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BUS 700: ECONOMICS
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ASSIGNMENT (INDIVIDUAL)

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KUSUM THAPA: 11600980

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EXECUTIVE SUMMARY

Australia has only 33% of one per cent of the total populace and records for as it were two
per cent of world financial yield yet both Woolworths and Coles (Wesfarmers) rank in the
best twenty of world retailers. In much retail advertise circumstances in Australia a couple of
retailers play prevailing roles. Both Coles and Woolworths include dominatingly in an
extraordinary a significant number of these concentrated markets. In the basic need advertise
the focus is especially high. Together these two retailers represent roughly 80% of piece of
the pie while the best two staple chains in the UK just record. A reasonable perception is that
both Woolworths and Coles are prevailing and very extensive. This report will (in part a)
describe the dominance of supermarket powers Coles and Woolworths and in part b critical
analysis of the two supermarket giants will be done to analyse whether the competition and
duopoly is good for the Australians or not.

The main findings of the study are-

1. The two supermarket name enjoys dominance in the Supermarket retail segment.

2. The competition needs admittance of new players to break the duopoly and exploitation.

3. The traditional merchants need support of legislative guidelines to arrange for advantages
to them.

The major recommendations made are-

1. An equitable parity between buyer’s power and supplier’s power need to be announced so
that dominance of the two retail giants can be regulated.

2. In order to protect privileges of the traditional merchants and farmers, improvements must
be made in administrative rules.

3. For regulating unfair trade practices, Consumer and Competition Act must be amended.

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PART A

INTRODUCTION

Stores have an expanding part in the advancement of the Australian horticultural segment. A
heightening in piece of the overall industry for Coles and Woolworths has made a testing
situation for some Australian agriculturists and providers. It has prompted to worries that the
present awkwardness in market control, supporting the real general stores, is hindering to
Australia's farming industry. The significant test is to guarantee that a fitting level of security
exists to permit the proceeded with operation of little and medium-sized agribusinesses and
retailers, to advance rivalry in the agrarian segment (FDI Team, 2014).

In 1971 the two noteworthy general store chains had 35% of the market, in 1981 it was a little
more than half and now it is around 80%. In the more extensive commercial centre showcase
focus is in fact on the expansion. The quantity of retail organizations fell by 7.9% from 2012
to 2014 regardless of a volume increment of 14%. The equipment business is normal to lose
5999 independents in the period between 2016 and 2024.The little populace and extensive
separation from bigger markets has been given as an explanation behind this fixation.
However, the populace is expanding however so the level of market fixation is (Keating,
2015). Different variables, for example, the specific laws and directions influencing rivalry,
the development of strip malls and the strategies of the predominant players are additionally
referred to as reasons.

COLES AND WOOLIES DUOPOLY

Australia's generally capable general store players, Woolworths and Coles, have expanded
their strength on a worldwide scale in the wake of being named among the top retailers on the
planet. The two goliaths, which work many general stores, rebate chains and tool shops, were
the main two Australian organizations to be incorporated into a gathering of the biggest
worldwide stores by income. The Deloitte Global Powers of retailing report said Woolworths
and Coles had performed to a great degree very much, contrasted with their universal
associates (Rhodes, 2012). Clients of Coles and Woolworths have encountered striking
advantages from the development of the two chains, especially through enhanced access to
more moderate items. These advantages, and their present favourable circumstances for
Australian nourishment security, can't be downplayed (FDI Team, 2014).

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These supermarket giants contribute generously to the financial abundance of Australia.
Notwithstanding these business openings, the size of their operations gives the essential
markets to neighbourhood agriculturists, allowing them more extensive access to end-
customers than is conceivable with littler retailers. These retailers can meet shopper
inclinations with a scope of items at decreased costs. The extent of their purchasing
operations permits them to manage arranging terms to get appropriate deliver with ease.
These advantages are of specific significance to the general population as they result in
transient nourishment moderateness (Sheedy, 2016). Marking down methodologies connected
by both general stores enhance the scope of sustenance alternatives accessible to clients at
lower costs.

