Professional Documents
Culture Documents
www.emeraldinsight.com/0140-9174.htm
Monopoly in the
twenty-first
century
Jennifer Rowley
Manchester Metropolitan University, Manchester, UK
Abstract
751
Purpose The purpose of this paper is to propose that the traditional definition of monopoly needs to be
extended to accommodate twenty-first century marketplaces. The concept of superpoly is defined and
discussed. Superpoly is a development of the concept of monopoly to accommodate market structures in
networked and knowledge-intensive economies characterised by a high underlying level of consumer choice.
Design/methodology/approach A definition of superpoly is offered and each of the seven market
spaces in superpoly are defined and illustrated with reference to Tesco, the UK supermarket chain. A
discussion section explores the issues that arise from over-dominance of one business in each of these spaces
in terms of the positives (typically emphasised by the dominant business) and the negatives (typically
emphasised by other stakeholders).
Findings In order to achieve a state of superpoly, businesses focus on seven interrelated market spaces,
including respectively: commercial space, channel space, consumption space, community space, cultural
space, career space, and communication space. These are the seven spaces of superpoly. The proposed
concept of superpoly suggests that researchers should take a broader perspective on competition and
competitive practices.
Originality/value The article is the first to propose a development of the concept of monopoly and
business dominance for knowledge-based, consumption focussed and networked societies and economies.
Keywords Monopolies, Modelling, Stakeholder analysis, Supermarkets, United Kingdom
Paper type Conceptual paper
Introduction
Monopoly is a fundamental economic concept, which is thoroughly embedded in
theoretical discussions about how markets operate. Furthermore, societies generally
deem monopolies undesirable and have sought to control potential monopolies by
regulation. When monopolies become too powerful, the state may intervene to forcibly
break up a monopoly, regulate it or convert it into a public-owned enterprise. In a
global marketplace, states may only be able to exercise limited power over monopolies;
however, this does not alter the fact that monopolies are a concern to societies.
As is suggested in the following quotes, monopoly is an economic concept that has
its roots in a focus on competition:
Monopoly is a circumstance in which one company supplies the entire market. . . .
monopolistic competition occurs when one company has a controlling share of the markets
and other small companies follow its lead in setting prices and producing goods (Blythe, 2006,
p. 20).
In economics, a monopoly is defined as a persistent market situation where there is only one
provider of a product or serve. . . Monopolies are characterised by a lack of economic
competition for the good or service that they provide and a lack of viable substitute good
(www.en.wikipedia.org/wiki/monopoly, accessed 7 December 2006).
MRN
32,8
752
and Payne et al. (2005) both propose the six markets model, which identifies six different
stakeholder groups and their associated markets (customer, supplier, internal,
influence, referral and recruitment). They implicitly identify six market spaces in which
businesses operate and thereby identify six different spaces in which businesses can
potentially be dominant or develop and exert a monopoly. This leads to the proposal that
monopoly in twenty-first century markets is a multi-dimensional concept.
The current flurry of activity on corporate social responsibility (CSR) (summarized,
for example, by Jones et al., 2005) suggests that businesses are consciously managing
their reputation and seeking to be viewed as participating in communities and taking
appropriate social and environmental action. According to Wood (1991), the basic idea of
CSR is that business and society are interwoven as opposed to distinct entities. Typically,
CSR involves both internal and external dimensions, which relate, respectively, to
socially responsible practices within the company (such as health and safety at work and
the management of environmental impacts) and socially responsible practices that
extend beyond the company into the local community and the world beyond and involve
a number of stakeholders (such as reducing the consumption of natural resources,
polluting emissions, and waste products) (CEC, 2001).
This article develops the concept superpoly to refer to this new type of monopoly.
Importantly, it is argued that superpoly is more than the sum of monopolies in different
market spaces, since marketing strategies, actions and competences that focus on one
space typically have impacts on other spaces.
The purpose of this article is to define and discuss the concept of superpoly and
thereby to introduce a concept, which will:
.
Inform policymaking.
The article deliberately avoids making value judgements about whether or not
superpoly is a positive or negative development. In addition, the use of Tesco as a case
study should not be taken to imply that Tesco is currently in a state of superpoly or
even monopoly. It is, however, in a position of market dominance and its efforts to
dominate all of the market spaces that comprise superpoly and the responses that these
actions have provoked make Tesco a useful example of an organization that is, at the
very least, reaching towards superpoly.
