Economics of Cannibalization Research Industrial

Question: Discuss about the Economics of Cannibalization Research Industrial. Answer: Introduction This study has highlighted the concept of market power of Woolworths and Coles in the market of Australia. In this connection, it can be stated that Coles and Woolworths are the two largest supermarket chains of Australia. In Economics, market power is the capacity of a firm to increase the market price of the products. As per the statement of Carf and Perrone (2013), it can be mentioned that the market participants have the market power and they are treated as the price makers. This study has highlighted the market power of Coles and Woolworths. Therefore, this study is helpful to increase the balance between the seller power as well as the buyer power. The policies of Australian government would be benefitted to provide incentives to the local farmers and suppliers in case of the competitive market structure. On the other hand, this study is also very important to understand the competition between Woolworths and Coles in the market of Australia. This competition reflects to understand which organisation is good for the Australians. This is also helpful to identify the effect of the performance of the organisation in the future. Market power of Coles and Woolworths As per the statement of Choudhary and Zhang (2016), it can be mentioned that Australian super markets have been increasing in the growth of the agricultural sector. The growth in the market share of Coles and Woolsworth have highlighted a challenging environment for the other Australian suppliers and producers. Therefore, it can be mentioned that economic health of Australia is decided by the power of Woolworths and Coles. They are performing in the market structure like duopoly. These twp major organisations eliminated the other competitors from the market. This would in turn create the market power diversities. The major challenge can be discussed as the appropriate level of protection exists to consider the activities of the small and the medium sized agribusinrss. This would in turn promote a strong competition within the agricultural market of Australia. In the points of Kitamura and Shinkai (2013), it can be mentioned that Australias largest trading union, Shop Distributive and Allied Employees Association (SDA) has identified that duopoly market structure would be improved by increasing their shares within the market place and also with the hekp of the activities of SDA. The food market in Australia: In the words of Kitamura and Shinkai (2013), the supermarket industry of Australia is controlled by a group of retailers such as Woolworths and Coles. Both of the organsations have been experiencing a strong growth since four decades. In this context, it can be stated that Woolworths and Coles controlled approximately 70 percent of Australias super market. In addition, these two retailing organisations can determine the prices and can affect the entry barriers. Therefore, ut can be assumed that this would in turn make a reflection on the remaining food chain of the country. Most of the local farmers are found in the vulnerable position and this decision is made by Coles and Woolworths. According to Kitamura and Shinkai (2014), it can be mentioned that Coles has occupied approximately 33.5% market share and Woolworths has occupied 39.6% in the market of Australia. Market power can influence the terms of trade of the country. As the retailers can improve the overall market share, they can consolidate the position within the food supply chain of Australia. This would in turn increase the production and the distribution. Kopel, Ressi and Lambertini (2016) identified that the performance of Coles and Woolsworth have been increasing day by day. As a result, it can be mentioned that the economic wealth of Australia has increased. In addition, it can be added that the number of employment has also increased due to the increase in the productivity of these two companie. In this purpose, Matsumura and Ogawa (2012) mentioned that near about 300000 Australians got the opportunities to be employed. On the other hand, the performance of Woolworths and Coles have reflected the performance of the other smaller retailers performance. Moreover, both these organisations can meet the customer preferences in the reduction of prices. In this connection, it can be mentioned that the consumers could receive the products from the organisations at comparatively lower cost. According to Matsumura and Tomaru (2015), it can be stated that Woolworths and Coles have reduced the price of their products by 11 percent and 6 percent respectively. Therefore, it can be mentioned that discounting strategies can improve the range of the food options as it is available to the consumers comparatively at lower prices. Therefore, in a synopsis, it can be inferred that both Coles and Woolworths have enhanced their market share not only by providing better service or by reduction of cost of the products but also these organisations have capacity to increase the cost structure of the competitors. This situation is also boost up by the members of SDA (Woolworths Online. 2016). On the contrary, Ohori (2014) argued that the market power of Coles and Woolworths affect the domestic suppliers of the country. In this context, the shrinking market share of Australians of the independent producers leaves the major suppliers along with the little choices, however, it would be negotiated with the duopoly market of Australia. Therefore, it can be inferred that this market environment can assures that the performance of these organisations can influence the pricenegotiation as well as the standardisation demands. It can be mentioned that Woolworths and Coles have been belonging from the duopoly market structure (Sakai 2016). This would adversely affect the anticompetitive behaviour by these two super market giants. Therefore, the smaller retailers are negatively influenced. Competition between Coles and Woolworths Competition between the retailers: It is known that Woolworths and Coles are identified as the huge and diversified organisations. Woolworths has the specialisation in the production of the retail business of hardware, electronics, groceries, liquor and hospitality. Moreover, it can be mentioned that the organisation is also specialised in the business of coal mining, industrial safety, chemical and the fertiliser operations. The grocery operations of Woolworths and Coles have increased the valuation of the business. This would be led by the price wars among the competitors. This would be helpful to understand the pricing structure of the competitors. In this