There are four major types of competitive market structure, these include: Perfect competition, Monopolistic competition, Oligopoly and Monopoly. The competitive market structure an organisation belongs to is determined by the nature of their product, the number and size of other firms in the market and the entry and exit conditions of that market. The two organisations I will be comparing and contrasting are Tesco and Sainsbury’s which I believe belong to the Oligopoly market structure. The market structure an organisation belongs to is very important because it can determine the firm’s behaviour and performance.
Furthermore, Tesco and Sainsbury’s are both top competitors in their industry which mainly concerns grocery shopping, however, …show more content…
The main supermarket chains involved in this price war included Tesco, Sainsbury’s and Asda due to a fall in oil prices. Tesco were the first organisation to announce that they were “cutting the cost of petrol and diesel by 2p per litre at all of its 500 petrol stations” (Reference 2). Following Tesco’s announcement, Sainsbury’s and Asda also made similar announcements stating they would also reduce prices. In this case, Tesco is demonstrating price leadership by cutting their prices first, Sainsbury’s and Asda then follow because they want to maintain their market share. This example of price leadership demonstrates that Tesco and Sainsbury’s belong to the same competitive market structure (oligopoly).
Price theory involves exploring elements of supply and demand to establish a competitive price point for a product/service. Demand is the quantity of a good/service an individual is willing and able to buy at a given time, an increase in price will decrease demand (and vice versa). On the other hand, supply is the quantity of a good/service that a seller is willing and able to sell for at a given time. Therefore, companies aim to achieve equilibrium where demand in a market is equal to supply in a
Furthermore, Tesco and Sainsbury’s are both top competitors in their industry which mainly concerns grocery shopping, however, …show more content…
The main supermarket chains involved in this price war included Tesco, Sainsbury’s and Asda due to a fall in oil prices. Tesco were the first organisation to announce that they were “cutting the cost of petrol and diesel by 2p per litre at all of its 500 petrol stations” (Reference 2). Following Tesco’s announcement, Sainsbury’s and Asda also made similar announcements stating they would also reduce prices. In this case, Tesco is demonstrating price leadership by cutting their prices first, Sainsbury’s and Asda then follow because they want to maintain their market share. This example of price leadership demonstrates that Tesco and Sainsbury’s belong to the same competitive market structure (oligopoly).
Price theory involves exploring elements of supply and demand to establish a competitive price point for a product/service. Demand is the quantity of a good/service an individual is willing and able to buy at a given time, an increase in price will decrease demand (and vice versa). On the other hand, supply is the quantity of a good/service that a seller is willing and able to sell for at a given time. Therefore, companies aim to achieve equilibrium where demand in a market is equal to supply in a