The next section of the article defines superpoly and explains its origins. Discussion
of the issues and challenges for all of the stakeholders of an organization operating
under, or striving towards, dominance follows. The article concludes by urging a greater
awareness of these issues and more in-depth understanding that in a knowledge-based,
consumption-focussed, networked society more rounded appreciation of the nature of
business dominance would serve all stakeholders in the longer term.
The case study: Tesco
Large retailers and supermarkets, in particular, are viewed as having a significant
control over consumer spending and a corresponding impact on the supply chain,
society and the environment. Indeed, campaign groups have been formed to challenge
the environmental and social impacts of the power of such supermarket chains. For
example, the tescopoly campaign is a response to the increasing dominance of Tesco
and other large supermarkets in the UK grocery market. The tescopoly alliance claims,
Tescos success is partly based on trading practices that are having serious
consequences for suppliers, farmers and workers worldwide (www.tescopoly.org).
The above statement identifies three stakeholder groups and thereby three market
spaces in which Tesco is currently creating tension suppliers and farmers (channel),
workers (career), and local shops (commercial). Nonetheless, the importance of other
groups such as citizens and consumers, and thereby other spaces in which businesses
strive towards market dominance is overlooked. Simms (2007) and Fishman (2007)
(writing about Tesco and Wal-Mart, respectively) are challenging critiques of the impact
of supermarkets on society which show how supermarkets shape lives everywhere.
They implicitly recognize that large supermarkets exert power and control in market
spaces that go beyond the commercial, career, and channel market spaces.
Observation of the growth and development of Tesco and an analysis of its use of
customer data through Tesco Clubcard suggest that Tesco is suitable for further
analysis. Accordingly, this paper utilizes a holistic single case design to view the
surrounding world to ask how or why type questions (Yin, 1994). Typically, single
case designs are appropriate when the case has something special to reveal, which
might act as a point of departure for challenging received wisdom and prior theoretical
perspectives and assumptions. This is the case here. The purpose of this research is to
analyze an innovative case in pursuit of the formulation of a refreshed statement of the
nature of monopoly in knowledge-based, consumption-driven and networked societies
and marketplaces. Desk-based research has been conducted to gain a thorough
understanding of Tesco and its activities. These characteristics are discussed and
analyzed to illustrate and assert the proposed seven market spaces of superpoly.
Tesco, a major UK-based supermarket retailer has been chosen as the case in this
analysis for the following reasons:
.
Tesco has the largest market share of grocery retailers in the UK (30.5 per cent in
mid-2006 and its share is only slightly less than that of the two largest
competitors Asda (16.6 per cent) and Sainsburys (16.3 per cent) combined (see
http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/4694974.stm).
Tesco has a huge impact on consumption. Tesco accounts for 1 in every 7 spent in
British shops (Finch, 2006a). Tesco is now the dominant supermarket in 81 of
Britains 11 postcode areas (Finch, 2006b). Inverness has been branded as Tesco
town since an estimated 50p in every 1 spent on food is believed to be spent in the
three Tesco stores in the city (see www.en.wikipedia.org/wiki/Tesco). In 2005, 53.1
per cent of all households in the UK visit a Tesco store in any four-week period.
Tesco has more sales space in the UK than any other leading supermarket. It
currently has 1897 stores in the UK with 124 store openings planned by early
2008 and an increasing store portfolio in the Czech Republic, Hungary, Poland,
Republic of Ireland, Slovakia and Turkey (see www.tescocorporate.com).
Monopoly in the
twenty-first
century
753
MRN
32,8
754
Comment
Extra
Superstore
Compact
Metro/high street
Express
Table I.
Tesco store formats
range of businesses, each of which may have positioned themselves on the basis of
location or convenience, including other supermarket chains such as the Co-operative,
Boots for pharmacy, independent greengrocers and butchers, bakery chains such as
Greggs, garage forecourt stores, independent book sellers and book, music and media
retailers such as HMV, W. H. Smith and Amazon. When planning permission refusals
have resulted in difficulties for expansion in the UK, Tesco has turned to growth in
foreign markets (see www.tescocorporate.com).
Channel space
Channel space is the space in which the business manages the organizations in its supply
chain. Tesco has been extremely proactive in managing the efficiency of its supply chain
processes adopting just-in-time models (with the assistance of information and transport
technologies) that, for instance, ensure very short times between picking and display in
store of fresh food. Tesco was an early investor in technology solutions to support the
management of its supply chain. Between 1983 and 1996, it introduced point-of-sale
(POS) scanning, centralised automated ordering, centralized distribution, automated
warehouse control and introduced EDI with its main suppliers. These innovations
reduced lead times with significant consequences for stockholding levels and the
capacity to manage the supply logistics associated with expansion in product ranges.