respect, Tanaka and Satoh (2016) opined that if one competitor would plan to reduce the price of the products, then the other competitor also planned to reduce the price. Therefore, it can be stated that the consumers would be benefitted and they could enjoy the advantage of lower prices. The diversification between the performance of these two organisations into the Australian retailing sectors assures that they are shielded compared to the other independent grocers. This would prevent the smoother performance of the organisations in the Australias grocery sector. After making the price wars, Tanaka (2016) criticised that both the organisations would be able to increase the grocery prices to maintain the shortcomings in the other sectors. In addition, it can be mentioned that the business of Coles ans Woolworths have been performing across both in the metropolitan and the regional sectors of the country. The exploration of this duopoly business drive the other smaller businesses and other retailers of the country. This situation is mainly observed in the rural areas. Therefore, it can be stated that these retailers would not be able to compete with the major supermarkets. As a result, absence of the market competition reduces the performance of these smaller organisations. Wang and Ma (2013) opined that the employment and the income of the smaller organisations would be hampered. In the comparison with the performance of Woolworths and Coles, it can be mentioned that Woolworths had entered into the business of petrol and the convenience store in the year of 1996 and Coles had started th same business in the next year. This proves that there is a strong competition between these two retailing organisations. After that, in the year of 2007, bot the organisations have started their business in the hardware business. In this year, Coles has started bunning chain whereas Woolworths has started its business in hardware brand along with the home timber and haedware chain (Wang and Zeng 2014). The restricted number of the retailers has enhanced the dependency between the producers in the supermarkets in order to make a communication between the consumers. This will deprive the farmers and the other retailers and will have the power to negotiate their organisationa terms. In order to identify the comparison between the performance of Woolworths and Coles, it can be mentioned that Woolworth has expanded its business in the manufacturing of home appliances business across Australia. On the other hand, the rival of Woolworth, Coles has experienced $40 billion home improvement market. On the other hand, it can be noticed that in the year of 2011, Woolworths has launched its own brand, Masters along with the partnership with America, the organisation has earned $3 billion. In this respect, ABC news has identified that Masters has made several mistakes. Therefore, the profitability has decreased compared to Coles. According to Matsumura and Ogawa (2012), Woolworth has made poor business strategy. In this connection, it can be stated that as Coles has made a partnership with Bunnings in their business performance, Woolwoths was distracted from the supermarket in case of the home improvements. Woolworths has been chosen wrong location for expansion of the business, while Bunning has chosen the appropriate position. In the other hand, Kopel, Ressi and Lambertini (2016) mentioned that Woolworths has expanded its business in America, which was out of season. Moreover, it can be stated that the workplace of Woolworth has rigid working environment compared to Bunnings. As a result, it can be mentioned that Woolwoths has scored only 5.7 out of 10, whereas Coles is at higher position than Woolworths. Coles has scored 7.1 out of 10. This clearly signifies that the consumers are highly satisfied with the service of Coles compared to Woolworths. This score has measured by the estimation of USB. Moreover, Choudhary and Zhang (2016) opined that the working environment of Coles is better compared to Woolworths, which is identified by the employees of both the organisations. In thos connection, it can be identified that Coles is at 0.7 percent better position compared to Woolworths. The morale of Woolworths is comparatively lower than Coles. On the contrary, in the year of 2008 and 2009, Woolworths had continued to improve its performance, but Coles tried to manage the gap and started to improve the service and organisational performance. Apart from this, it can be mentioned that in case of the loquor business, Coles has been started to get the real traction in the liquor business compared to Woolworths. Therefore, it can be mentioned that Coles make a good performance in the food and liquor business for a long time. On the contrary, Kitamura and Shinkai (2014) argued that Coles sales performance is not so appreciable in groceries and alcohol business compared to the Woolworths. However, the other businesses of Wesfarmers such as the performance of Bunnings and Kmart compared to Coles, are comparatively better. In addition, it can be stated that Goyder has identified that Kmart has met its organisational target along with the sales growth, whereas Coles is at back position (Woolworths Online. 2016). Conclusion This study has highlighted the organisational performance of Coles and Woolworths within the Australian supermarket. After analysing the study, it can be noticed that these two organisations have occupied a larger share in the market. In this connection, this study has highlighted the organisational performance of Coles and Woolworths. Moreover, the performance of these two organisations how affect the smaller retailers of the market fas also mentioned. The pricing structure of the Australian market has also described. On the other hand, this study has demonstrated the competition between these two organisations. In this respect, it can be observed that Coless performance is better compared to Woolworths. References Carf, D. and Perrone, E., 2013. Asymmetric Cournot duopoly: A game complete analysis.Journal of Reviews on Global Economics,2, p.194. Choudhary, V. and Zhang, R., 2016. The Economics of Pricing Add-on Products under Duopoly Competition. Kitamura, R. and Shinkai, T., 2013, September. lThe Economics of Cannibalization: A Duopoly in which Firms Supply Two Vertically Differentiated Products, mpresented paper in the EARIE 2013. InAnnual Conference of European Association for Research Industrial Economics, Evora, Portugal August(Vol. 30, pp. 1-22). Kitamura, R. and Shinkai, T., 2013.The economics of cannibalization: A duopoly in which firms supply two vertically differentiated products(No. 100). 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