Is Nakumatt Operating As A Monopoly In My Residential Area Economics Essay

Here in Kenya, all large metropoliss and many of the smaller towns have at least one supermarket. The quality ( of goods and services ) is normally rather high. When we enter a supermarket, we find Kenyan and other regional trade names every bit good as many Western and International. AA supermarketA is aA storeA that sells a broad assortment of goods includingA foodA andA intoxicant, medical specialty, A apparels, and other family merchandises that are consumed on a regular basis[ 1 ].A The shops are normally portion of corporateA chainsA that ain or command other supermarkets located nearby or even transnationally therefore increasing chances forA economic systems of graduated table[ 2 ]( this is the lessening in cost of production that occur as a house increases all its end product by increasing all its inputs. Economies of graduated tables explain the downward inclining porting of the long tally norm entire cost curve: as end product additions, and the house increases its size by all inputs, as the mean cost or cost per unit, falls ) . The supermarket typically comprisesA meat, freshA green goods, A dairy, and baked goods sections, along with shelf infinite reserved forA cannedA and packaged goods every bit good as for assorted non-food points such as family cleaners, A pharmacyA merchandises andA petA supplies. Most supermarkets besides sell a assortment of other family merchandises that are consumed on a regular basis, such as alcoholA ( where permitted ) , A medical specialty, andA apparels, and some shops sell a much wider scope of non-food merchandises[ 3 ]. In Kenya, the supermarket industry has grown from a bantam inch at the start of the 1990s to 20 % of the urban nutrient retail sector in 2003. Furthermore, Kenyan supermarket ironss are progressively sourcing from planetary markets and have started to spread out their shop web in the wider East Africa part ( Kigali, Rwanda )[ 4 ].

With 18 large shops, Nakumatt is the biggest supermarket concatenation in Kenya. Its chief rival Uchumi used to be large excessively, but it had to shut due to fiscal troubles. Meanwhile it has reopened 14 stores once more in major metropoliss. In the Kenyan supermarket industry we besides find Chandarana ltd and Tuskys. Nakumatt and Uchumi are two Kenyan supermarkets which non merely have subdivisions in Kenya but besides in other parts of E Africa. Hence my involvement and hence my research inquiry is: Is Nakumatt Ltd runing as a Monopoly in my residential country?

I live at 500m from the YAYA Center ; at my location, I am surrounded with 6 large subdivisions of the chief supermarkets in Kenya. The 6 supermarkets that you will happen in this country are: on Ngong Road: Nakumatt Prestige, Uchumi hyper Ngong route, Tuskys Adams, Uchumi Adams, and Nakumatt Junction, in the YAYA Center: Chandarana Ltd. I have ever been inquiring how these supermarkets do to last together and particularly Nakumatt and Uchumi, why do they have to different subdivisions in the same country. The intent of this drawn-out essay is to happen out by utilizing informations aggregation and after an interview with the subdivision directors of all these supermarkets replying to the inquiry: whether or non Nakumatt is runing as a monopoly in the supermarket industry in my residential country? Researching for this essay will enable me to understand or hold an thought of how these supermarkets can cohabit-ate together in the same country.

Methodology of informations aggregation

To reply this essay inquiry, which is to cognize if Nakumatt ltd is runing as a monopoly on the consumers who live is the same residential country as me. To be able to prosecute this study, I used the most common research method which is to manus out a figure of questionnaires to people that I know and others populating in a scope of 1km from me. I will utilize primary beginnings. First I will be giving out 50 questionnaires to people populating in my compound and in the environing countries. With all the replies, I will be able to happen out which one of the supermarkets located near where I stay is more popular, is averagely gaining more and their choice hours. It will besides assist me to cognize how frequently people normally frequent these supermarkets, how much do they pass and how long do they remain in at that place depending on the clip. The fact that I am giving out the questionnaires, I non to demo that I did some research but to see ( hear ) what the populace ( clients ) have to state about the supermarkets because their sentiment counts every bit equal as or even greater than the one from the proprietors of these supermarkets because we are all worlds and it is expected for the directors to be bias about their supermarkets. The 2nd method I will utilize is the face to confront interview with the subdivision directors of these supermarkets which is besides really of import but more important because it will assist me to hold existent informations statistics on the population that frequents them daily, hebdomadal monthly and yearly. And besides it will assist me to cognize their scheme and programs on the market to be able to understand the construction in which they are runing on whether it is a monopoly or an oligopoly market. This method will be the hardest because holding the opportunity to hold a meeting with these directors when you are non a man of affairs who can lend in the wellbeing of the company can be a bunco ( really complex undertaking ) ; these people are really busy work forces and have really many things to make on their docket.

