PRICE AND MARKET (WOOLWORTH SUPERMARKET)
Introduction
Outstandingly, supermarkets act as a one-stop shop where different customers can find products
of their preference and purchase them. By exposing a wide range of products to its consumers,
supermarkets are able to accommodate each customer. Nonetheless, for a supermarket to operate
effectively, it has to lay down proper strategies such as of pricing and similarly have sufficient
resources to spearhead its operations; resources can be in terms of human labor, access to funds
amongst others.
Woolworth supermarket (Australia)
The trading place visited was Woolworth supermarket which is arguably the largest supermarket
chain in Australia which has established itself as an iconic brand over the years (Boyd, 2015).
The items of trade in this supermarket are largely groceries of a wide range, this includes
vegetables, fruits, meat, and even packages foodstuffs. By operating in such a large scale sphere,
it means the supermarket has numerous distribution centers and support offices whose main
objective is to promote and provide superior service to the customers (Spillan, 2015).
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Buyers
With the supermarket attractive a mammoth of buyers flocking its stores each day, arguably all
persons from the young to old members of the society get to shop at Woolworths. However,
there is a going belief that women in particular tend to shop more as such regarded as the most
regular customers. Men are presumed to be more frustrated by aspects such as long checkout
queues, failure to find an assistant, and items being sold as compared to women. It is such
occurrence that limits their turnout.
Importantly, customers are motivated by various factors that push them to shop at the
supermarket. Top amongst these is the proximity of the store to their homes. Similarly,
convenience with regard to aspects such as parking, finding items on shelves also stands out as a
major contributing factor to attracting shoppers. Others aspects such as pricing, branding, quality
and customer service relatively play significant influence.
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Source: Shoppers Survey Report, Street Ahead Project. (November 28 th , 2014).
Sellers
This supermarket mainly sources products from Australian farmers and growers. This is the case
because naturally groceries such as vegetables are easily perishable. This prompts the need to
acquire them from a convenient place where they are readily available taking into consideration
the required quantity. Importantly, by allowing local farmers and sellers to be the main sellers,
the supermarket promotes growth within the economy because of provision of income to these
people to sustain themselves and invest in other businesses.
Equilibrium
So as to achieve symmetry in sales and purchases, the amount of products put on sale depends on
the demand that is available for them. In circumstances whereby there is excess demand and
excess supply of products, to achieve equilibrium, then buyers must subject themselves to
purchasing only amounts sufficient for the usage whereas sellers produce quantities that would
evenly match the demand.
Market Structure
Woolworth operates under an oligopoly market structure where an imperfect competition exists
between Woolworth supermarket and its closest rival Coles as the two main operators (Sprothen,
2016). This market structure is characterized by aspects such as having a significant market share
and control and a large loyal customer base. This form of market structure limits entry of new
competitors based on the high standards and barriers set by the two dominant players as such
prompting government intervention so as to set parameters with regard to aspects such as pricing
and quality of products because when only certain businesses are dominant, there can be a
tendency to constrain customers.
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Hence, the purpose of government intervention is to facilitate a fair competitive environment that
does not hurt the consumers and other firms that may wish to join in that field of operation.
Without such an intervention, one would argue that it is the consumers that would bear the most
suffering.
Word Count: 615.
MICROECONOMICS ANALYSIS
Introduction
Significantly, under this section the main object will be to analyze how a certain economic
phenomenon by a business is likely to impact on the targeted group and consequently ascertain
the end result of such undertakings. Thus, microeconomics gives us an insight of what is likely to
be anticipated when certain changes are instigated with regard to the operations of a company
and this is important because it can further aid in making proper decisions and initiating
sustainable operating strategies.
For this section, the microeconomic issue identified is the cutting of prices of products or equally
giving of offers by business. The table below briefly illustrates on the tangible issues that will be
further discussed.
TOPIC QUESTION TOOL
PRICE CUTS/OFFERS Why do businesses provide
price cuts/offers on
products?
