Different Market Structure In Australia Essay

Question:

Discuss about the Different Market Structure in Australia.

Answer:

Introduction

The market structure depends on the number of buyers and sellers engaged in transaction. The market structures are of four types namely, perfectly competitive market; monopoly market; monopolistically competitive market and oligopoly market. Perfect competitive market engages huge number of buyers and sellers; and this market is considered to be the most efficient one. In this market, identical products are bought and sold. The price is determined through demand and supply mechanism. Perfectly competitive market hardly exists and in real world it actually takes the form of monopolistically competitive market. In this kind of market, there are large number of firms producing slightly differentiated products. The monopoly market constitutes of single seller, who is the sole determiner of the price of its product (Baldwin and Scott 2013). In the oligopoly there is few sellers who produces close substitutes. In this market structure, the firms often decide price by colluding with each other. In this paper, different kind of market structures in the Australian market will be discussed. It has selected postal service; restaurant and catering business and retails stores of Australia for analysing the monopoly; oligopoly and monopolistically competition in this nation respectively.

Different Market Structure in Australia

Monopoly in Australia

Australia Post dominates the postal service industry in Australia. This is the largest logistic company and monopoly provider of certain mail service (Ibisworld.com.au 2016). Australian Post is run by the government of Australia. There are many companies in the postal service, but Australia Post has been retaining its monopoly power over others by charging a very low price for the mail delivery. It has largest network all over the nation and its service is available at every corner of this country. The Australia Post does not have profit maximizing motive. This postal service firm practices second-degree price discrimination. It charges less price for bulk mail delivery than single mail. Moreover, it charges according to the weight of the parcel; as the weight is less it charge low price and it charges high prices for heavy parcel. This is another characteristic of monopoly firm.

However, currently, it faces competition from DHL, FedEx etc., but it is the still the sole operator in the delivering ordinary mail (CustomerGauge 2013). The cheaper cost strategy of the company. The company put its focus on the customer retention policy and developed IT department with training programs in order to help the staff to understand the customer satisfaction tools. Australia Post have taken measures to improve its parcel operations, as online retail sopping has created huge demand for parcels. Though it is losing because of decline in the letter business, but online parcel delivery demand is helping to grow the business volume of Australia Post (Carbonell 2011). However, since last year, this monopoly mail carrier increases its price. This is mainly because, the Australia Post fall short of its revenue. However, it has been argued that the Australia Post will fail to retain its position of monopoly as it ignores greater efficiency and does not pursue digital mail strategy.

Oligopoly in Australia

In Australia, the biggest oligopoly market is its supermarket. The Woolworths and Cole are two giant retail chain industries. This is also known as duopoly market structure. The other firms are Aldi; IGA; Costco; Food Works and SPAR (Knox 2016). The Coles and Woolworths enjoy the most of the market share of this nation. They are engaged in cartel and adopt similar price and similar quantity. This cartel between them soars the price of the products at grocery stores. However, one can cheat and produce more than decided at a lower cost. This enabled these two companies to increase its market share. Since, both of the giants cheat in the cartel by producing high quantity, the price tends to fall. As a result of this, the other firms lagged behind and could not compete with these two giant companies, in terms of quantity and price as well. The buying power to bear down the suppliers has kept the prices of this retail giants in check (The Sydney Morning Herald 2014). This price level is hard to achieve by other companies. However, the oligopolies generally do not engage in price war, rather they compete in terms of sales and aims to capture the maximum market share. There is barrier to entry in the oligopolistic market structure. This is because; it requires enormous investment to open up retail chain stores and to establish the brand name.

Monopolistic Competition in Australia

The most of the companies of this nation are engaged in the monopolistic competitive market. The restaurants and catering industry is a major example of monopolistically competitive industry. There are huge number of restaurants in this nation and they are engaged in huge competition among themselves. The restaurant service and catering The restaurants may offer same dish of same quantity, but the price charged by them may vary. The price variation may be in terms of variation in taste or service offered in the restaurants. Differencing in the taste of the food; quality of services, customers perceive the products to be different even if it is almost identical (Lee, Saderhmukh and Hallak 2015). The restaurants can also differentiate themselves by offering multiple cuisine. By differentiating their products, the restaurant firms charge their prices. Therefore, the firm under this industry has some sort of monopoly power over price. Monopolistically competitive restaurants also differentiate their brands by engaging in advertisement and promotional activity. There is no barrier to entry in this market, however, it requires huge investment to set up a new restaurant business and establish its brand. The prices of the restaurant meal have increased by 1.7% in this nation (competitionpolicyreview.gov.au 2014).

Conclusion

From the above discussion, it can be said that in Australia the all market structures are present. The Australia Post has monopoly in the postal and mailing services. The Coles and Woolworths operates in the oligopoly market structure and often considered as duopoly in the supermarket chain. The restaurant and catering industry is operating in the monopolistically competitive market. The features of each industry are similar to the characteristics of respective market structures.

References

Baldwin, W. and Scott, J., 2013. Market structure and technological change (Vol. 18). Taylor & Francis.

Carbonell, R. 2011. Australia Post plans to perfect pass the parcel. [online] ABC News. Available at: [Accessed 11 Aug. 2016].

competitionpolicyreview.gov.au. 2014. Competition Policy Review. [online] Available at: [Accessed 11 Aug. 2016].

CustomerGauge. 2013. Net Promoter News: Australia Post's customer service package, Digital Doctor's NHS diagnosis, Best Buy's NPS payoff, Flying Kangaroo's earnings leap | CustomerGauge. [online] Available at: [Accessed 11 Aug. 2016].

Ibisworld.com.au. 2016. Postal Services in Australia Market Research | IBISWorld. [online] Available at: [Accessed 11 Aug. 2016].

Knox, M. 2016. Supermarket monsters Coles, Woolworths and the price we pay for their domination. [online] themonthly.com.au. Available at: [Accessed 11 Aug. 2016].

Lee, C., Sardeshmukh, S.R. and Hallak, R., 2015. Innovation as a driver of performance in the Australian restaurant industry. CAUTHE 2015: Rising Tides and Sea Changes: Adaptation and Innovation in Tourism and Hospitality, p.224.

The Sydney Morning Herald. 2014. Coles: Reviewing law of supply and demands. [online] Available at: [Accessed 11 Aug. 2016].

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