Development of the FMCG market structure – transaction cost theory approach

Abstract

Entering into a transaction always incurs various transaction costs which are comparable to the ‘friction forces’ in a physical system. However, economists tend to direct comparatively little attention to transaction costs, even when devising rigorous economic models, which considerably limits their practical use.

The article outlines the essence and origins of transaction costs, assets specificity in the sphere of exchange and their impact on shaping the trade pattern. There is also presented the problem of the market structure being shaped by concentration which manifests itself in equity investments leading to the increasing number of trade networks and middle sized stores. Trade development results in appearance of mega stores located usually in the suburbs of towns. They are surrounded by shopping centres whose offer is more attractive than that of shopping centres located in town centres. This leads to changes of location value and incurs substantial capital outlays which include also current operating expenses. The article addresses also the dilemma of choice between organising transactions inside companies, through network structures or through the market. The development of network links and own brands stimulates establishing partner relationships with suppliers of goods in order to lower the control costs, which is currently observed on the Polish market. The article also indicates the role of specific assets in shaping certain structures in the sphere of exchange (controlled shopping centres, franchising, long-term contracts with suppliers of goods) and presents trends shaping the structures of Polish FMCG market the majority of which is controlled by foreign trade networks.