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Compare the market structures of Perfect Competition, Monopoly, Monopolistic Competition and Oligopoly under the following headings (About 150 words).
i. number of firms in the market
ii. similarity of the products sold
iii. barriers to entry
Coles is an Australian company providing supermarket, retail and consumer services through its chain of outlets operating throughout Australia. Its main competitors are Woolworths and Aldi. There also the many small vegetable and grocery stores but Coles, Woolworths and Aldi are believed to dominate the Australian market. Coles has over 100,000 employees across Australia.
Identify the market structure Coles operates in.
State your reason why.
Coles and its main competitors sell very similar products through their supermarket outlets. These include milk, ice cream, fruits, vegetables, nuts, eggs, frozen meat and a wide range of other products used and consumed by households. Their profit margin on products is very thin as prices are reduced to a minimum.
Discuss how Coles would consider demand for its eggs in terms of elasticity – perfectly elastic; elastic; inelastic or perfectly inelastic? Draw its demand curve to illustrate this. Explain your choice.
The following extract from the New Daily is about Coles. Read it and answer the questions that follow. (https://thenewdaily.com.au/money/finance-news/2018/03/07/coles-down-down-slogan/)
“Coles shifts away from ‘annoying’ price-focused Down Down with new wholesome slogan
Mar 7, 2018
Coles appears to be finally ditching its much-derided ‘Down Down’ ad campaign in favour of a radically different marketing strategy that emphasises not rock-bottom prices but high quality, locally-sourced produce.
The new TV ads rest on the slogan ‘Good things are happening at Coles’ and cultivate an image of wholesomeness, similar to the image conjured up by rival Woolworths’ slogan ‘the fresh food people’.
The ads … feature celebrity chef Curtis Stone, Aussie farmers, an 85-year-old checkout operator, and kids eating fresh fruit.
The decision follows months of criticism from consumers, marketing experts and financial analysts (that) …. concluded the supermarket chain had “lost its way” – largely thanks to its obsession with price.
Some examples of the ‘good things’ to feature in upcoming Coles ads include its donations to charities such as Redkite and Secondbite, the phasing out of single-use plastic bags … and the Coles Nurture Fund which helps Australian farmers.
One of the ads also emphasises that 96 per cent of Coles’ fruit and vegetables are grown in Australia.
“Price is very black and white,” says retail expert Dr Gary Mortimer of Queensland University of Technology.
“By using storytelling and a celebrity endorser, an 80-year-old checkout operator and farmers – real people – customers will start to associate these positive feelings with the Coles brand.
“Down Down worked really well when it launched but it’s got to a point now where they can’t keep cutting prices.
“Price is also no longer a point of difference. The two big supermarkets have the same layouts, the same products, mostly the same brands and often the same prices too.” ….
A Coles spokeswoman said … “We know our customers care about price, but they also care about where their food comes from, they care about their community and they care about the environment.”
End of extract from the New Daily
What is the term used to describe the new strategy that Coles is adopting to increase market share?
Describe how it works.
From the same reading above, identify any two (2) methods used by Coles to compete without reducing price.
Coles sells a considerable amount of vegetables every month to households. Assume that its source of vegetables is mainly from the local farms and that over the last few months these farms have been experiencing unusually dry weather.
Use the Demand Supply model to illustrate the likely effect on the price of vegetables as a result of the weather, ceteris paribus (a diagram is expected here).
Briefly discuss any two differences in the market structure that Coles belongs to with the market structure Monopolistic Competition.
State which market structure that you think each of the following businesses best belongs to. Explain your choice.
i. the only cobbler in a country town
ii. McDonalds Restaurant in your city
iii. Metro Trains in Melbourne and Sydney Trains
iv. National Australia Bank
v. Academies Australasia Polytechnic
vi. A small stall in one of Melbourne/Sydney’s Sunday markets that sells souvenirs such as wallets, caps, tee-shirts, key chains
vii. A car workshop or hair salon in your city
viii. Iphone and Samsung in the mobile phone industry
Resources for this assignment are:
Chapters 7 – 9 from the the prescribed text book A, Robinson. T, and Tucker I. (2015) Economics for Today. Copies of these chapters are on LMS.
Videos resources for assignment on LMS.
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