Milk and Supermarkets
Introduction
In recent years, the relationship between supermarkets with UK farmers that called oligopsony is a heated topic in the society. Some people hold the view that the advantages of oligopsony overweigh those disadvantages. Nevertheless, others believed that it is one way that UK farmers controlled by the supermarkets. It is natural that people come from different backgrounds will have various attitudes to the same issue. In the report, the advantages and disadvantages of oligopsony for both supermarkets and UK farmers are discussed. In addition, nowadays the supermarkets in the UK in order to increase the profit, they use different types of marketing methods. Such as intense price competition, loyalty schemes and provides non-food products and service. The smaller retailers were influence by those marketing methods also reported as follows.
1.0 Oligopsony
Oligopsony is “similar to an oligopoly (few sellers), this is a market in which there are only a few large buyers for a product or service. This allows the buyers to exert a great deal of control over the sellers and can effectively drive down prices.”(www.investopedia.com
A good example of an oligopsony would be the UK supermarket industry, in which a small number of large buyers (such as Asda, Tesco, and Sainsbury’s) control the UK farm market. Such control allows these supermarkets chains to dictate the price they pay to farmers.
1.1 The effect on supermarkets
According to the BBC news (http://news.bbc.co.uk), Tesco account the UK supermarkets share is 31.6%, Asda took over 17% in the UK supermarkets share, which is ranked second. The third biggest one is Sainsbury’s, which accounted 15.8%. (Appendix 1)
The total percent of big three supermarkets took over more than 50% in all the UK supermarket industry. These supermarkets owned market power in two ways which are selling to consumers (oligopoly power) and buying from producers (oligopsony power).in another words, It means that the few
In recent years, the relationship between supermarkets with UK farmers that called oligopsony is a heated topic in the society. Some people hold the view that the advantages of oligopsony overweigh those disadvantages. Nevertheless, others believed that it is one way that UK farmers controlled by the supermarkets. It is natural that people come from different backgrounds will have various attitudes to the same issue. In the report, the advantages and disadvantages of oligopsony for both supermarkets and UK farmers are discussed. In addition, nowadays the supermarkets in the UK in order to increase the profit, they use different types of marketing methods. Such as intense price competition, loyalty schemes and provides non-food products and service. The smaller retailers were influence by those marketing methods also reported as follows.
1.0 Oligopsony
Oligopsony is “similar to an oligopoly (few sellers), this is a market in which there are only a few large buyers for a product or service. This allows the buyers to exert a great deal of control over the sellers and can effectively drive down prices.”(www.investopedia.com
A good example of an oligopsony would be the UK supermarket industry, in which a small number of large buyers (such as Asda, Tesco, and Sainsbury’s) control the UK farm market. Such control allows these supermarkets chains to dictate the price they pay to farmers.
1.1 The effect on supermarkets
According to the BBC news (http://news.bbc.co.uk), Tesco account the UK supermarkets share is 31.6%, Asda took over 17% in the UK supermarkets share, which is ranked second. The third biggest one is Sainsbury’s, which accounted 15.8%. (Appendix 1)
The total percent of big three supermarkets took over more than 50% in all the UK supermarket industry. These supermarkets owned market power in two ways which are selling to consumers (oligopoly power) and buying from producers (oligopsony power).in another words, It means that the few