Analysis of Sporstwear
Case I. COMPETITION HITS SPORTSWEAR GROUP’S PROFIT
1. Explain why the sportswear industry in JJB operates may be considered an example of monopolistic competition.
Textile Intelligence Reports in 2007 indicate that the UK sportswear market was estimated to have a value of £3.65 bn (US$6.72 bn) in 2006. The reason behind is that, purchase levels are high. Sportswear items are purchased by almost 90% of people under 35 years of age, and by 76% of the population as a whole according to the research.
UK sportswear industry can be considered a monopolistic competition in the sense that there are only about four leading sportswear retailers in the United Kingdom: JJB Sports, Blacks Leisure. John David Group and Sports World.
The dominant player in the market is JJB sportswear given the number of outlets and stores it operates 450 stores, the closest is JDB by around 300 stores. Given the wide gap, JJB at some point has control of the control of the entire market sales and distribution and posed a barrier of entry.
[pic] Illustration from: http://www.bized.co.uk/current/leisure/2004_5/111004_map.htm
Given the above, characteristic of a monopolistic competition exist in this industry. The characteristic of monopolistic market is further expanded on Question 2.
In this case of UK sportswear market structure is a pure monopoly. There are quite a number of sellers in the industry and therefore many close product substitutes in existence but nevertheless firms like JJB retain some market power.
2. How does the monopolistic market structure exemplified in the article differ from perfect competition?
Below are two comparable sets that differentiate monopolistic market from perfect competition:
|Perfect competition |Monopolistic competition |
|Many sellers – |Single seller -
1. Explain why the sportswear industry in JJB operates may be considered an example of monopolistic competition.
Textile Intelligence Reports in 2007 indicate that the UK sportswear market was estimated to have a value of £3.65 bn (US$6.72 bn) in 2006. The reason behind is that, purchase levels are high. Sportswear items are purchased by almost 90% of people under 35 years of age, and by 76% of the population as a whole according to the research.
UK sportswear industry can be considered a monopolistic competition in the sense that there are only about four leading sportswear retailers in the United Kingdom: JJB Sports, Blacks Leisure. John David Group and Sports World.
The dominant player in the market is JJB sportswear given the number of outlets and stores it operates 450 stores, the closest is JDB by around 300 stores. Given the wide gap, JJB at some point has control of the control of the entire market sales and distribution and posed a barrier of entry.
[pic] Illustration from: http://www.bized.co.uk/current/leisure/2004_5/111004_map.htm
Given the above, characteristic of a monopolistic competition exist in this industry. The characteristic of monopolistic market is further expanded on Question 2.
In this case of UK sportswear market structure is a pure monopoly. There are quite a number of sellers in the industry and therefore many close product substitutes in existence but nevertheless firms like JJB retain some market power.
2. How does the monopolistic market structure exemplified in the article differ from perfect competition?
Below are two comparable sets that differentiate monopolistic market from perfect competition:
|Perfect competition |Monopolistic competition |
|Many sellers – |Single seller -
References: McTaggart, Findlay and Parkin (2007), Economics (5th ed.) Pearson Education Australia Publisher Nicholson, Walter (2005) Microeconomic Theory: Basic Principles and Extensions 9th edition, Ceneage Learning India Pvt Ltd Publisher Antony Davies & Thomas Cline (2005). "A Consumer Behavior Approach to Modeling Monopolistic Competition". Journal of Economic Psychology 26: 797–826 [pic]