UK supermarket sector is an oligopoly Essay Example | Topics and Well Written Essays - 2750 words

UK supermarket sector is an oligopoly - Essay Example The entire functioning in the supermarket is looked after by the Commission. Although the commission tries to disrupt the impacts of oligopoly, there is evidence that there is prevalence of oligopoly in the UK supermarket sector. This is because the supermarket sector in the UK is predominantly operated by a few firms, i.e. Tesco, Sainsbury’s and ASDA. The rapidity of the deliberation with regards to oligopolies concern has gained acceleration during the past five years. The supermarket sector in the UK falls under the category of grocery market that had accounted for a total market share worth  £146.3 billion in the year 2008. Supermarket sector is the largest sector among all other sectors under the grocery market in the UK and it accounted for a total of 73 percent of the sales in grocery market. In the UK grocery market, the three biggest chains are Tesco, ASDA and Sainsbury’s that accounted for a share of 67.9 percent (Li, 2008). In this research paper, the UK supermarket sector will be analysed with reference to the performance of the three giants in the market. The belief that the supermarket in the UK is dominated by oligopoly will be critically evaluated in this research paper. ... The most important characteristics of an oligopoly market are existence of a few firms, high barriers to entry or stiff competition and earning of high or above-normal profit. 2.1 Firms in the UK Supermarket It has already been mentioned earlier that the UK supermarket’s four biggest chains are the Tesco, ASDA, Sainsbury’s and Morrisons. The share of these chains in total accounts to 67.9% of the grocery market. This data explains that more than half of the market share belongs to these chains and thus resembles the scenario of an oligopoly market. The data about the operational efficiencies of the three topmost chains will support the fact that the UK supermarket sector is an oligopoly. 2.1.1 Market Share and Performance of Tesco in the UK Market Tesco is the third largest retailer in the world and is the topmost in the UK; and at present it is observing a steady recovery in the consumer market segment in the UK. The expectation is supported by the sales figure during the period September-November, 2010. The market share of Tesco had grown up to 30.7 percent during the year 2010. According to the article published in Bloomberg Business week, the sales that boosted up during the period of Christmas last year had been initiated by the shift in the preference of consumers to products with better quality. The performance of Tesco in the UK market provides evidences of dominance in the supermarket sector (Shannon, 2010). 2.1.2 Market Share and Performance of ASDA in the UK Market ASDA, with a market share of 16.8 percent is the second largest operator in the UK supermarket sector. Although its performance level declined as it faced competition from its rival