However, the fast development of ALDI has altogether adjusted the Supermarkets and
Grocery Stores industry in the course of recent years. Progressing value wars among the
business' two biggest organizations, Woolworths and Coles, have been exacerbated by the
ascent of ALDI, which has prompted to lower item costs in the course of recent years.
Regardless of lower costs, industry income has stayed solid and is anticipated to develop at
an annualized 4per cent over the five years through. This incorporates estimate development
of 2 per cent (ANZSIC, 2016) .Woolworths and Coles have picked to diminish costs as a
focused procedure, conflicting with the pattern of abroad grocery stores contending through
item separation. Thusly, both players have concentrated less on overall revenues and more on
piece of the overall industry. Rivalry inside staple retailing will stay furious over the gauge
time frame. While markets will keep on being the main basic need retailers direct as far as
esteem deals over the gauge time frame, its execution is probably going to be tested by the
fast extension of the ALdi chain of discounters (Farr, 2015). Rivalry won't be constrained to
markets as the two biggest contenders, Wesfarmers and Woolworths, proceed to grow and try
different things with new channels inside basic need retailers including comfort stores.

FINDINGS

1. There has been a noteworthy move out in the open feeling against Woolworths and Coles,
however it needs cognizance.

2. The general population's impression of the development of Woolworths and Coles has
tipped over from pride in nearby accomplishment to dread and doubt of their size and power.

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3. Little nearby shops is attempting to contend and purchasers' most loved brands are
vanishing from the racks.

4. Coles and Woolworths have expanded their piece of the pie by wearing down and a
capacity to oversee expanded costs that contenders can't deal with.

CONCLUSION

Australia's nourishment and basic need segment is under serious weight from a scope of
powers including the aggressive way of the store retail division; repressed trust in the more
extensive financial environment; Australian cash changes; and a nearly higher cost of
working together in Australia than different nations. These organizations have accomplished
huge level of predominant position in the Australian retail industry and the significant reason
prompting to such profoundly effective position of these organizations is for the most part the
methodologies as sought after by the organization. As the piece of the overall industry of
Coles and Woolworths keeps on developing they are crushing the edges of their providers
and putting weights on ranchers and nearby makers.

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PART B

INTRODUCTION

The benefits of the market framework are established in rivalry. Generally, rivalry has been
comprehended as that procedure that restrains the obtaining of market power by business
firms. The expected impact is that market costs will reflect "monetary" values – other than in
the short term, costs will mirror the cost of creation. The financial matters course readings
house the idealist form of this story, 'idealize rivalry', in which showcase power is
demolished. Horde autonomous firms and flexibility of section drive down costs
hardheartedly (Jones, 2006). The market leads over any individual firm. In 'this present
reality', there is a lasting propensity for business solidification as a apparently characteristic
result of market progression, and a nonappearance of any practically identical countervailing
power. The Americans are shouting blue murder in light of the fact that Wal-Mart and their
rival have now come to around 24% piece of the overall industry. Here we have two stores
with a piece of the pie of more than 81%, so in the event that they choose to chop down the
measure of cash they will pay agriculturists and raise the cost to the shoppers, they can, in
light of the fact that there is no opposition (Samuel and King, 2013). For a considerable
length of time the retail basic supply area in Australia has been the subject of serious open
investigation and civil argument. A significant part of the consideration and scrutinize has
fixated on the Coles-Woolworths duopoly. The consolidated piece of the pie of some 71-81
per cent of these two retail mammoths has produced calls for radical change to our opposition
laws, dominatingly by method for an update of the preclusion on abuse of market power.

CRITICAL ANALYSIS

Organizations like Coles and Woolworths are emphatically, maybe interestingly, situated to
contribute decidedly to society. Their bad habit like hold on supply binds enables them to set
norms and impact business conduct – in connection to the treatment of chickens by egg
makers and vagrant labourers by natural product cultivators, for instance. Also, they can do
this in courses much more prompt, less expensive and ostensibly more compelling than any
type of government direction (Wells, 2015). Through vertical reconciliation and long haul
supply gets, the purchasing force of our significant grocery store anchors empowers them to
advance maintainability in our cultivating area and development in assembling, having to a
greater degree an effect than any administration freebee or bolster measure would ever plan
to make.