More recently, Tesco has concentrated on applying lean manufacturing principles
to its supply chain, optimization of transport utilization and the use of Clubcard and
online shopping data to ensure that the right stock is in the right place at the right time
( Jones and Clarke, 2002). Through standards, policies and contracts, Tesco can use its
power as a customer to the food production industry to make exacting demands in
terms of behaviour, processes, timing, and margins. Tesco can be seen to be in
competition for profits with organizations in its own supply chain.
Consumption space
This is the space in which the business strives to influence and control consumption
through its product and service portfolio. Tesco was originally a food retailer or grocer.
Recently, it has extended its control over consumption by expanding its product
ranges. In the food sector, Tesco now offers the following brand ranges to meet the
needs of different tastes and pockets: value, brand (Tesco), finest, healthy living, kids
and organic (see Table II). Non-food products now sold through Tesco stores include:
clothes, consumer electronics, financial services, music, telecommunications, and
budget software. This diversification means that Tesco have positioned themselves to
try to take an ever-larger share of their customers purse. This extended range also
means that Tesco is now a significant player in these areas, and for, example, competes
with banks and insurance companies in the financial service sector.
Community space
This is the space in which the business becomes an integral part of social (in addition
to the commercial) communities. Increase in the number of Tesco outlets automatically
increases the significance of Tesco stores as a meeting place for neighbours and
friends. Initiatives such as Tesco in the Community and Computers for Schools
demonstrate Tescos desire to be seen as engaging with the community. Tesco also
promotes healthy eating, recycling and urban regeneration and support charities.
Recent initiatives include Green Clubcard points, encouraging re-use of carrier bags,
nutritional labels, and Christmas card recycling. Tesco is also a member of the Business
Monopoly in the
twenty-first
century
755
MRN
32,8
Range
Comment
Tesco value
Around 1,000 lines. Lines are benchmarked against the cheapest branded
competitor in terms of quality and the cheapest supermarket or discounter
in terms of price
More than 8,000 lines. Product specifications are positioned to achieve
market leading quality at a lower price than the market leader
950 lines. A response to changing lifestyles and designed to capture a
greater proportion of spend from existing customers; reinforces the
affluent image of the product
400 products. Covering both food and non-food, and designed to respond
to the increasing interest in healthy eating and sports and fitness
40 lines. Aimed at children aged 5-10 years, and designed to increase
nutrients in childrens diets
1,200 products. Covers produce, diary, bakery, meat, baby and BWS (beers,
wines and spirits).
150 products. Designed for those with food allergies and intolerances.
100 products. Guarantees that developing world farmers are paid a fair
price, plus a premium to be spent on community projects in healthcare,
education, sanitation and housing.
Tesco brand
756
Tesco finest
Healthy living
Kids
Organic
Free from
Fairtrade
Table II.
Tesco brand ranges
Source: www.tesco.com/talkingtesco/retailing
in the Community Per Cent Club, giving 1 per cent of its pre-tax profits to community
activities. Tesco has adopted community as one of its core steering priorities
alongside customers, operations, finance and people (see www.tesco.com/talkingtesco/
retailing, accessed 5 January 2007; Prynn, 2006). Sir Terry Leahy, Tescos Chief
Executive Officer, in a recently made statement, reinforces this focus:
The battle to win customers in the 21st century will increasingly be fought not just on value,
choice and convenience, but on being good neighbours, being active in communities, and on
behaving responsibly, fairly, and honestly (Butler, 2006).
In addition, deals forged with planning authorities often lead Tesco to make a variety of
other investments in local infrastructure and services, which can make it difficult for
communities to say no to their involvement. Further, Tesco also has its own communities.
Tesco Clubcard is an umbrella membership organization for Tesco customers and there are
opt-in clubs including wine, healthy foods and baby products, which typically also have an
online presence. These clubs are designed to meet a genuine customer need and seek to
promote emotional attachment to the Tesco brand (Humby et al., 2003).
Cultural space
This space is the one in which the business seeks to influence the values and identities
of consumers and possibly communities also. Tesco seeks to influence the values and
behaviour of both their suppliers and consumers. In the context of suppliers, Tesco
indicates that they:
Expect all Tesco suppliers to extend fair and honest dealings to their employees and to all
whom they do business with . . . In 2001, we developed a new course for our buyers and
technical managers to raise their awareness of the Ethical Trading Initiative, ethical issues, and
worker welfare in the supply chain (see www.tescocorporate.com).