- Competition
- Boost sales
- Brand promotion
- Market dominance
- Economic recession
- Market failure
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A. PRICE CUTS
Undisputedly, the pricing of a certain product eventually determines on whether it is likely to
guarantee higher sales or losses. Ordinarily, customers are sensitive when it comes to the price of
s product that they want to purchase because if it is not a pocket friendly price, then a majority
will opt to buy an alternative product that will equally serve the same purpose but at a reasonable
price (Dogan, et al 2013).
Similarly, when operating under a certain field competitors are bound to be present. This means
that for one to outsmart them they have to come up with effective strategies to lure more
customers to buying their products as compared to the rival’s and subsequently gain a large
market share ( Pauwels & D’aveni, 2016). Hence, pricing seemingly plays a vital role under such
circumstances.
Important to note is that before a business embarks on an initiative of providing price cuts on its
products, there are certain essential factors that must be considered. This is so because not all
price cuts may work for the advantage of the company. In fact, it is assumed that most price cuts
tend to lead to low profit margin for the concerned business and this may hurt the overall
operations of the business. Among the things to be considered includes the long term
implications of price cuts. For instance, one a price cut has been made and new customers have
joined the bandwagon of purchasing it, increasing such a price thereafter may lead to loss of
these customers as such a business must put in place other plans such as improving the quality of
the product so as to demand a higher price because without such modification the initial price cut
may end up hurting the business.
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So as to answer the critical question of why do various businesses offer price cuts, the
subsequent section of this paper will dwell on analyzing the various tools identified in discussing
the economic issue.
- Competition
Foremost, competition is one of the key features of any market. However, stiff competition may
force a business out of the market as only the dominant participants get to have the larger market
share. To mitigate such an event occurring, businesses are inclined to offer price cuts to their
products so as to retain a fair share of the consumers in the market.
By giving such price cuts, it means that such a company can compete fairly in the area of
operation. Accordingly, one can argue that consumer would often resort to buying products at
reasonable prices, hence if one of the competitors is offering the same product at a higher price it
is highly likely that they will lose buyers to the company that gives relatively cheaper pricing. In
such a situation, to promote a fair competitive market, prices will thus be relatively proportionate
as a result leading to a fair share of each participant in terms of customers and the market place. - Sales
Significantly, when a product does not sale it may eventually cause the business to succumb to
losses. Thus, the concept of sales can be boosted in a twofold channel. First, for new products
that have been introduced to a market it is imperative that price cuts are given so as to entice
customers into buying the products.
On the other hand, when there are low buy outs of products, then a company may opt to initiate
price cuts all in a bid to try and revamp the product. Generally, price cuts that aim to boost the
sale of a commodity have to address a certain deficiency. In this way, having reduced prices
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serves as an effective tool in enhancing the purchase power of consumers towards a specified
product.
- Brand Promotion
Particularly, for new products that are unknown to consumers, it is vital that price cuts are
provided. This is so because, often consumers may refrain from interacting with new products in
the market based on aspects such as having a preference of the already existing ones. Such
circumstances may impair the emergence of new businesses in that market. Thus, when price
cuts are offered as incentives for customers, it id then highly likely that new consumers will
indulge in buying the given product based on its reduced pricing. - Market dominance
Naturally, for businesses that operate in the same field of operation the market share that one has
over the other largely matters. The market share determines the profit that a company expects to
acquire from its sales. Hence, companies are motivated to initiate strategies that would put them
at an advantage position over their rivals. One of the ways of doing this is by providing price
cuts on the products of the business. Price cuts as aforementioned in the discussed sections are an
allure for new customers.
When one business obtains new customers that belonged to a rival company it subsequently
means that the former company acquires a large market share. However, such an undertakings
has its downside in that it forms a platform for emergence of a monopolistic market structure
whereby there is only one dominant player. When this happens, consumers are put in the liberty
of that dominant player in the market because such a business has all the power and keys of
controlling how that particular market will operate. - Economic recession
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Notably, the economic state of a country determines how consumers of products will purchase
and spend on products. In the case where the economy is booming and businesses are not
financially constrained, consumers are highly likely to purchase products without much
limitations or considerations such as on pricing. In this scenario, offering price cuts whereas
fellow competitors are not may harm the business because consumers may not give too much
concern about their spending.