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Their significant market control gives the two combinations the capacity to decide costs,
influence passage boundaries and set up a level of desire in the part. This puts weight on
whatever is left of the natural way of life in Australia. Numerous neighbourhood
agriculturists are put in a helpless position by choices made by Coles and Woolworths,
whether they include estimating, the volume of exchanges or other business procedures (FDI
Team, 2014). The broad market force of these two goliaths, in any case, is additionally in
charge of critical issues influencing residential providers in the Australian sustenance
framework. The contracting piece of the overall industry of autonomous retailers leaves the
larger part of providers with minimal decision yet to consult with the duopoly. This market
environment guarantees that the store goliaths employ huge impact over value transaction and
institutionalization requests. Their outlets are currently multiplying crosswise over both
metropolitan and territorial focuses of Australia (Chung, 2016). The development of the
duopoly is driving out littler organizations, especially in country territories, which can't
contend with the significant grocery stores. This likens to misfortunes in work and pay for
these family-claimed wanders. The limited number of retail players has expanded the reliance
of providers on the general stores as a channel to achieve end-buyers. This is denying
agriculturists and sustenance makers of the adaptability and energy to arrange the basic need
operations of both organizations have expanded relentlessly in an incentive as of late
(Cummins, 2016). This has been aided, in expansive part, by the 'value wars' between the
rivals, which have gotten clients.

The expansion of Wesfarmers and Woolworths into other retail parts and administrations
guarantees that they are protected, in contrast with free merchants, from minor sustenance
value weights (Mitchell, 2015). This has made an uneven playing field in Australia's basic
need area. Conversely, both aggregates can likewise raise basic need costs to address
shortages in other sectors. From essential makers to providers, everybody is presently battling
for their share of rare benefits and upper hand. The ramifications of this competition reach far
and wide into the Australian economy (Wall, 2014). Producers confront requirements on rack
space and hence chances to achieve their purchasers. Their items are regularly relinquished to
clear a path for aggressive duplicate feline private mark offers, exchange edges and the 'cost
of working together', and additionally retailer requests for profound limited time evaluating.

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FINDINGS

1. Woolworths' strict and unbending work environment culture did not take into account an
enabled workforce.

2. Woolworths and Coles have frequently been tested over the self-important way they utilize
control in the relationship.

3. The Australian bylaws don't give controllers enough energy to demoralize anticompetitive
conduct.

RECOMMENDATIONS (For PART A and B)

1. An obligatory industry set of principles is required to cover the whole production network,
from grocery stores through to processors and makers.

2. Extreme new laws to permit the ACCC the ability to apply to the courts to separation
organizations where advertise control has been mishandled.

3. The Government should make a supervisory body to guarantee that marked items keep on
having access to store rack space on a reasonable and even-handed premise.

4. The Australian bylaws must give controllers enough energy to demoralize anticompetitive
conduct.

5. Outside offices ought to be locked in to lead normal provider fulfilment overviews, the
aftereffects of which ought to be pitched by the stores in their normal announcing cycles.

CONCLUSION

This forceful position of the retail duopoly in new site rollouts can't be seen freely from a
similar longstanding society inside the property improvement and building parts, for whom
the retail monsters are huge. It is fitting that markets likewise agree to principles as they
identify with the treatment and fulfilment of the individuals who supply them with their
items. The duopoly's market fixation has effectively gone too far and people don't accept
there is sound rivalry. They are worried that they are the failures as far as cost and they need
a great deal more decision and assortment. It can be concluded that the retail giants are not
good for the Australian economy and people.

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REFERENCES

ANZSIC. 2016, September. Supermarkets and Grocery Stores in Australia: Market Research
Report. Retrieved from: https://www.ibisworld.com.au/industry/supermarkets-and-
grocery-stores.html

Chung, F. 2016, April 22. Moody’s rings Aldi alarm bell for Coles, Woollies. Retrieved
from: http://www.news.com.au/finance/business/retail/moodys-rings-aldi-alarm-bell-
for-coles-woolies/news-story/5fa28b85abb45c9e06b89b1c9f502fea

Cummins, C. 2016, August 5. Supermarket Wars are Gaining Traction. Retrieved from:
http://www.smh.com.au/business/property/supermarket-wars-are-gaining-traction-
20160804-gql47t.html

Farr, M. 2015, July 1. Small business chief savages Coles and Woolies and their trade union
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FDI Team. 2014, July 17. Market Power in the Australian Food System. Retrieved from:
http://www.futuredirections.org.au/publication/market-power-in-the-australian-food-
system/

Jones, E. 2006. The Australian retail duopoly as contrary to the public interest: Report for the
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Keating, E. 2015, September 14. Supermarket Monsters: Seven insights into how Coles and
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Mitchell, S. 2015, March 31. 75pc of Australians want more competition for Coles and
Woolworths, Masters Grocer survey shows. Retrieved from:

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coles-and-woolworths-masters-grocer-survey-shows-20150330-1mbjul.html

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