Competition in the Australian Market for Groceries.

Competition in the Australian Market for Groceries.

 

Question: The retail grocery sector in Australia came under a lot of criticism in the past
couple of years because ofthe rising prices of goods. One issue in the debate was the role of competition in the sector. The Australian Competition and Consumer

Commission estimated that Coles and Woolworths accounted for about 70% of packaged grocery sales and 50% of fresh food product sales in Australia. This assignment asks you to apply microeconomic principles to
analyse the market for groceries in Australia.

1. Is the retail grocery market in Australia a perfectly competitive one?

Outline the major reasons why it might not be perfectly competitive.

What are the likely implications ofthis for consumers?

2. Explain the concept of ‘workable competition’. Why might it be relevant
in this market? What indicators could be used to assess whether workable competition exists in the retail grocery market? Justify your answer.
3. The major retail grocery chains are vertically integrated. Explain the meaning ofthis term and the implications
for any competitors in the industry. Suggest a strategy for successful entry of a new competitor.
Draw up a payoff matrix to illustrate your strategy.
Some references to get you started

ACCC (2008) Report ofthe ACCC inquiry into the competitiveness

of retail prices for standard groceries, available on the web at www.accc.gov.au
Australian Economic Review Policy Forum: Competition

Issues in the

Australian Grocery Industry, Vol. 37 No. 3 Sept 2004.

Food System Research Group (2009). Structural Changes in Food
Retailing
http:llwww.aae.wisc.edulfsrglpublicationslMonographsl!food_retailing2009.pdf