The background for this assignment is to choose a firm in Australia and to use both theory and data in order to identify the market structure under which it operates (part 1). In part 2, you are asked to consider the effect of EITHER one economic condition that changed due to the Covid pandemic OR a government policy that was introduced at the time and how it would have influenced outcomes for your firm.
1. For the firm you have chosen, define the market and identify the key competitors. Analyse the output market characteristics of this firm (e.g. monopolistic competition, monopoly, oligopoly etc.). Justify your answer using market data (e.g. market share, profits, sales etc.) for this industry in recent years and by linking to the theory and materials covered in the course. Your answer should include the use of the Herfindahl index or market concentration ratio for your justification.
2. The 2020 Covid pandemic has changed much in world markets and seen different types of government response. For the firm you have chosen, provide analysis of the likely effects of one aspect (choose one specific economic issue) of the pandemic OR one policy response made by the Australian government that directly affects your firm. Your answer should discuss aspects such as entry and exit of firms and the implications for the firm’s position in the market, and on profitability.
Both sections are of equal weight
Make sure to provide a rationale and justification for any of the assertions you make. You are expected to draw upon the theoretical concepts contained in the course in your discussion of such aspects as market structure, entry and exit, and rivalry between competitors. You should use appropriate diagrams to illustrate your answer.
RESEARCH ASSIGNMENT FORMAT:
• Your task is to write a short research paper on the above topic. Word limit: 1500 words including references.
• Please note that this is an individual research assignment.
• This is a research project. It should take the appearance of an academic paper and be structured as follows:
Mention the main objectives of this research and the reasons you chose this firm. You may cite any relevant literature to explain the importance of your research.
o Basic analysis of the firm characteristics
What kind of a market is this firm competing in – monopolistic competition, monopoly, oligopoly etc.? Justify your answer using market data (e.g. market share, profits, sales etc.) for this industry in recent years. Which firms are the main competitors? How do the competitors influence the pricing decision of this firm?
Implications of Covid Pandemic OR Government Response
For the issue/policy you have chosen, discuss what the likely effects will be for your firm -in terms of market conditions (eg entry and exit, profitability)
Conclusions (may be in one short paragraph)
Summarise your findings and future policy implications for this firm and the industry overall.
Do not forget to refer to the data sources and any other references you have used to write this short paper.
You will be graded based on your writing and communication abilities to a broader audience. The assignment must be clearly written; any diagrams, charts, tables etc. must be clearly labelled and explained in your text and any equations defined and explained. The quality of your argument, the clarity with which you explain and illustrate the relevant concepts and the way in which you relate theory to the available empirical evidence is very important here. Detailed feedback will be provided upon grading.
Weighting: 25% of your total grade
Due: by 11.00 PM, 29 April 2023 via Learnonline website. Submit in word format (pdf and other formats
will not be accepted). Penalties for late submission = 10% per day.
This research paper aims to analyze the market structure and key competitors of Woolworths Group Limited and evaluate the likely effects of the Australian government’s policy response to the Covid-19 pandemic on the company. Woolworths is one of the largest supermarket chains in Australia, and its operations span across various segments, including grocery, liquor, and petrol. The research will focus on the output market characteristics of the firm, including market concentration, market share, and profits. Additionally, the analysis will be based on relevant economic theory and literature, including the Herfindahl index and market concentration ratio.
Basic Analysis of Woolworths Group Limited:
Woolworths operates in an oligopoly market structure, with a few dominant players competing for market share. The Australian supermarket industry is dominated by two main players, Woolworths and Coles, with a combined market share of approximately 66.3% in 2021 (IBISWorld, 2021). Woolworths Group Limited, as of 2021, has a market share of 34.6%, while its closest competitor, Coles Group Limited, has a market share of 31.7%. Other key competitors in the industry include Aldi, IGA, and Costco, with a market share of 8.8%, 7.2%, and 2.7%, respectively (IBISWorld, 2021). The industry is highly concentrated, with the Herfindahl index being 0.24 in 2021, indicating a highly concentrated market.
The oligopoly market structure implies that Woolworths operates in an industry with significant barriers to entry, high market concentration, and interdependence among competitors (Mankiw, 2014). The presence of significant barriers to entry limits the entry of new players, thereby limiting competition. The high market concentration and interdependence among competitors imply that the pricing decision of one firm has a significant impact on the pricing decision of the other firms in the industry. Woolworths’ pricing strategy, therefore, is influenced by the pricing decisions of its competitors, particularly Coles.
Implications of Covid Pandemic OR Government Response:
The Covid-19 pandemic and the Australian government’s policy response had significant implications for the supermarket industry in Australia, including Woolworths. One of the significant impacts of the pandemic was panic buying, leading to shortages of essential goods, such as toilet paper, hand sanitizers, and flour, among others. This resulted in a surge in demand for essential goods, leading to increased sales for Woolworths and other supermarket chains.
The Australian government’s response to the pandemic included lockdowns and social distancing measures aimed at reducing the spread of the virus. These measures resulted in a shift in consumer behavior, with consumers opting for online shopping and home delivery services instead of physical shopping. Woolworths responded to the shift in consumer behavior by increasing its online operations and home delivery services, resulting in increased profits.
Additionally, the Australian government introduced various policies aimed at stimulating the economy, including the JobKeeper program, tax cuts, and infrastructure spending. These policies resulted in increased consumer spending, leading to increased sales and profits for Woolworths.
In conclusion, Woolworths operates in an oligopoly market structure with significant barriers to entry and high market concentration. The company’s pricing strategy is influenced by the pricing decisions of its competitors, particularly Coles. The Covid-19 pandemic and the Australian government’s policy response had significant implications for Woolworths, including increased sales and profits due to panic buying and the shift in consumer behavior towards online shopping and home delivery services. The Australian government’s policies aimed at stimulating the economy also contributed to increased sales and profits for the company. However, Woolworths still faces significant challenges, including increasing competition from Aldi, IGA, and Costco