On the other hand, when there is an economic slump, in that businesses are not doing as well as
they would normally do this thus calls for effective measures to retain and attract customers so as
to continue operating.
Under an economic recession situation, consumers would preferably want to spend less. To
match with such changed dynamics, then one would argue that price cuts on the products of a
business are the most viable solution to follow.
- Market failure
Considering market failure is a concept that occurs as a result of inefficient allocation of certain
resources within the market of operation, then such a situation is consequently likely to affect the
operations of the company (Fabella, 2015). For instance, a monopolistic market structure may be
deemed as a market failure ingredient based on the fact that new businesses will find it hard to
compete in a market that is largely dominated by one player.
Nonetheless, in such a situation a company may opt to provide price cuts on its product so as to
try and mitigate the market failure effects which if not diminished will certainly curtail the
operations of the other businesses. - Government failure
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Significantly, the government is duty bound to make sure that businesses operate in a fair and
friendly environment. To do this, certain limitations must be imposed and constraining barriers
broken down. For instance, take a situation whereby the government fails to monitor the
operations of businesses through relative agencies, in such a situation certain business may drain
consumers by instigation undertakings that would solely serve their own interest. One of such an
undertaking may be over-pricing on the produced products.
However, such an undertaking may not suit all the businesses within the market as such
prompting the need to lower prices of similar goods so as to counter the other business
competitors.
SECTION SUMMARY
Normally, the interaction between the
supply and demand of commodities in
the market place determines the price
that a certain product will sell at. The
point of equilibrium marks the
acceptable value for both the buyers and
sellers.
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Nonetheless, there may exist factors that may affect this equilibrium price such that a business
may be forced to make adjustments. This is of essence because without such alterations, a
business is likely to operate under losses. The aspect of price cuts maybe one of the ways that
business may use to reach certain equilibrium. By giving price cuts it fundamentally indicates
that a company aims at first increasing its sales and similarly obtains new customers.
Importantly, aspects such as the profit margin that the business aims at must be considered
before making such a move. In doing this, prior research is essential because without having
knowledge of such information then a business may orchestrate its failure.
CONCLUSION
Foremost, markets are placed that are guided by certain distinctive features that must be
observed and preserved so as to allow business to operate efficiently. For instance, without
embracing the concept of fair competition between rival businesses, then one may triumph over
the other leading to unfair labor practices.
Significantly, the importance of government intervention in market practices cannot be ignored.
The government plays a key role in regulation of various aspects of the market so as to facilitate
proper co-existence between the firms themselves and the consumers that they serve. Without
such an intervention, evidently every business would seek to protect their own interests putting
aside all other basic requirements such as offering quality products.
When it comes to the various macroeconomic issues that may affect the operations of markets,
first it is important to note that such issues may have a direct effect on the activities of consumers
and as a result end up curtailing the operations of the business in the end. Microeconomic issues
should be looked at from a wider scope. Their particular effects should be analyzed in depth so
that the right techniques are initiated to mitigate on their possible hazards.
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Significantly, these issues should never be ignored before they may have adverse effects on the
operations of the company as such creating the need to find way to move around them and
benefit the business.
Finally, without fair market practices, not only does firms suffer but consumers too share in the
same suffering. This calls for proper market practices that protect both the interests of the
businesses and consumers so that none is inclined to spear-head their own interests on the
expense of the other. Where unfair practices may emerge, it is imperative that even the firms
themselves take personal measures and approaches to meditate on the negative consequences.
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Reference
Boyd, T. (2015, Nov 28). Woolies crisis to go for years. The Australian Financial Review
Retrieved from https://search.proquest.com/docview/1736670877?accountid=45049
Dogan, Z., Deran, A., & Koksal, A. G. (2013). Factors influencing the selection of methods and
determination of transfer pricing in multinational companies: A case study of United
Kingdom. International Journal of Economics and Financial Issues, 3(3), 734-n/a.
