Two good articles about the news that Morrisons have a £176m pre-tax loss for the year to February 2, and the strong impact that their plans to compete hard with the discount retailers has had on the stock market value of Tesco and Sainsburys.
We often cite the UK supermarket industry as an example of an oligopoly market, and today's news around Morrisons gives plenty of scope for students to use some stakeholder analysis to look at what is going on in that market - who wins and who loses?
For this one from the Daily Telegraph, 'Morrisons price war fears wipe £1.3bn off supermarkets', I would be inclined to give students the article to read and ask them to use economic theory to explain the headline, and the reference in the article to "pricing contagion" - and hope that their analysis would make use of some classic oligopoly material with the kinked demand curve, the dangers for oligopoly producers of price wars and game theory featuring strongly.
This second article, from the BBC website, has a bit more detail about the way in which Chief Executive Dalton Philips sees the market changing, with an emerging gap between the discounters and the 'big four', which he hopes Morrisons will be able to fill. Here is a quotation from him in the article: "We have identified over a billion pounds that we can take out of our business now and that billion pounds is going to be invested back into our proposition to get those lower prices for our customers." Can students produce graphs to show this?
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