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Differentiating Between Market Structures Kimberly Adcock ECO/365 December 7, 2015 J. Carl Bowman

Differentiating Between Market Structures 2 The Kroger Company has started in 1883, by the founder Barney Kroger, he had taken all of his life savings to open the first Kroger grocery store in Cincinnati, Ohio. “Over the next 130 years as the supermarket business evolved into a variety of formats aimed at satisfying the ever-changing needs of the shoppers” (thekrogercompany.com). There are more than 2,600 stores within 34 states and more than a dozen banners and their annual sales is in the billions. Kroger is one of the biggest grocery stores in the world. There are two departments that Kroger supermarkets, the bakeries and meat and seafood. History of Kroger “In the 1900s grocery stores bought their bread from an independent individual, but Barney Kroger has, come up with the idea to put the all of the main ingredients together to be able to make a profit” (thekrogerco.com). He decided that if he was to bake his own bread he would be able to decrease the price, so that the consumers would be able to afford and still make a profit. In the year of 1901 Kroger was the first grocery store to have their own bakery, and also was the first to be able to sell meat and groceries all in the same building. He even cook his own can goods. “Kroger operates 37 food processing facilities that make thousands of products that range from bread, cookies, and milk to soda pop, ice cream and peanut butter, 40 percent of the private-label items that is found on the shelves at the Kroger stores are all made at one of the Kroger’s manufacturing plants” (thekrogercompany.com). Over the years Kroger has expanded, the company has a floral shop, and fuel center with over thousands locations, that would accommodate the customers to be able to put fuel in their vehicle in stop. Kroger has had many mergers over the years as well. In 1983 Kroger had merged with 3 the Dillion Company, Inc. that was established in Kansas, which it had become the world wide “of food, drug and convenience stores” (Thekrogercompany.com), but the largest merger was in 1999 when Kroger had merged with Fred Meyer, Inc. when the merger with Fred Meyer, Inc. had happen that is when Kroger had established the “big economies of scale within the purchasing, manufacturing, information systems and logistics” (thekrogercompany.com). Market Structure The market structure of Kroger is monopolistic competition. There are several companies that are in competition with Kroger, such as Walmart, Food Lion, Publix, and Target that just to name a few. In some areas Kroger has a supercenter which the products that are sold can range “from groceries to auto parts and from electronics to clothes” (thekrogercompany.com). With the current market structure each of these organizations will have a different method of the organizations that is just like Kroger’s. The main agenda is to have more sales than their competitor in all areas, but that is not likely to happen. Kroger may fall short in one area where they excel in another. All of the different organizations within the same industry tend to follow the same trend to lower their prices. Perfect Competition In perfect competition it is “a market structure in which the following five criteria are met: 1. All firms must sell the exact same products. 2. All firms are price takers they cannot have control of the market price of their product. 3. All firms must have a small market to share. 4. Buyers must have all the information about the product that is being sold and prices that is 4 being charged by the firm, and 5. Perfect competition is also refer to as pure competition” (Investopedia.com).
