Advantages and Disadvantages of a Duopolistic market structure

Only available on StudyMode
  • Download(s) : 11894
  • Published : November 9, 2013
Open Document
Text Preview

Advantages and Diadvantages of a duoppolistic Market structure jaiveer Khurana
GBBA10028
09/10/2013
Advantages and Disadvantages of a Duopolistic Market structure

A duopolistic market structure is a form of oligopoly in which two main companies dominate most of the market share of a particular product or a service. The impact on the market is quite similar to that of a monopoly.

In a duopolistic market structure the companies that have a duopoly reap the full benefits of controlling the price and output in the market. But this makes it very difficult other companies to enter the market or survive in the long run

In Australia the best example of a duopoly is perhaps Woolworths and Coles. Lets take the case of the Woolworths and Coles Duopoly to explain the advantages and disadvantages of a duopolistic market structure that exists in the Australian Market

Advantages of a Duopoly from a company viewpoint

Price Power- Woolworths and Coles collectively control about 80% of the country’s grocery market and they exploit their market share to the fullest. The supermarket power what these two retailers have achieved is mainly because of their ability to have a control on the pricing of the products they sell. Any consumer’s main concern is to get the best quality and maximum amount of quantity in the money that they spend on groceries. The home brand product that these supermarkets offer considerably cost less than the other brands, which they offer of the similar products. . Supplying the home band products that Coles and Woolies have been offering has been beneficial to the both in many ways. A lot of suppliers have been forced to cut down on their prices so as to match the price range of the home brand products. Most of the substitutes of the products from companies like Coca-cola, Heinz, Kwality walls, Nestle can be easily found. The products of these kinds of suppliers are easily discriminated if these suppliers do not cut down their prices. . For example The milk Woolworth sells is for $1 a liter, which is a very affordable price for the consumers. Besides offering good discounts on groceries they also offer a discount on petrol and liquor. If any one buys groceries for AUD 200 they obtain discounts of 45 c a liter and 30 dollars 16 c a litre. . This has been quite helpful for them in retaining customer loyalty as well. Competition Control- This duopoly by Coles and Woolworths has kept the competition from other retailers at bay. Even though it’s a free market where any one can participate, but competing against the two supermarket giants of the country thwarts the survival of other retailers. The Australian competition and consumer case have tried hard to break this duopoly in this sector but the have had very limited success to do so. As they have captured at least 80% share in the market, the remaining 20%, which includes international retailers, like Aldi, Spar and some small local retailers like Foodwroks find it very hard to compete in the environment set by the duopoly.

Disadvantages of a duopoly from a company point of view

Criticism from The Australian Competition and Consumer Commission (ACCC)- The strong monopoly by both Woolworths and Coles has made it very difficult for other firms to enter and survive the market. Their duopoly has eliminated the ways of being a free market trade where all the suppliers can freely operate in a perfectly competitive market. The ACCC has taken strict measures to control their expansion and make it a fair trade for everyone equally. The ACCC’s main agenda is to ensure that the competition is fair; they do not support any individual suppliers. There have been allegations against Woolworths and Coles that they do not treat their suppliers properly. The suppliers are forced to accept the price set by Woolworths and Coles otherwise the sale of their products comes in jeopardy. Also Woolies and Coles give petrol shopper dockets for the amount of...
tracking img