Research On The Competitive Situation Of Chinese Liquid Milk Industry From The Perspective Of Market Power

Liquid milk,as the most commonly accepted dairy product for Chinese people,is increasingly favored by consumers,which makes the liquid dairy industry become one of most important part of the food industry.At the same time,there are still many problems in liquid milk industry of China.Liquid milk is a product with high product homogeneity and low added value.In order to expand market share,possess stronger monopoly power and market power,obtain higher excess profit and then realize profit maximization,enterprises have long been engaged in ‘price war',‘advertising war',and ‘imitation war'.However,the liquid milk industry's average profit margins have been sluggish for a long time.The contradiction between fierce market competition and depressed profits in the liquid milk industry has become the focus of both the academic community and the business community.It is also an urgent issue to be resolved.From the perspective of market power,this paper examines the effects of various competitive strategies commonly used in liquid milk enterprises,studies the competitive situation of China's liquid milk industry,and puts forward corresponding suggestions for the healthy development of liquid milk industry on the basis of empirical research.This paper firstly establishes the dynamic decision model between competition strategy and market share,and then tests the effect of competition behavior.The results show that there is a significant negative correlation between price change and market share change,which has been verified cross region and product categories.Non-price competition has a significant impact on market share,but the impact is weaker than the price competition.The impact varies with the brand and product category.Since market power is an indicator of the ability of companies to control the prices above marginal costs,the greater the market power of the enterprise,the stronger the ability of raising prices,the higher excess profits can be obtained.Therefore,based on the empirical study of the market power of China's liquid milk companies,the paper finds out the asymmetric relationship between market share and market power of liquid milk companies.Enterprises with large market shares do not obtain stronger market power.They cannot increase their market power by increasing market share.The empirical conclusion points out that excessive price competition may cause consumers to be more sensitive to price changing,cultivate a habit of liquid milk promotion,and become more unwilling to accept the commodity of the original price.The result is that the average price of products in the industry is lower than the reasonable value,and the average profit rate of the industry is continuing to slump.The study also finds that non-price competition is conducive to enterprises to enhance market power and achieve profit maximization.