Discuss How Milk Processors Might Try to Improve Their Competitive Advantage in the Milk Industry. Which Strategy Is the Best?

886 Words4 Pages
In the current situation, milk processors have a competitive problem because their customers in the monopoly market are not paying them s much as they used to for milk. These customers are companies such as Tesco and Sainsbury’s. Supermarkets have made a cartel where they allegedly agreed on a 3p increase in the price of milk. This could ensure high profit margins for all of them. This causes a problem for milk processors because supermarkets are where most milk purchases take place, and therefore competition cannot for down prices. There are several ways that milk processors could increase their competitiveness. This could be forming a cartel, invest in their capital products, and differentiate their product. If the milk processors formed a cartel then they would be able to set a price which the supermarkets would not be able to refuse, because if they did, then they would not be able to get milk from anywhere else, and so could lose out on profit because milk is a good that is sold a lot. A cartel is when a group of firms come together to agree price and output levels in an industry. If milk processors formed a cartel, then their competitive advantage would rise, because they would be able to have some control over how much supermarkets such as Tesco’s, which is the leading supermarket because it has a 31% market share, pay for their milk. However, the problem with forming a cartel is that it is illegal in the UK, and so if the companies involved are found out, then legal action can be taken to stop it. If the milk processors were found forming a cartel, or being part of a cartel, then they could lose their profits because they might have to pay a fine, which would cause more problems, however if the supermarkets got found out in an investigation then it would be very good for the milk processors because they won’t have had to do anything to increase their

More about Discuss How Milk Processors Might Try to Improve Their Competitive Advantage in the Milk Industry. Which Strategy Is the Best?

Open Document