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Uk Supermarket Price Competition And Non Price Competition Economics Essay

The British supermarket is dominated by four main suppliers, Tesco, Sainsbury, Asda and Morrison which formed a large retail market chain in the UK for several years. This is called oligopoly market [Oligopoly Watch, 2003]. According to 123helpme.com (2009), an oligopoly is a market controlled by a few number of bulky firms which are interdependent. First of all, four main groceries in the UK have high degree of concentration. For example, in 2003, four supermarkets together have approximately three fourths market share in the retailers market which can be seen in the diagram. [Oligopoly Watch, 2003]. Moreover, based on the huge economics of scale and enable lower the price to consumers, the barriers to entry for other suppliers in the market are high. It is believed by Climate Change Crop (2006), “consumer research told them that price, quality and convenience were the key criteria for the mass of shoppers”. Therefore, the UK leading firms in supermarket chain begin the high competitions in price rivalry and non-price strategies. This essay will concentrate on analyzing both price competition and non-price competition among Tesco, Sainsbury, Asda and Morrison, and then evaluates the advantages and disadvantages for the customers.
Grocery market share
Tesco 27.1%
Asda 16.9%
Sainsbury 16.1%
Morrison/Safeway 12.4%
Sept 2003 rankings, Source: The Guardian
Consumers have benefits for saving money because of immense high competition and low-price strategy among the main retailers in the UK. Those oligopoly firms such as Tesco, Sainsbury, Asda and Morrison are interdependence. It can be easy to lead to price rigidity among major UK supermarkets which assumes that oligopoly market have cooperation in setting stable price in similar products. In addition, if one firm increases its price while other companies stay constantly, the firm who increase the price will lose market share because consumers do not want to purchase high price if they can also buy in original price in other groceries. This is called kinked demand curve theory. [Revision Guru, 2010]. As can be seen in the following diagram, P equals to price. Q equals to quantity. MC equals to marginal cost and MR is for marginal revenue. Demand curve is more elastic for a price rise than for a price fall. MC1 then a rise in costs to MC2 would result in stable price.
Kinked demand curve theory [Revision Guru, 2010]
Furthermore, it is reported by 123helpme.com (2009) that an action of one firm contributes to the change of other competitors. For example, rivals will be compelled to prevent to loss market share if a retailer lower its price. In UK supermarket chain, apart from Sainsbury which focus on produce quality and outstanding value to meet consumers’ need, other three retailers include Asda, Tesco and Morrisons are mostly low-priced based. To be more specific, Asda offers the cheapest price of the three companies [Thinking Made Essay, 2009]. Consequently, an ardent competition happens as a result of lowering price of those three rivals. Consumers are in favour of choosing the cheapest one to buy because they can save money. However, when competitors stay their products in high price, customers should have a positive aspect in charging more money.
Both branded and qualitative products can satisfy consumers’ needs but should be paid in higher price than unbranded products. Owing to the effectiveness of the advertising and marketing which made by large firms, customers are willing to pay more money to buy branded products to satisfy their psychological needs. The Leading firms in the UK supermarket tend to produce branded products to attract more attentions from consumers and then increase sales. Morrisons, for instance, has eight different categories for food selling which consist of ‘The Best’ a premium range; ‘Eat Smart’, a healthy range; ‘Bettabuy’, economy products; ‘Organic’ and the free-range ‘Free From’ collection [Whitwell, 2006]. These strategies are also barriers to those companies which want to come into the market. As a result, more consumers make their first choice to the branded products. If the companies want to obtain more market share among those competitors, they must also produce products which are in good quality. Therefore, the fixed and variable cost cause the mark-up of the qualitative and branded products higher than other plain products. Even though consumers spend more money to buy these products, they also obtained the quality guarantee of the production [Tutor 2u, 2010]
Other price competition such as discount by these UK groceries results in more money cost by consumers. In oligopolistic market, because major firms want to maximise their profit, they would get together and make a same agreement on product quantity or price which means collusion [S-cool.co.uk (2010)]. According to Oligopoly Watch (2003), Asda, Tesco and Morrisons built their reputations as discount chains to gain market share quickly, this lead to the decline of Sainsbury which has been the biggest retailers since 1995. However, those three large supermarket chains hope their discount can stimulate their consumers spend more money on other profitable products. This price strategy leads to the revenue of the chain increase sharply. The whole things cost costumers much more money than they spend as usual because of the discount on cheap products.
Though the price strategies help a lot on increasing consumers’ expenditure and reputation, non- price competitions which concentrate on other strategies for rising market occupancy are also an essential part of attracting more purchasers. Consumers have power to change the shopping place if they do not think the service and quality of the original retailers satisfy them [Biz/ed, 2005]. Non-price competitions comprise numerous strategies such as mass media advertising and marketing, home delivery systems, innovative use of technology and internet shopping for consumers [Tutor 2u, 2010]. According to Thinking Made Essay (2009), the proportion that make consumers switch to other brands are correspondingly low. The leading UK supermarkets use non-price competitions to hope customers finish shopping and continue to purchase in the next time. Therefore, each of them focus on good service to shopping people because consumers may alter their choice to other grocery if they consider the one they buy usually do not content them.
