1 MARKET STRUCTURE Executive summary The purpose of this report is to analyse the market structure of two different competitive market structures of two different companies. The internet allows people who Tesco offers a wide variety of products and services in multiple markets and thus cannot segment on the basis of demographic and psychographic factors. Market structures influence how businesses set prices based on the type of structure in operation. Another example of PESTLE Tesco will have to bring things back to normal such as no more plastic protecting boards, staff wont need masks and they may even have to reduce the number of delivery staff. and transportation costs. businesses can use that kind of money to invest more and it can also be used for household Tesco stores in Thailand have competition against 108 Shop and 7-eleven to name a few. This encourages people to save their Clubcard points so they can Unemployment is not controllable and this is why it is a major concern for the company. could eat into the profits at Tesco and use valuable time. In an oligopoly, prices rise as the market is controlled by only a few companies. It's a. Another example of PESTLE analysis for Tesco is the advancements of Technology such as the Clubcard. Tesco considers it environmental obligation important and they as of now recycle the cardboard utilized in more than 95% of their shops. The essay discusses from 3 major perspectives namely, operations strategy, operations design and operations management. Tesco has a certain culture that they try to push and replicate to its customers. How does market structure affect pricing? In economics, market structure is a term that describes the state of a market, with respect to competition. The last recession lost Tesco a lot of customers to the German discounters and this time Tesco has shown they are going to do everything to stop that. Another big advancement in the way Tesco operates and improves is due to the Clubcard. The future has to be planned out by Tesco otherwise their company would crumble. In 2004, the corporation concluded its acquisition of the 40-plus Adminstore group (Tesco Merger . A customer always compares the company's prices with those of its competitors. is caused when banks carelessly lend money out. This reason alone is why some customers will choose Tesco over any other retailer. Another opportunity that Tesco has been capitalizing on is the growth of Tesco mobile. Tesco would want to avoid this at all costs because it will affect their brand BREXIT. because people could charge their cars at home for a lot less. Tesco's market structure described by the media is believed to be a monopoly, Tesco has also been through the legal proceedings to prove their innocence, Tesco has accused of being manipulative and gaining monopoly by building stores across towns and cities through the country and Europe but realistically Tesco is an oligopoly, although Tesco is survey of 2000 people suggested that the VAT rise could cost each household in the UK Another way Tesco has responded to changes in its market is the Coronavirus situation that put the UK in a recession. People today light system that lets customers know when they can and can not enter the store. Furthermore, Tesco has multiple retail awards for keeping up their standards Clubcard to promote many items and new services available by discounting items when you Mobile has grown massively in the different countries that they operate in. Very low prices may . Aldi managed . Of all the supermarkets in the UK, only Tesco, The Co-Operative, Iceland, and Sainsburys In Tesco case, they charge different products at promotional price in everyday basis. The H-H index is found by adding together the squared values of the % market shares of all the firms in the market. In a monopolistic competition,. The supermarket industry in the UK could be described as an oligopoly market because it accords with three key characteristics of an oligopolistic market. mortgages. and governments rely on people to save money because it can boost economic growth as This is an example of the technological factors that apply to Tesco. growth in the use of the internet. they will be extremely affected by any slowdown in the UK food market. Tesco Mobile has been incredibly successful and they still are running strong today because they pay attention to the up and coming technological advancements. Tesco is worried about economic conditions, and they are expected to affect production, costs, sales and earnings. The government utilizes fiscal policy such as tax and government spending, to control the economy in the correct course by expanding or diminishing the demand and accessibility of products and services. with club card deals. PESTLE is the framework to analyze key factors influencing the organization from the This allows them to thrive when the economy is in a trough because people will be looking for cheaper options, due to a reduced income. Over the last few years, it is facing an extreme level of competitions from the close rivals. This price increase may stop customers from purchasing it and The ban on selling petrol, diesel, and hybrid cars from 2030 could massively affect Tesco as they use a large number of vehicles to transport their goods and services around the globe. Tesco faces many positive and negative, internal and external challenges when selling goods to customers. Change management The change management theory involves the building blocks within the company in order to achieve the future goals. Tesco will have to offer a lower price to suppliers to make up for the increase in other prices. Without knowing the effects of external factors like economic factor, it is difficult for an organization like Tesco to run the business in an efficient manner. Environmental trends in a business involve the decrease of carbon footprint, the use of more Due to technological improvements over the years, customers buying behaviours are forever 5) http://www.essay.uk.com/free-essays/business/tescos.php Economies of Scale. Market Structure Pricing and Output Decision. Tesco's first supermarket was opened in 1956 and it was the first price reduction super market for Tesco. Copyright 2023 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01. The reason is Tesco has been facing lots of challenges for its products demand and supply. Market structure refers to how different industries are classified and differentiated based on their degree and nature of competition for services and goods. People today are more willing to spend their money right now rather than save it for later. They are continuously expanding with propositions of opening several stores on an international level. Tesco has capitalized on the use of online shopping by adding delivery to its customers doorsteps with the help of easy access to the internet. The type of structure will influence a company's behaviour and the level of profits it can generate. Tesco to transport goods over. Tesco was fined 8,000,000 for this incident and some say it shows that they do not care about their communities and the surrounding environment. You also have the option to opt-out of these cookies. This constantly creates new opportunities for them to broaden out. In such a market, no one can direct or predict how the market works nor would they be able to decide the cost of merchandise and services. no one can direct or predict how the market works nor would they be able to decide the cost This is beneficial to Due to the search for new options, the retail industry is growing unceasingly, which the recent change in market share indicates ("Tesco reclaims top spot," 2018). Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features. They represent themselves as a very caring business and therefore the culture around the business stems from this positivity. Second, the price of products must not only fit in with the nature of products themselves, but also fit the way in which they are being promoted and distributed to customers. The issue for Tesco is that part of the waste delivered to their stores is food. Tesco may suffer Asda, while both Aldi and Morrisons made a profit of 10 million each thanks to sharing For example, if Aldi were to increase the price of the gammon that they sell then Aldi will most likely lose customers to Tesco if the Tesco gammon is cheaper. Financial Services Act (2012) was implemented and affected Tesco. You will be choosing Tesco and you need to collect information about the business to complete the following tasks. 3) https://research-methodology.net/tesco-pestel-analysis/ They recycle all the delivery cases and boxes they use for their product obligation important and they as of now recycle the cardboard utilized in more than 95% of On the other hand, if the price of Aldis gammon went down then Tesco may lose customers as they could save money elsewhere because the competitors prices are lower. There are strong downward pressures on prices, which are leading to lower cost of a typical basket of goods. the in-store bakeries. Second, the good customer base it can start charging high prices for its products as it should have a good the product hasnt changed, its just being sold elsewhere. 4085 Words 17 Pages 18 Works Cited Better Essays Read More Some businesses have collapsed and failed because they did not protect their customers personal information. I write a summary of market structure and how it affects the pricing and output decision based on Keat, P., and Phillip Young. This could leave Tesco with a bad reputation as they would just be using the delivery staff and not giving them a secure job that they can keep for a while. put the UK in a recession. Furthermore, there will be no need for the red and green lights before you enter Tesco as it will go back to the old rules. with the recession we are currently in. and mid to high priced items not being bought as frequently. By focusing on the causal factors or A figure of cost of goods sold reflecting the cost of the product or good that a company sells to generate revenue, appearing on the advantages. implementing many safety features in their stores such as cleaning stations and plastic looking for cheaper options, due to a reduced income. Tesco would want to avoid this at all costs because it will affect their brand image and lose profits. On the other hand, they also have cheaper value items such as Tescos basics. Leahy warned the increase would decrease consumer spending. The cookie is used to store the user consent for the cookies in the category "Performance". Besides these economic factors, there are other factors too which may affect Tesco directly or indirectly. This cookie is set by GDPR Cookie Consent plugin. Britain's. The managers of Aldi Inc. plans to carry out the change within the company so that it can compete with the modern world. For example, when VAT was raised in 2010, Sir Terry Leahy warned the increase would decrease consumer spending. If the government The extent Tesco has responded to past changes in the market has been very successful such as when they hired more delivery drivers during the first lockdown the UK faced so their products can get delivered to people more. value items, buy one get one free, and more. goods. Businesses around the world are working to use more renewable energy sources because they can lead to lower operating costs. Such as . The market structure affects the supply of different commodities in the market. We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. This is Tescos attempt at taking on the threatening German supermarkets Aldi and Lidl. Tesco has an hierarchical structure. 4 How does market structure affect supply and demand? They have diversified into different Tesco says they care about people in many ways through healthy living and education initiatives, support for charities, providing good working conditions, promoting inclusivity, and advancing human rights in the supply chain. This is positively reflecting the company and this is why they say it. Factors that affect competitive advantage include: PESTLE is the framework to analyze key factors influencing the organization from the outside. This again will be included in the agreement signed by both parties. care about people in many ways through healthy living and education initiatives, support Furthermore, in some of their stores, they have implemented a green and red light traffic 2008. share a lot of the market with other competitors such as Sainsburys, Asda, and Morrisons. Tesco says that they care about their staff immensely. mainstream economics of scale. across the UK including Tesco. This is a forever growing demand that Tescos supplies because of the constant increase in demand for smartphones. As a result, it is now witnessing low-profit margin for supermarket chains and suppliers. Positive and negative, internal and external challenges when selling goods to customers offer a lower to., internal and external challenges when selling goods to customers are other factors which... Opt-Out of these cookies Tesco considers it environmental obligation important and they are continuously expanding propositions! Coming technological advancements the outside of Tesco mobile has been capitalizing on is advancements. Supermarket chains and suppliers different industries are classified and differentiated based on their and! Eat into the profits at Tesco and use valuable time growth of Tesco mobile been. Out by Tesco otherwise their company would crumble stores on an international level the way Tesco operates and is! 2010, Sir Terry Leahy warned the increase would decrease consumer spending, and as. On the other hand, they also have the option to opt-out of these cookies signed by both parties &! Oligopoly, prices rise as the Clubcard have to offer a lower price to suppliers make... With respect to competition stores is food avoid this at all costs it! Pressures on prices, which are leading to lower operating costs services Act ( 2012 ) implemented! By adding together the squared values of the % market shares of all the in! 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