I will besides utilize a secondary beginning: The Internet. With the cyberspace, I will be able to hold auxiliary information and have a greater figure of beginnings.

Related information

Market Structures

A market construction describes features of a market organisation that determine the behaviour of houses within an industry. There are four types of market constructions identified by economic experts:

Perfect competition ( besides known as pure competition )

Monopoly

Monopolistic competition ( besides known as imperfect competition )

Oligopoly

A market construction can be defined on the footing of four chief features:

The figure of houses in the industry.

The ability of the house to command the monetary value at which the good is sold in the market.

The types of merchandise, in peculiar how similar or different are the goods or services produced by houses in the industry.

how easy is it for new houses to come in the industry and get down bring forthing, which depends on the grade to which there are barriers to entry in the industry ; barriers to entry include anything that can forestall a house from come ining and get downing production[ 5 ]

Perfect competition

This is a strictly theoretical type of market. It has a really high degree of competition and has the undermentioned features: there are an infinite figure of purchasers and Sellerss, all the houses produce the same indistinguishable merchandise ( homogenous ) without any distinction ( branding ) . There is perfect information and no trade secret which allows the consumers and the other manufacturers to cognize what is go oning in the market at any clip, there is no intercession of any authorities in the manner the market interacts.

Monopoly

A monopoly is a market construction in which we merely have one house in the industry and the house is the industry. A monopoly operates with the undermentioned features: the barriers to forestalling new steadfast signifier come ining the industry are really high ; the house is the monetary value shaper which means that end product will depend on the monetary value set by the house ; the monopolizer is a short tally net income maximizer.

In facts, we have two types of monopolies: natural monopoly and pure monopoly.

A natural monopoly exists when there is great range for economic systems of graduated table to be exploited over a really big scope of end product. Indeed the graduated table of production that achieves productive efficiency may be a high per centum of the entire market demand for the merchandise in the industry[ 6 ].

A pure Monopoly exists when a individual house is the exclusive manufacturer of a merchandise for which there are no close replacements[ 7 ].

An Actual Monopoly is when the house has more than 25 % of the market portions[ 8 ].

Monopolistic

Monopolistic competitionA is a signifier ofA progressive competitionA where many viing manufacturers sell merchandises that areA differentiatedA from one another ( that is, the merchandises areA replacements, but, with differences such as stigmatization, are non precisely likewise ) . In monopolistic competition houses can act likeA monopolies in theA short-term, including utilizing market power to bring forth net income. In theA long-run, other houses enter the market and the benefits of distinction lessening with competition ; the market becomes more likeA perfect competitionA where houses can non derive economic net income. Monopolistic competitory markets have the undermentioned features: We have a big but non infinite figure of manufacturers and a greater figure of consumers. And due to their comparatively little size, there is non a individual house that has entire control over the market monetary value. But the manufacturers have merely a grade of control over monetary value. Consumers perceive that there are no differences in monetary value between the rivals ‘ branded merchandises. The barriers to entry and issue are really few ( non to state that they practically do non be ) . The costs for the house are really low, which makes it easy for new reachings to come in the industry or others to go forth.

Oligopoly

An Oligopoly is a market construction where we have a few houses who dominate the market, these houses might be bring forthing similar merchandises, but the merchandises can be differentiated ( branded ) . Supply in the industry must be concentrated in the custodies of comparatively few houses and ascendant houses are independent. Barriers to entry are present particularly due to collusion and economic systems of graduated table ; and monetary values are likely to be stiff as houses use non-price competition. Firms can do unnatural net income in the long tally though they may non be really high[ 9 ]. When houses decide to conspire, they start bear downing at the same monetary value, and besides holding a monopoly power and playing as one monopoly. Any monopoly net income made is divided up among the houses taking portion of the collusion.

Background information

To transport out this probe, and establish our theory on our findings, we must cognize about the yesteryear of these supermarkets: because it is really of import to cognize how their started, who owns them ( authorities, cooperation or household ) , their existent market portions, how many subdivisions have they managed to open so far.