These co-branding strategies both build brand presence and create stronger fun and
pleasure connotations to the Tesco brand. Quarterly mailings of Clubcard reward coupons,
together with product coupons are also a significant but targeted and personalized
opportunity for Tesco to talk to their customers. After all, very few people will throw their
reward envelope in the bin as unopened junk mail when it contains reward coupons.
Career space
The business determines employment and advancement opportunities and experiences
in this space. Accordingly, pay, working experience, workplace values and priorities as
well as development and career opportunities shapes not only the lives of employees but
also the lives of their families. Consequently, they have a significant impact on the social
and economic lives of the community from which staff are drawn. Retailers as employers
have replaced the factories and mines of industrial society as major influences on the
community. As an employer in the UK, Tesco is second only to the NHS and was the UKs
largest private sector employer in mid-2007 (see www.tescocorporate.com). Tescos
Monopoly in the
twenty-first
century
757
MRN
32,8
758
activities in these areas embrace careers and training, health and safety, inclusivity
(specifically people with disabilities and older people) and family friendly policies.
In Table III, the market spaces of superpoly are summarized. These seven market
spaces are not, however, independent. Strategies and actions that advance dominance
in one of the spaces often create synergies that allow expansion in other market spaces.
For example, strategies in the communication space are typically intended to build
brand community, thereby placing the business in a stronger position to make its voice
heard and to influence the community space and values in cultural space.
Building a presence in the consumption space through expansion of product
portfolios has potential to increase power in the commercial space by strengthening a
businesss competitive position relative to other businesses. A good example that is
specific to Tesco is their commitment to purchase from local suppliers (www.tesco.com/
talkingtesco/suppliers). By sourcing a significant proportion of fresh produce locally,
Tesco manages channel space by reducing distances from farm-to-store they also
affect the local economy and thereby manage their influence in the community space.
Responses to superpoly
Superpoly, like monopoly, is a result of business dominance in the marketplace. This
dominance is achieved through the management of presence in the seven market
spaces. As with monopoly, whether or not any specific business has achieved a level of
dominance that can be described as superpoly is open to debate. In each of the different
market spaces, there are both positives and negatives associated with one large
business holding a dominant position.
Positives are often embedded in the rhetoric of the business and are marshalled to
manage reputation and relationships in pursuit of business performance. Other
stakeholder groups, acting on behalf of the environment, communities, farmers or
planning authorities, typically argue negatives. Table IV illustrates the congruence
between issues and superpoly market spaces and shows how the seven spaces offer a
framework for ensuring that all dimensions of superpoly have been fully considered.
This reduces the danger of guerrilla skirmishes between powerful businesses and their
stakeholders, which resolve little and leave most fronts intact for further stand-offs at a
later stage.
Protestors, in particular, need to recognie that while they may seek to damage the
brand reputation, the business will recognize the threat and take defensive action to
protect their position. By engaging, they are providing the business with more
knowledge of their stakeholders, which can be leveraged by an effective superpoly to
its own advantage. Even though not all members of any community will agree with
Table III.
The seven market
spaces (7Cs) of
superpoly
Market space
Focus
Commercial
Channel
Consumption
Community
Cultural
Communication
Career
Space
Commercial space
.
.
Channel space
.
.
.
.
.
.
Convenience
Customer has outlet/channel
choice
Consumers benefit from
competitive rivalry
Competitive pricing
.
.
Consumption space
.
.
.
Convenience
Brand reliability
More competition drives prices
down and quality up
.
.
Community space
Cultural space
Communication space
.
.
.
.
Career space
Monopoly in the
twenty-first
century
759
Table IV.
Market spaces: pros and
cons of market
domination
MRN
32,8
760
everything that an organization does, protestors are in danger of providing the brand
publicity and joining the brand community.
Discussion thus far has been concerned primarily with business and other
stakeholders in this context, a specific reference to consumers is required. While
many consumers may align themselves with the protestors and echo the negatives (for
example, the negative power of supermarkets), there is also a consumer voice (and
behaviour) that supports the large supermarkets. Some consumers are happy with
market dominance, if it delivers to them what they want or what they think they want.
Such consumers might argue thus:
If they are successful, we should be congratulating them and emulating them.
Curbing supermarkets to make them more in line with local shops. . .would be infringing on
consumer rights.
They are an essential part of todays society.
I would love to shop locally at independents, but I get home after 7pm and do not have time to
travel to the high street.
Tesco have built up a strong market position because customers choose to shop there (see
http://www.newsforums.bbc.co.uk/nol/thread)
In the light of the above discussion, a critical question emerges. Given that large
businesses operate in a variety of market spaces that influence our environment,
communities, consumption patterns and values, can members of society ever make
informed decisions about what they really want?
