SUBMITTED BY: MAIRA MUNEER

STUDENT ID: W19BACT012

SEMESTER: 3
COURSE TITLE: ECONOMICS
ASSIGNMENT: POST MID ASSIGNMENT 1
SUBMITTED TO: MS.NAILA SADIQ
DEPARTMENT: ACCOUNTING & FINANCE
DEADLINE: 21-11-2020
 FOOD INDUSTRY

INTRODUCTION:
Food industry in Pakistan is very vast and it‟s expanding each day. As we know
that needs and wants of humans are unlimited and as world have evolved so much
food are not only limited to basic commodities like rice, wheat, meat, fruits and
vegetables anymore. A lot more things are added to it and food is now further
categorized into frozen food, packaged food, retail grocery, canned food, snack
food, bakery food, fast food, dairy, beverages and many more.

 FAST FOOD:
Starting with fast food industry in Pakistan which is a perfect example of
non-collusive oligopolistic market, because there are not many fast food
chains in Pakistan the only ones we‟ve are; McDonalds, KFC, Hardees,
Burger King, Subway, Dominos, Pizza Hut and Fri-Chicks.

We can see that only McDonalds and KFC is dominating the market because
people prefer them over others, because they‟ve been here since years when
it comes to:

1. Burgers.
2. Fried Chicken.

As for pizza, we‟ve a number of local pizza shops/restaurants but only Pizza
Hut & Dominos are dominating its rivals; Broadway, California Pizza and
Pizza Max. Even though Broadway is emerging day by day, it‟s still not
there. One more thing that makes the fast food industry and oligopolistic is
when these well-known chains like McDonalds and KFC do something like;
introducing something new and making changes in menu, the rest fast food
chains closely analyze that and follow them.

Example can be: 4-5 years back McDonalds Pakistan introduced their
Chapli kabab burger and KFC Pakistan introduced their Krunch burger, the
 reason behind this new addition to menus, was to bring something economic
that can be easily afforded by public and both were under Rs.300. Burger
King Pakistan wasted no time and quickly followed them and introduced its
Chatpata chicken burger also at the same price.

(The Rs.300 deal of all these three chains included fries and beverage as
well)

They key characteristics that can help you see them in an oligopolistic
competition are:

 Few international chains.

 Producing differentiated products.
 All these companies keep an eye on their rivals and formulate their
policy and set prices accordingly.
 One firm‟s revenues or losses affect the competitors.

Abnormal profit in an oligopolistic competition:

(Above attached graph was made with Microsoft paint)

Revenue in fast food industry, when a specific firm introduces a cheaper product or
reduces its prices and other firms follow them so they don‟t lose customers.

a
Price

MR

Q
Output
(made with Microsoft word’s shapes (illustrations)

 RETAIL GROCERY STORES:

In the last few years there‟s been an increase in the number of retail grocery stores
nationwide, over a decade ago we only had Alfatah, Hyperstar or Metro but now
local grocery stores are stepping in competition and a retail grocery store is now
seen almost in every area. A 1kg pack of Bonus washing powder will cost you
almost same both from Sawera Departmental Store and Sadaf Departmental store.
The retail grocery stores comes under „Perfect Competition‟ market structure due
to many factors, but some of them are:

 Selling the same/identical and undifferentiated product.

 Large number of sellers and buyers.
  They don‟t have control over price.
 No barriers to entry into or exit from the market, if a grocery stores goes out
of business it will have no effect on other stores and also any new store can
enter market anytime as there is no specific store dominating the market.

Revenue of Grocery stores as per perfect competition

Average Revenue and Marginal Revenue of a grocery store.

M.R=A.R=PRICE

Q
 Long period price determination of grocery stores would be:

AR=MR
PRICE

QUANTITY

 RESTAURANTS:
Restaurants in Pakistan are a pure example of monopolistic competition, we
can‟t say a restaurant is best because all of them have their distinct offerings
and ambience‟ there is currently high pressure in restaurant market as we see
new restaurants being opened almost daily with mouth-watering menus.
Each Restaurant has its target set of audience for example we‟ve NOVU and
THE WOK, it targets the people who prefer to eat east-asian cuisine or
chinese, then we‟ve JUNOON and DERA it targets people who prefer to eat
desi or Pakistani cuisine then we‟ve CHAAYE KHANA and URBAN
KITCHEN, they‟ve everything from burgers to pastas. To identify
restaurants as a monopolistic market the key traits can be:

 Large number of restaurants.

 Similar but not same products.
 No entry/exit restriction.
 They set their own prices
  Average cost equal their Average Revenue.

One more reason why restaurants come under monopolistic competition is that
they produce products that are close substitutes to each other but they differ
because of quality, brand, trademark, price and quantity. For example a Rs.550
Cesar Salad from Gloria Jeans is a close substitute of the Rs.500 Cesar Salad from
Chaaye Khana but they‟re not exactly same or identical due to serving quantity,
brand, quality, different ingredients and price.

Short run price determination for restaurants:

(Made with Microsoft paint)

Long- run price determination for restaurants.

(made with Microsoft paint)

 BEVERAGES:
By the word „beverages‟ the context of this paragraph would be something
other than colas (carbonated soft drinks), the beverage industry in Pakistan
comes under Monopoly. We might have many local and international
beverages available, but we rarely see them. Rings a bell, right? Whenever
you go out to your local grocery store and you wonder in the beverages aisle,
it‟s full of NESTLE products, right? From your favorite whole milk; milk
pak to the refreshing; nestle fruita vitals‟ juice range, to the most asked for
nescafe cold coffee and to the Milo that has every kid‟s heart, all of these
comes from the House of Nestle. Nestle Pakistan is the leading food &
beverage monopoly in Pakistan.

Total Revenue for Nestle:

(graphs made with Microsoft paint)

Nestle Pakistan‟s price determination under short run.

Nestle Pakistan‟s price determination under long-run.

When it comes to soft drinks or colas, the only name that comes to
majority‟s mind is “coke” and “coca-cola” a recent food consumption survey
proved that even though there‟s pepsi in the market majority prefers coca-
cola over it. Things keep getting interesting, approximately 20 years back
Pepsi accused Coca-cola of Monopoly, but the claim was empty as coca-cola
is not the only supplier of the soft drinks. Because coca-cola outsells Pepsi,
the latter company has gone bankrupt twice and coca-cola always present the
offer to purchase pepsi but pepsi refuses. If there exists a situation in future
where pepsi is purchased by coca cola, the Coke or Coca-Cola would be a
huge monopoly of the beverage industry when it comes to soft drinks but
currently in Pakistan‟s soft drink industry, there exists a situation of
Oligopoly because the coca-cola is dominating the market.
CONCLUSION:
Even though our country Pakistan is listed in the list of under-developed
countries, our food industry is thriving and producing excellent result on
both small and large scales. A huge development is seen in the last years,
hence making it difficult to label the whole industry under a specific market
structure. Our market structures in the food industry are diversified, each
market structure in our food industry is unique according to its methodology
of demand, operating, producing and selling.
 REFRENCE/CITATION:
 Cambridge International A levels economics, theme 3.4: Market Structures
by PMT education.
 Article from https://www.questia.com/magazine/1G1-18173747/food-
industry-in-pakistan

NOTE: THE GRAPHS ARE MADE WITH MICROSOFT PAINT AND MICROSOFT
WORD’S ILLUSTRATIONS, PLEASE EXCUSE THE POOR PIXEL QUALITY OF THE
ATTACHMENTS.