In summary, Tesco, Sainsbury, Asda and Morrison use different price strategies such as price stability and discount and non-price competition such as service. Consumers in the UK retailer chain have both positive and negative aspects. Owing to the interdependence of oligopoly, Tesco, Sainsbury, Asda and Morrison use price rigidity to control the market. Consumers have benefits for low-price strategy. Furthermore, the retailers use loss leader strategy; concentrate on good value but high price to consumers who may spend more money on those qualitative products. What’s more, customers can choose the best service supermarket because every groceries use non-price strategies to attract consumers’ attention. Nevertheless, price competition such as discount may cost more money in other profitable things.
References Section: Biz/ed.co.uk (2005) “Supermarkets and Oligopolies”
http://www.bized.co.uk/dataserv/chron/news/2449.htm
Climate Change Crop (2006)
“UK supermarkets – Waking up to sustainability marketing”
http://www.climatechangecorp.com/content.asp?ContentID=4503
Oligopoly Watch (2003) “British grocery oligopoly”
http://www.oligopolywatch.com/2003/10/13.html
Revision Guru.co.uk (2010) “Oligopoly”
http://www.revisionguru.co.uk/economics/oligopoly.htm
S-cool.co.uk (2010) “Other features of oligopoly”
http://www.s-cool.co.uk/alevel/economics/market-structure-2/the-kinked-demand-curve-model.html
Thinking Made Essay, 2009 “Strategic Analysis of Morrison, Asda and Tesco”
http://ivythesis.typepad.com/term_paper_topics/2009/07/strategic-analysis-of-morrison-asda-and-tesco.html
Tutor 2u.net (2009) “Oligopoly”
http://tutor2u.net/economics/content/topics/monopoly/oligopoly_notes.htm
Whitwell Stuart, 2006 “Stretch potential: the supermarket brands”
http://www.intangiblebusiness.com/Brand-services/Marketing-services/News/Stretch-potential-the-supermarket-brands~390.html
123helpme.com (2009) “First 1500 characters of UK supermarkets – Oligopolistic competition”
http://www.123helpme.com/preview.asp?id=97935]

The Advanced Manufacturing Technology Strategy Economics Essay

Academic institutions need to exhibit the appropriate flexibility to meet the demands of industry. This descriptive study seeks to identify the problems both in the private sector and in the education sector with regards to engineer training and to utilise the strengths of both to provide a solution. The study highlights the current growth of the manufacturing sector and the continuing skills gap. It identifies the problems faced by the manufacturing industry and also changes that can be made to the further education training curriculum. Investigations of the impacts of the engineering training and the factors affecting training and that inhibit or facilitate the engineering training were done. Based on experience and many discussions with the private and education sector with regards to the particular problems currently being faced by those wanting to use advanced manufacturing technology it is hoped this document will generate a lively debate between the private and public sector. This paper fulfils an identified training need and offers a practical solution to overcome a national skills shortage.
Introduction
Manufacturing is important to South Africa. It contributes over 15% of the national gross domestic product (GDP),[1], over half of all exports and is the second largest employer. As important as it is, there are signs that the manufacturing sector is in decline, as evidenced by:
• A declining value-add from the sector (5.2% in 2007 compared with 2.6% in 2008)
• A declining rate of change in manufacturing export growth
• A dramatic decline in gross domestic fixed investment in the sector between 1991-1996 and 1996-2005
• A low labour intensity
• A decline in employment across the sector
The South African Government, in recognizing the importance of manufacturing in the economy, recently developed two strategies: the National Research and Development Strategy (NRDS),[2] and the Integrated Manufacturing Strategy (IMS),[3]. The former, released by the Department of Science and Technology (DST),[4], aims at ensuring that technology resources are better developed, focused and utilized. The latter, by the Department of Trade and Industry, recognizes that South Africa’s future competitiveness will depend on the capacity of the manufacturing sector to master advanced technology domains, to innovate and to meet the precise needs of customers.
The IMS recognizes the need to move from raw material-intensive manufactured goods towards increasingly knowledge-intensive goods and services. The NRDS regards Technology and Innovation Missions as central elements for accelerating economic growth, the creation of wealth on a sustainable basis, and the improvement of quality of life of South Africans.