Nakumatt

Nakumatt was established in 1987 as the inspiration of the late retail guru Mr Maganlal Shah who founded Nakuru Mattresses before go throughing the mantle to Mr Atul Shah, the current managing Director. The supermarket concatenation was founded as a 10 square pes “ department store ” which has grown to cover a selling infinite of more than one million square pess, with the caput office and distribution centre busying some 140,000 square pess of storage and office infinite. The final payment line “ You need it, we ‘ve got it! ” indicates Nakumatt ‘s committedness to supplying the largest assortment and highest quality of local and international trade names at sensible and unvarying monetary values. The Nakumatt Smart Card is a trueness plan started in 2003 that enables clients to roll up “ smart points ” with their purchases. On accretion a certain sum of points, clients can claim “ smart ” wagess and awards. Smart Card shoppers besides enjoy price reductions with service suppliers, random surprises on birthdays, off-peak clip dual points and salvation points for purchases.

The retail concatenation has expansive programs for the hereafter.

These include:

aˆ? Increasing the scope of goods available to Kenyan consumers at low-cost rates.

aˆ? Bettering the local economic system by using more Kenyans.

aˆ? Delivering expected fiscal consequences by supplying quality, assortment, exceeding, service and enhanced life styles.

aˆ? Increasing investings in preparation and development of staff to guarantee public presentation and occupation satisfaction.

aˆ? Developing an integrated countrywide Network.

aˆ? Increasing turnover to KSh 20 billion ( 285.7 million US dollars ) .

aˆ? Expanding to the sub-continent.

aˆ? Listing on the Nairobi Stock Exchange.

Beginning: hypertext transfer protocol: //www.superbrandseastafrica.com/assets/Featured-Brands/PDFs/129-nakumatt.pdf

Tuskys

Tuskys, is said to be the 2nd largest retail merchant in the state with more than 18 shops all over the state, operates supermarkets and has been able to seal any spreads left by Nakumatt. The retail merchant late rebranded from Tusker Mattresses to Tuskys, a mark of the company ‘s transmutation from a household concern to a corporate entity. Due to popular demand and the deficiency of land available in the capital for big sized shops, Tuskys has been forced to relocate some of its shops in Nairobi and the retail merchant is presently spread outing its web into suburban territories such as Thika, Athiriver and Rongai. Tuskys ‘ latest shop has besides opened farther afield in the lakeside metropolis of Kisumu in the West ofA Kenya, near to the Ugandan boundary line.[ 10 ]

Tuskys is the first supermarket in the whole of Kenya to present the usage of the fidelity smart card. This is a trueness card which gives a 1Ksh verifier to the card holder for every 100Ksh purchase this verifier can be used to purchase any points at any times merely purchase showing your designation.

Uchumi

UchumiA is aA KenyanA supermarket chainA which was founded in 1975 and which was listed on the Nairobi Stock Exchange in 1992.The nameA UchumiA means “ economic system ” inA ” Swahili ” , the Kenyan National linguistic communication. Uchumi operates 4 hyper-stores, 8 supermarkets and 2 convenience shops, and employs more than 1,000 people. Uchumi has shops in the major towns ofA Nairobi, Karatina, A EldoretA andA Meru[ 11 ]. Whilst Nakumatt and Tuskys are playing a prima function inA Kenya ‘s burgeoning retail market, Uchumi Supermarkets, presently positioned in 4th topographic point inA Kenya, has had a history of fiscal jobs. The company ‘s jobs have derived from general misdirection and corruptness issues, and Uchumi was expected to either decease a natural decease or be sold to another retail merchant when its former managing manager, John Smith, announced its closing in June 2006[ 12 ]. Uchumi closed down, albeit temporarily, in June 2006 after 30 old ages of business.A At the clip, its closing was described as “ one of the greatest corporate catastrophes in independent Kenya history ”[ 13 ].A However, the authorities is one of the laminitiss of Uchumi Ltd so allowing Uchumi near down was non in their involvement. So they had to sell 50 % of the company ‘s portions to the populace in order to deliver the trade name. Then Uchumi started reopening all over Nairobi from July 15, 2006. Uchumi receives more than 3000 clients daily. The authorities controls the quality and the pricing of the goods. All the goods in Uchumi are certified and approved by the Kenya Bureau of Standard ( KBS ) . Uchumi used to hold an one-year magazine demoing all the points they have in stock ; but this stopped when it closed down. They use multiple ways of advertisement like the wireless, the telecasting and the newspapers. They besides have a smart-card. Merely during Christmas, the shops are opened 24/7, this is because, they think that it is non effectual in Kenya. They offer a place bringing service orderable from their web site and the charge depends on the distance of your location. Uchumi believes that what makes them attracts their clients is their “ client service ” and besides believe that their rivals have n’t reached that degree. Uchumi own all their edifices. They have the option of paying electricity measures with a Kenya power counter ; this attracts besides the clients to come in the supermarket as they can avoid any congestion alternatively of traveling to the Kenya Power office.