Conclusion
This paper defines superpoly as a development of the concept of monopoly to
accommodate market structures in networked, knowledge-intensive economies
characterized by a high underlying level of consumer choice. Such marketplaces are
divided into the seven interrelated market spaces of superpoly. This article suggests that
in todays complex marketplaces, dominant businesses seek to enhance market control
by gaining dominance in all seven spaces, thereby reducing the power and choice of
consumers and other stakeholders. The spaces, which have been defined and illustrated
in this article, are interrelated and the effective business will manage its strategies and
actions in these different spaces with high degrees of synergy. Ambitious businesses will
use all of the tools at their disposal to achieve a dominant position, and, in particular, this
means making effective and innovative use of communications media and technology,
information and knowledge tools and processes.
Superpoly emerges as a twenty-first century version of monopoly. While traditional
monopoly describes the competitive marketplace structure for products, superpoly
embraces other market spaces that encompass the businesses engagement with, and
management of consumption, cultures and communities. Superpoly can be viewed as
both an outcome of consumption and a driver, which is propelling society into new age
of consumption.
The framework proposed in by this paper concerning the different market spaces that
contribute to superpoly can be used by businesses as a checklist to assess their drive
forward to market dominance by making the aware of different market spaces and
negotiating their impact in these spaces. The framework can also be used by campaign
groups, individual consumers, citizens and policy makers to enhance awareness and to
ensure that their interactions with dominant businesses embrace a wider range of issues.
This is to move beyond the guerrilla tactics of individual issue campaigns. A more
transparent and shared understanding of the nature of different market spaces in the
marketplaces of the twenty-first century should benefit both businesses and consumers.
References
Blythe, J. (2006), Principles and Practice of Marketing, Thomson Learning, London.
Butler, S. (2006), Tesco pledges to build community links, The Times, 11 May.
Christopher, M., Payne, A. and Ballantyne, D. (1991), Relationship Marketing: Bringing Quality,
Customer Service and Marketing Together, Butterworth-Heinemann, Oxford.
Christopher, M., Payne, A. and Ballantyne, D. (2002), Relationship Marketing; Creating
Stakeholder Value, Butterworth-Heinmann, Oxford.
Commission of the European Communities (CEC) (2001), Promoting a European Framework for
Corporate Social Responsibility, available at: http://europa.eu.int/eur-lex/en/comgpr/2001/
com2001_0366en01.pdf.
Finch, J. (2006a), Tesco shoppers spend, spend, spend pushing half-year profits to 1.15bn, The
Guardian, 4 October.
Finch, J. (2006b), Where to avoid Tesco: Harrogate, Shetlands, Orkney, Outer Hebrides, The
Guardian, 11 October.
Finch, J. (2006c), Rivals warn over Tesco, The Guardian, 21 October.
Fishman, C. (2007), The Wal-Mart Effect, Penguin Books, London.
Humby, C., Hunt, T. and Phillips, T. (2003), Scoring Points: How Tesco Is Winning Customer
Loyalty, Kogan Page, London.
Jones, D.T. and Clarke, P. (2002), Creating a customer-driven supply chain, ECR Journal, Vol. 2
No. 2, pp. 28-37.
Jones, P., Comfort, D. and Hillier, D. (2005), Corporate social responsibility and the UKs top ten
retailers, International Journal of Retail and Distribution Management, Vol. 33 No. 12,
pp. 882-92.
Payne, A., Ballantyne, D. and Christopher, M. (2005), A stakeholder approach to relationship
marketing strategy: the development and use of the six markets model, European
Journal of Marketing, Vol. 39 Nos. 7-8, pp. 855-71.
Powell, S. (2006), Clive Humby winning customer loyalty, an interview by Sarah Powell,
available at: http://unjobs.org/authors/clive-humby
Prynn, J. (2006), Tesco U-turn over Sunday hours, Evening Standard, 10 May, available at
www.thisismoney.co.uk (accessed 7 December 2006).
Simms, A. (2007), Tescopoly: How One Shop Came Out on Top and Why it Matters, Constable,
London.
Wood, D.J. (1991), Corporate social performance revisited, Academy of Management Review,
Vol. 16, pp. 691-718.
Yin, R.K. (1994), Case Study Research, 2nd ed., Sage, Thousand Oaks, CA.
Corresponding author
Jennifer Rowley can be contacted at: j.rowley@mmu.ac.uk
Monopoly in the
twenty-first
century
761