Supermarket Industry in the Uk
BE2128.
Assignment 1
2009-2010
Date of hand-in. Wednesday 25th November 11.00am 2009
Word count 1500 words – this is a strict maximum limit.
Examine the supermarket industry in the UK. Explain the structure conduct and performance of this industry.
In particular how do you consider the structure of the industry explains the conduct and performance of individual companies? Give evidence for this from the company accounts showing familiarity with profit and other ratios, expansion of the companies etc.
The supermarket industry in the UK is one estimated to be worth “ÂŁ110bn”. The amount of revenue that can be generated in the market has allowed for supermarkets to grow substantially over time which has in turn caused an oligopolistic structure. I will examine the relationship between the structure conduct and performance of companies in the industry and how they shape the three variables.
Firstly by taking a look at the market structure we can immediately see that tesco has the dominant market share with 31%. We can also see that there is a five firm concentration ratio of 76%.
The structure of this industry makes it difficult for new firms to gain a foothold in the market. the large economies of scale the supermarkets gain from buying in huge quantities makes it almost impossible for new entrants to compete on price.
There have been accusations that the leading supermarkets squeeze profit margins and demand such low prices that farmers can only provide goods at a loss. The telegraph reported the case of a farmer mr sherrell who said within a decade, his farm went from receiving 25 pence per litre to 16 pence.
On average,