Market Structure In Context Of Assessment Answer

Answer:

Introduction


The market structure is based on the number of buyers and sellers exchanging goods and service. The market structure can be classified into four types, such as, perfectly competitive; monopoly; oligopoly and monopolistically competitive. In the perfectly competitive market there are numerous sellers and buyers, exchanging identical products. The price is determined where demand and supply equalised automatically through invisible hand. Therefore, the participants of this market are price takers.Since the price and quantity is solely decided by the market itself, this market is said to be most efficient one. However, this kind of efficient market does not exist in the real world and most of the firms are engaged in monopolistic competition. In this market, the producers differentiated their products from each other. They can also set price, however, the control over price is moderate. The another kind of market structure is the oligopoly market structure, where there are few number of sellers who decides price by colluding with each other. This paper will discuss the different market structures in the Australian market. It will discuss about the firms that enjoys the monopoly in this country. It will also talk about businesses and industries that operates in the monopolistically competitive market. The paper will also discuss about the oligopoly market in this nation. [1]

Market Structures in Context of Australia

Monopoly Market

In Australia, the postal service industry is dominated by the Australia Post. This company is operated by the government of Australia and other companies are restricted to enter this market. This company has the largest network over every single corner of this nation. It is the monopoly firm that provides certain mailing services. Apart from this company there are many companies that operates in the same industry like, FedEx; DHL etc. However, in spite of many companies in the same business, Australia Post has successfully maintained its monopoly by charging very low price for its services. With the help of government support the company did not focus on the profit generation. Australia Post can discriminate its price, and charge low price for bulk delivery. The private firms charge very high charges for delivering in the extremely rural region of this country. In contrast, the Australia Post offers this service at minimum possible price. The price may differ due to the distance between the sender and the receiver, but do not vary because of the location where it has to be posted. However, due to decline in the traditional method of communicating through letters, the company has been facing challenges over decades. It has developed its parcel plan that are used in online delivery services. This ensures a growing demand for the parcel and high revenue collected by the firm. The regulation of this organization has restricted other private postal companies to drop their parcels in the Post box of Australia Post[2]. Therefore, the regulation has helped the company to maintain monopoly in some of its services. However, this monopoly firm must focus on attaining more efficiency and pursuing digital marketing strategy. [3]

Oligopoly Market

In Australia the supermarkets operate in the oligopoly market structure. There are few supermarket chain like Woolworths; Cole; Aldi; Costco; IGA; Food Works and SPAR. However, Coles and Woolworths are two giant supermarket chain that occupy 70% -80% market share in this country, therefore, they together form duopoly in the supermarket chain. The rest of the share is captured by IGA; Aldi as a boutique niche and other operators[4]. The Australia is considered as oligopoly community, as many industry operates under oligopoly market structure. The two giant supermarkets are the major players of this industry and practice a certain degree of competition in price setting. However, the price war in the oligopoly set up is not profitable and have detrimental impact on the firm. This is because; the oligopoly firm forms cartel to decide its price and quantity. The cartel might soar the price of the products at retails stores. If one firm cheats, and supply more products then the price might decline. The fall in price will attract more customers to the stores of that company; and it will capture higher market share[5]. The other firm can also cut prices to give tough competition. However, too low price may lead to fall in revenue of both companies. Therefore, instead of engaging in the price war, it is beneficial for the firms of oligopoly market to increase its sales at given price, through promotion and brand differentiation, in order to capture the maximum share of the market.

Monopolistically Competitive Market

There are many industries in Australia that has the characteristics of a monopolistically competitive market. The clothing and apparel industry operates in the monopolistically competitive market. There are many clothing brands in Australia who are engaged in huge competition in this industry. The features of this industry is that, clothing and textile industry produces almost identical products. However, they differentiate in terms of quality of the fabric; design of the clothes etc. Therefore, different clothing brand charges different price for its own product. Due to variation in the types of fabric; better quality; different designs of the apparel, the consumers perceive the products to be different. Some clothing firms hire qualified and reputed designers for designing apparels, this places the company in the niche market charging high price[6]. Therefore, product differentiation enables the companies of the clothing industry to set price by their own, hence, enjoying monopoly power. There is less barrier to enter the market, as it requires huge spending to make fabrics; stitching them or to design apparels. It takes lot of effort to establish brand name. Moreover, some international brands have entered into the clothing industry of Australia, that has increased the competition to the local retailers of cloths and apparels[7].

Conclusion

In Australia, all the market structures are prominent. In the postal and mailing service, Australia Post enjoys monopoly. The supermarket chains operate in the oligopoly industry with two giant supermarkets Woolworths and Coles. The Clothing industry of this nation operates in a monopolistically competitive market. The paper has analysed the features of each industry in context of Australia.

References

ABC News. (2014). Post offices are the lifeblood of rural Australia. [online] Available at: https://www.abc.net.au/news/2014-01-08/elliott-australia-post/5190156 [Accessed 12 Aug. 2016].

ABC News. (2014). Retailers struggle as foreign fashion chains hit Australian market. [online] Available at: https://www.abc.net.au/news/2014-09-10/retailers-struggle-foreign-fashion-chains-reach-australia/5735070 [Accessed 12 Aug. 2016].

Carmody, B. (2015). Australia Post is hurting small businesses with PO Box monopoly, says delivery company Sendle - SmartCompany. [online] SmartCompany. Available at: https://www.smartcompany.com.au/growth/49035-australia-post-hurting-small-businesses-with-po-box-monopoly-says-delivery-company-sendle/ [Accessed 12 Aug. 2016].

Okonkwo, U., 2016. Luxury fashion branding: trends, tactics, techniques. Springer.

The Sydney Morning Herald. (2014). Coles: Reviewing law of supply and demands. [online] Available at: https://www.smh.com.au/comment/smh-editorial/coles-reviewing-law-of-supply-and-demands-20140506-zr5k1.html [Accessed 11 Aug. 2016].

TheAustralian. (2013). We are an oligopoly economy: Robb. [online] Available at: https://www.theaustralian.com.au/business/companies/we-are-an-oligopoly-economy-robb/story-fn91v9q3-1226699531519 [Accessed 12 Aug. 2016].

Williams, J., 2016. Economic insights on market structure and competition.Addiction.

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