and Criticisms. Economics Discussion. Published August 1, 2017