South Africa’s traditional industries have been resource based, particularly in minerals. Today most minerals are exported in primary metal forms, the main exception to this being fabricated steel structures. This prevents South Africa from reaping the full benefit of its very rich resource base. Manufacturing can add value to these exports by converting ores to primary metals and primary metals to higher value-added manufactured products. Manufacturing will also complement the service sector. High-value manufacturing will generate demand for the provision of technology-intensive services. On the other hand, failure to upgrade resource-based industries will make South Africa vulnerable to the global trend of deteriorating terms of trade for commodity producers, which has been evident over the last few decades. Thus manufacturing can be seen as an important catalyst for the upgrading of the entire economy.
The goals and objectives of the National Advanced Manufacturing Technology Strategy are to:
• Develop a vision of the technological profile of the industrial sector in the year 2014
• Identify priority sectors which have the greatest potential for supporting relevant goals contained in the IMS and the NRDS. These goals include national and social goals such as job creation and equity
• Stimulate technological upgrading in industry
• Facilitate the flow of technological resources to industry through new knowledge networks to foster innovation
• Facilitate the building of an environment conducive to innovation, particularly through the supply of skilled manpower, technology infrastructure and funds.
The strategy was developed through extensive consultation within the private, public and education sectors, and care was taken to ensure strategic fit with other national strategies and the avoidance of unnecessary duplication. The approach (see Figure 1) ensured:
• Wide consultation with industry, local and international science councils, Tertiary
Education Institutions (TEIs), labour and government; and
• Learning from international best practices and processes – successes and failures.
The need for human resource development is critical in each of the three key requirements
for developing the manufacturing sector. This is demonstrated in Figure 1.
The available evidence indicates that there is indeed a significant demand for people with skills,[5], which is not matched by their availability. Factors such as economic growth, sectoral levels of labour intensity, projections of net migration, sectoral age profiles, the business cycle, government expenditure decisions, projections of HIV/AIDS morbidity rates, industrial policy and foreign direct investment, all affect this supply and demand dynamic,[6]. Without an understanding of the dynamics of the skills environment, it is not possible to plan appropriately. The consequences of skills imbalances are undoubtedly negative. This needs to be corrected through a focus on industry-driven and academic institution supported human resource development.
A well developed Further Education and Trainining (FET) sector in South Africa will no doubt make a considerable contribution to the envisioned economic growth of the country,[7]. The reason for this is that this sector is situated at the intersection of a wide range of government policies, which are critical to the new information-based economy [7]. These include macro-economic, industrial, labour market and human resource development policies. Government coordination across these domains is key to their success and to the establishment of a policy framework which will promote the development of the human capacities, knowledge and skills of our people.
Moreover, as we approach the 21st century, FET is fast becoming an important strategic force, in a context where a country’s ability to compete effectively in the global economy increasingly depends on the knowledge and skills of its people, [8]. The pace of scientific and technological advancement, and the challenges and opportunities of the information age, mean that high quality education and training, and lifelong learning, are essential if South Africa is to keep abreast of changes in the nature of knowledge and in methods of production.
Skills education training authority (SETA) research have identified middle level skills needs in their sectors and put in place strategies to address them, particularly through the use of the public FET colleges and universities of technology working in partnership with employers providing workplace-based training.
LITERATURE REVIEW
A definition of Further Education and Technology (FET)
The public FET college system is central to the government’s programme of skilling and re-skilling the youth and adults. Its transformation is key to the integration of education and training and responding to the skills needs in our country. In recent years, FET colleges have been striving to make the transition from their former status as technical colleges to being responsive and vibrant post-school institutions for vocational education.
FET consists of all learning and training programmes from National qualifications framework (NQF) Levels 2 to 4, or the equivalent of Grades 10 to 12 in the school system. It is the band within the NQF which follows directly on General education and training (GET) and precedes higher education (HE). Learners enter FET after the completion of the compulsory phase of education at Grade 9 or Level 1 of the NQF. 3.2 FET is not compulsory education,[9]. By definition, it has no age limit. Its goal is to promote lifelong learning and education on-the-job. FET is provided directly or through distance education by public schools, public colleges, independent colleges and on-the-job trainers. This research only focussed on public college FET.
The mission of FET is to foster intermediate to high level skills, lay the foundation for HE, facilitate the
transition from school to work, develop well-educated, autonomous citizens and provide opportunities for
lifelong learning through the articulation of learning programmes.
State of the industry – forecasts
In the Industrial Development Report for 2011 of the United Nations Industrial Development Organisation (UNIDO), the competitiveness of 87 countries was determined using an index called the Competitive Industrial Performance Index or CIPI. South Africa’s rating in 2009, somewhat below Brazil and India(CIPI ratings of 0.202 to 0.206) BRICS counterpart,[10]. An increasing competitiveness is the reason that justifies technological upgrading; the principal element of the Technological Vision for South Africa must be the achievement of a substantial upgrading of the CIPI index by 2014,[11]. The most appropriate indicator for this strategy is technology intensity, defined as technology spending per capita. The latter includes domestic Research and Development R

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