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Monopolistic Competition In Aldi's Oligopoly Market

713 Words3 Pages

There are five types of market structures perfect competition, monopolistic competition, oligopoly and monopoly (Garlin et al. 2018). The Australian supermarket industry is an oligopoly market structure. An Oligopoly market structure is what is known as an imperfect form of competition (Garlin et al. 2018). Aspects such as a few number of firms within the industry, particularly large ones owning a significant share of the particular market, the products sold by the firms within the market being similar but with some amount of variation, and significant barriers to entry for other firms attempting to enter the industry due to the few more powerful firms already controlling the industry all are characteristics of an Oligopoly (Cloutman, 2018). …show more content…

Aldi’s business model, which includes a limited range of branded products and a lower marketing budget, allows the company to pass on savings to consumers, which enables Aldi to undercut Coles and Woolworths (Cloutman, 2018). In response, the major supermarkets have attempted to maintain market share by substantially reducing their prices over the past five years. Aldi’s rise and intense price competition have put pressure on Woolworths over the past five years, and Woolworths lost market share over the three years through 2015-16 (Cloutman, 2018). Woolworths sold or closed its underperforming hardware businesses in 2016, with the company placing greater focus on its Australian Food division (Cloutman, 2018). After strongly investing in reducing grocery prices, Woolworths’ fortunes improved and the company has gained market share over the past two years (Cloutman, 2018).
Coles responded to Aldi’s rapid expansion with an aggressive price discounting scheme. Coles’ ‘Down Down’ campaign, launched in 2010, has boosted company sales over the past five years (Nakos, 2017). However, Woolworths’ resurgence over the past two years has limited Coles’ performance (Nakos, 2017). Both Coles and Woolworths have suffered falling profit margins over the past five years. The major supermarkets have funded price reductions through deals with suppliers, and at a cost to their own bottom lines over the

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