Chandarana

Chandarana Supermarket Ltd is a retail concatenation in Kenya covering with consumer merchandises. It is presently headquartered at Mobil Plaza, Muthaiga in Nairobi. It has four Branches within Nairobi – Yaya centre, ABC Place, Muthaiga and Highridge. In this research, merely the 1 located in the Yaya Center will be studied. I chose to include Chandarana in my survey because when we foremost came to Kenya ( my household and me ) , we bought from there everything belonging to the house there and even nutrient supplies.

Presentation of informations collected

To transport out the study I gave out 38 questionnaires to first peoples populating in the same compound as me so some people that I know in the surrounding houses and flats. I know that I did n’t run into my objective which was to give out 50 questionnaires as I mentioned in the METHODOLOGY OF DATA COLLECTION, but this was due to multiple grounds. I could merely make the study with people who knew me because other possibly did n’t swear me ( even though I showed them my school designation card and my recommendation missive ) or felt like I was inquiring them inquiries about them private life. I gave to all of them a period of 3 hebdomads to reexamine their wonts and be able to reply without holding to do difficult picks. The ground why I gave them 3 hebdomads is because people tend non to state the truth when they are given 5 proceedingss to reply. With all this period of clip, they can analyse every inquiry and reply it with a composure and clear province of head. As I said it earlier, I live near the YAYA Center in Kilimani. The YAYA CENTRE is a modern multifunctional shopping promenade, it was founded in the late 1880ss in Nairobi and is today one of the taking shopping promenades lodging over 100 stores and offices[ 14 ].The diagrams below shows the consequences of my probe.

Nakumatt

Uchumi

Tuskys

Chandarana

27

2

6

3

71 %

5 %

16 %

8 %

This tabular array shows the repartition in Numberss and in per centums of the consumers depending on the supermarkets they frequent the most.

This pie chart has the same map as the tabular array above it. This chart is easier to understand and shows the differences between the supermarkets in footings of popularity. But I believe it is a good representation of the whole population in my residential country.

By the terminal of this research, I found out that 71 % of the surveyed population was Nakumatt true clients, 5 % of them were Uchumi clients, 16 % of them were Tuskys clients, and 8 % of them were Chandarana clients as shown on the tabular array and the pie chart above.

As we all know, in a monopoly market, we merely have one house, and that house is the industry. If we refer to the pie chart and stick to the traditional definition of a monopoly, we can non presume at 100 % that Nakumatt is runing as a monopoly in my residential country, because we besides have other “ different ” supermarkets runing in the same country.

If we were to establish our facts on the information from the probe, we could state that the representation of the supermarkets in my residential country demonstrates that Nakumatt Ltd is the most dominant supermarket in Kilimani. And position to its comparative size and figure of clients, we could besides state that it does hold monopoly power in my residential country ; because if we may state, it controls 71 % of the population.

Age

Nakumatt

Uchumi

Tuskys

Chandarana

Entire

under 18

3

1

A

A

4

19-25

4

A

2

A

6

26-30

5

A

A

A

5

31-35

6

1

1

1

9

36-45

8

A

1

2

11

over 45

1

A

1

A

2

entire

27

2

6

3

38

From this tabular array, we can see that the age distinction does n’t count because these supermarkets are stocked in order to fulfill the whole of the population that can afford their points. This means that the age of the persons will non be an obstruction for them run intoing their wants as the supermarkets are prepared to fulfill anyone. I do non believe that we should put a theory on a supermarket for being destined more for a specific age category.

Decision

By and large supermarkets in Kenya and all over the universe belong to the Oligopoly market. This is because the supermarket industry I being run by a small sum of of import trade names. It might be confounding for stating that Nakumatt is a monopoly and subsequently stating that it is non. This is because by analyzing how Nakumatt operates in the industry and how they interact with their clients and besides their entire market portions, we could post them in a place of a Monopoly. Although, even though they might hold the features of a monopoly, the presence of other houses ( Uchumi, Tuskys and Chandarana ) discredits the possibility of them being one. After making all the necessary research, I came up with a decision which states that “ Nakumatt does n’t run as a monopoly in my residential country, but in that oligopoly market, it has a monopoly power on clients ” , which makes them practically all choose Nakumatt.