In perfect competition it is a single firm that supplies a good or services and that organization can charge what they want because the customers has no alternatives. Perfect competition has many buyers and sellers. In perfect competition where Kroger is concern they would need to have the lowest prices on product that are the same as their competitors, if not their customers will go and shop at their competitors, yesterday as I was shopping I notice that Walmart had Folgers coffee for $7.94 and Kroger had the same product for $9.99, as a consumer we compare prices which the Folgers coffee was bought at Walmart that was a $2.00 savings. Monopolistic Competition Monopolistic competition has many sellers, but their items are not alike, even though they serve the same purpose. For instance, let’s say that Pepsi would put their products on sale at Kroger, but yet Coke products stay at the same price. In the meantime the consumers that usually buy Coke products will transfer to Pepsi products while Pepsi products are on sale. Kroger will need to order more Pepsi products while the sale is going on that way Kroger will have enough supply for the demand. However, if the price is high on a product the company will lose customer to the other competitor with the price being low. The grocery industry is a perfect example of monopolistic competition because customers have several choices to consider when t buying groceries. The best factor that will give the customers the purchasing choice which are location, price, customer service and brand. In several areas, a lot of the customers have more than one grocery store to consider to shop, where the customer will not have to drive too far. A successful company will have to differentiate their goods from the 5 competition and be able to build brand fairness. The grocery stores can be an aggressive competition with the high level of elasticity that will give the customer several alternatives to buy their groceries. It is significant to aim that monopolistic competition can be believe that a shape of imperfect competition. With the competitors that are in regards of, the net output of the industry that has decrease the net input. However, this is how the negative flow of the productivity is produce which will shift the equilibrium within the market. For instance, an organization that is able to produce profits, it will encourage other organizations to enter into the market and produce profits to decrease the rate. With this process it will keep going until the organizations are not able to make a profit, which could encourage the weakest organization to leave the market. Within the grocery industry this has become clear because the competitors function on a low profit margin. Organizations will produce a high volume of sales to be able to maintain at the level of the cash flow and profitability that will be accepted. Recommended Strategies for the Kroger Company The Kroger Company has a huge chain of grocery and supercenters all over the world. The recommendation are established to continue of the company’s success within the grocery industry. The profit margins will have to maintain to be low and the competition will also maintain to be high. However it will still be feasible to continue to have success within the industry with producing a high volume of sales. The recommendation will be differentiate products by the brand faithfulness and to implement the strategy of the pricing method. One of the recommendations, the Kroger Company will do is to educate the customers on the quality of all of the goods that Kroger has in their stores. A plan has to be in order to be 6 able to sale breads, cakes, and cookies from the bakery. Most customers are worry that the quality of the goods are not acceptable by the FDA. However with the customers being concern about the goods that is produce in the bakery it will give Kroger the chance to be able to differentiate their goods. To be able to accomplish the purpose, the company will have to invest into some marketing and advertising to be able to notify their consumers of the quality of the goods. With this method it will establish the success of monopolistic competition because it will be able to make the goods to seem different than the competition. With time the customers will realize that the goods are extraordinary and they have decided to buy the goods at a low price that Kroger’s has to offer. Product differentiation is a successful strategy and it will be the most important strategy at Kroger’s. The next recommendation will be to expand the position of the customer service that Kroger has to offer by the employees. An outstanding customer service will be able to maintain their purpose with the brand fairness. Customers will not have to be concern about the prices. The customer will realize that they will have a confident observation while shopping. Let’s say for instance that Food Loin decides to lower their prices on bread, which that will not have influence on Kroger, since the fairness that was built within the customer service. Another useful act would to reward the consumers of their continuous business with giving them coupons or reward points onto their Kroger card. Implementing the recommendation could be a high risk with the competition to defeat Kroger’s on price. The third recommendation for Kroger will be to establish the price structure that may be profitable to the organization’s net profit margin. To be able to accomplish the objective will be to decrease the prices severely on the most popular brands that will persuade new customers to 7 come shop at Kroger’s. The price decrease will produce a net loss on the item. The outstanding customer service that is offer that would persuade customers to buy more items. Most individuals do not like to go to grocery store to grocery store to do their shopping, therefore the net loss could be promptly recover from sales on several products. The main advantage of the recommendation was establish the net in the total sales within the company. Organizations that are monopolistic competition will establish the low profit margin, although it may be critical to establish the high volume of sales to be able to have a success within the industry. The pricing strategy can be relevant to several items. Conclusion Monopolistic competition is very popular within the market structures within the economy around, the world.. The grocery industry has supply an outstanding illustration of monopolistic competition within the high elasticity of demand, low barriers of the entry and product differentiation methods. In every division there are as many grocery stores competing for the market share within the same community. Customers has several alternatives to buy food and competitors must work forceful to be able to build a brand that is fairness. The Kroger Company has many stores all over the world.

Reference 8
Investopedia. Com/perfect-competition http://getmessmerized.words, December 10, 2012, Updated February 5, 2014 www.thekrogerco.com/about-Kroger/history-of-kroger www.therkrogerco.com/about-kroger/operations
www.web-books.com/elibrary/NC/B66/008MB66.html