Use the definitions of Industry, Sector and Subsector from FTSE Russell’s (2017) Industry
Classification Benchmark (ICB). This can be accessed from the PDF document titled ‘Industry
Classification Benchmark’ v2.3, available from https://tinyurl.com/yc4m464v.
• The task should be presented as an academic business report with the following sections:
- Cover page
- Table of contents
- Body with sub-sections
The food manufacturing industry is mainly divided by a few high profit, large corporations, therefore we can recognise that this industry has a Monopolistic competition competitive structure. A monopolistic competition is an industry that has characteristics of competition and monopoly. The industry comprises many firms, which offer substitute products, and many buyers. Although the products are substitutes, they are differentiated on the basis of physical attributes, image, advertisements and accompanying services. Gilani (2018) To provide evidence for this I measured the concentration ratio of the food manufacturing industry in the UK. The UK food manufacturing industry had a market size of £28.8 billion in 2017. (GOV.UK 2017). The top 5 companies in the industry had a combined market share of £12.5 billion. Robinson (2014) Therefore we can determine that the concentration ratio of the UK food manufacturing industry is 43%. Ultimately determining that the UK food manufacturing industry has a Monopolistic competition competitive structure, but furthermore this degree of competition currently in this industry is an indication of a fall in competitive pressures. And could also lead to a rise in prices for consumers. Product Pricing: Edward Chamberlin the developer of the monopolistic competition model, recognised that within a monopolistic competition such as the food manufacturing industry the products of rival firms are not at all homo-genius, for example each brand has its own personal characteristics, often set out through marketing campaigns to establish a brand identity, though the composition and the basics remain the same. This is the reason that each, individual brand is sold pricing decisions individually in the market, this shows that each brand is highly differentiated in the minds of the consumers. Under monopolistic competition the firm has some freedom to fix their price, due to the fact that differentiation between firms will not lose all customers as it increases in price. For example, the demand curve for the food manufacturing industry, with its monopolistic competition structure, would be less than perfectly elastic due to the fact that no firm dominates the industry due to product differentiation. The product of each firm seems to be a close substitute, though not a perfect substitute for the products of the competitors. Due to this, the firm in question has high elasticity of demand. Providing further evidence to the fact that firms in the food manufacturing industry has its own share of monopoly power, meaning that prices are mainly controlled by the firm, resulting in rising prices as competition rises in the market. JBDON (2017) Relating back to Brexit, the results could mean that prices in the food manufacturing industry could potentially rise, this is due to the fact that export and import prices could see a downturn, therefore in order to survive firms in the market will start profit maximising to reverse the adverse effects of an economic downturn, firms will rise their prices at an uncapped rate due to the competitive structure of the industry being a monopolistic competition.>GET ANSWER