Market Power And Performance Research On Foreign Investment In China Retail Business Within SCP Framework

Since December2004, after protection period of WTO,China retail business markethas entered comprehensive openning era. Because of the importance of retail business ineconomic society, foreign large-scale retail businesses will play a vital role in thedevelopment of China economy. It is necessary for us to research on market conduct andperformance caused by foreign large-scale retail businesses.According to the research on current situation of China retail business, the conclusionshows that the development of retail business plays an important role in nourishingeconomic growth, increasing employment and promoting urbanization course. Meanwhile,there are also many unbalanced regional development problems such as gap between urbanand rural and the gap between east and west.This artical studies on market concentration of China retail business by CRnindexwithin SCP Structure-Conduct-Performance theoretical framework from industrialorganization theory. The result indicates that the concentration of China retail business is inlow position, and market structure is competitive. However, on one hand,the concentrationof China retail business has been increasing since1999overall, and on the other, theresearch on concentration of retaill forms shows that market structures of generalmerchandise, chain supermarkets and specialty store are oligopolistic, the marketconcentration of these retail forms are still growing, and what’s more, these three retailforms are no other than the most ones that foreign capital entered into.The market conduct of foreign retail businesses includes greenfield investment, mergeand longitudinal control of supply chain. Longitudinal control of supply chain is animportant competitive strategy of foreign large-scale retail businesses. Foreign large-scaleretail businesses rake in profits from manufacturing companies uptream and competehorizontally by price method according to private brand in the hope of controllingcustomers downstream and monopolizing whole supply chain.The principal participants intraditional microeconomics are customers and manufacturers. Traditional microeconomicsstudies on price and quantity when market is in equilibrium. With the development of retailbusiness, as middleman connecting productiong and consumption, retail dealers can not beneglected because of their ability to influence price and welfare.This artical studies on market performance from the view of welfare distribution of three partticipants consistingsupply chain in three different market structures--Perfect competitive market, Inperfectcompetitive market and Monopoly market with “Shapley value”. The conclusions showthat: After enterring Chinese market, foreign large-scale retail businesses rake in profitsfrom manufacturing companies uptream in the first place and share the profit raked frommanufacturers with customers in perfect competitive market in the hope of horizontalcompetition and downstream control. In this case, the welfare of manufacturing companiesdecreases while customers and foreign dealers increase. In monopoly market, foreignlarge-scale retail businesses who monopolized whole supply chain will engross intactprofit from upstream. Customers will have no profit shared by foreign large-scale retailbusinesses and they are able to buy no cheap and good commodities provided in inperfectmarket.Chapter2to Chapter6are the main part of this artical. Current situation of Chinaretail business is introduced by Chapter2. Chapter3calculates market concentration fromthe view of whole industry and diffferent market forms, then analyzes market structureinfluenced by market power of foreign retail businesses. Market conduct of retailbusinesses in China retail market is discussed in Chapter4. Chapter5studies on marketperformance in different market structure by cooperative game model in the view of wefaredistrbution, then descripts the process of monopoly earnings’ accomplishment according tomodel results. Chapter6put forward suggestions on the basis of conclusions drawed byChapter1to Chapter5.