Rationalizing examples of Market Structures

Part 1 – Market Structures

For each of market segments below, determine the market structure and justify it using market shares and characteristics:

• Take away coffee market in the UK.
• Buying car insurance in the UK
• Commuter travel (home->work->home) in London

Research will be needed. You may wish to reference in this section. Please reference within the text. No particular referencing style (i.e. Harvard) is needed. Justifications not supported by research normally achieve low scores. A maximum of 200 words per answer please.

Part 2 – Relationships between variables (Correlation and regression).

Business reports have an introduction, findings and conclusions. The short report should not exceed 800 words. All Excel work and charts/graphs must be shown in the text NOT in an appendix.  Tables of data should be labeled and included at the end. The report should in Word format. For instructions see below (page 2). Any referencing should be within the text.

Sample Answer

Part 1: Market Structures

1. Takeaway Coffee Market in the UK – Monopolistic Competition

The takeaway coffee market in the UK can be best described as monopolistic competition. This is because there are many competitors such as Costa, Starbucks, Caffè Nero, as well as numerous independent local cafes and chains. Each firm offers a differentiated product, based on taste, quality, branding, price, or location. Although barriers to entry are moderate, brand loyalty and location advantages protect the larger chains. According to Statista (2023), Costa had the largest market share in 2022 at 27%, followed by Starbucks at 25%. However, no single company dominates, which is a key feature of monopolistic competition. Firms have some price-setting power, but competition keeps prices relatively close. Marketing and customer experience play a vital role in differentiating offerings.

2. Buying Car Insurance in the UK – Oligopoly

The UK car insurance market is an oligopoly, dominated by a few large firms like Aviva, Admiral, Direct Line, and AXA. According to the Financial Conduct Authority (2022), the top five providers hold a significant majority of the market. These firms compete both on price and service, with heavy use of price comparison websites like GoCompare or Compare the Market. Despite price competition, non-price factors such as customer service and brand trust also influence consumer choice. Barriers to entry are high due to regulation, capital requirements, and brand credibility. This market shows interdependence, where the actions of one firm affect others, and price rigidity, making it a classic oligopoly structure.

3. Commuter Travel in London – Monopoly/Natural Monopoly

Commuter travel in London is best described as a natural monopoly, primarily run by Transport for London (TfL). Services like the London Underground, buses, and trains are largely operated or regulated by TfL, making it the sole provider in many routes. High infrastructure costs and the need for coordinated planning make competition unviable. The nature of this market, huge fixed costs and limited duplication, creates economies of scale, leading to a natural monopoly. While private operators may run some train lines, TfL regulates fares and scheduling. The public interest is prioritised over profit, with services kept affordable and widely accessible. Customer choice is limited, and alternative transport modes are usually less efficient.

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