Tesco deals with a wide range of products, which has high demand in the market aiming at full customer satisfaction. The firm needs to establish its price and output levels to achieve its business objective of profit maximization. Sellers try to develop differentiate offers for different customer segments and, in addition to price, freely use branding advertising and personal selling to set their offers apart. Over recent years Tesco has become the world's third largest retailer and holds a dominant position in the UK's grocery market with a turnover of 42.6Billion in 2007 (FAME). Homogenous products are identical products or business e.g. Tesco has to focus on labor costing now in order to have a sound financial condition. Contacting their MEP and cast vote at the European Parliament elections the European Parliament enacts EU laws: (www.europarl.europa.eu). OFT plays a leading role in promoting and protecting consumer interests throughout the UK, while ensuring that businesses are fair and competitive. As the OFT only supervises what happens in the United Kingdom, there is the European Union which is active in a wide range of policy areas, from human rights to transport and trade, the European Union monitors all of the 27 countries that are part of the union, using similar techniques as the OFT but on a much larger scale, the policy to monitor and control competition is said as A fair deal for all and this policy is described as: (Octotutor, 2014). Examples of a perfect competition to its closest definition are in the financial market like stock exchange, currency exchange market and the bonds/certificates market. Contacting their NGOs (consumer associations, environmental pressure groups, etc.) A range of prices occurs because sellers can differentiate their offers to buyers. The conditions for a monopolistic market are as follows: there is only one firm, which is large in size. Market structure decides the interaction of buyers with the producers. Example of oligopolistic business industries are: supermarkets such as Tesco which alone owns 30.4% which is nearly 1/3 of the UK supermarket retail share market share, banking industry, chemicals industry, oil and energy industry, medical drugs and also the news and media broadcasting industry. This penalty to the British Airways has been the highest ever imposed by the OFT for violation of competition law and this demonstrates the determination of the OFT to deal strongly with anti-competitive behaviour. From my understanding there are many possible reasons that the government should consider while joining Euro, joining Euro would reduced exchange rate uncertainty for UK businesses and lower exchange rate transactions costs for both businesses and tourists. International business traffic is an important feature of the UK economys survival; almost 50% of UKs export is in the Non European Union zone, there fore international market has a vital role to play in UKs economy. Sainsbury which owns 16.3% of the UK supermarket shares and Morrisons which owns 11.5%, this means the entry barriers to entry are very high because the industry is dominated by small number of large firms which control and own that share market. One central bank cannot set inflation at the appropriate level for each member state. A single currency should end currency instability in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them. In the United States economy most markets can be classified into four different markets structures. As a comparison the total value of UKs trade-in-goods exported to Member States of the EU in April 2010 was 11.6 billion and for May 2009 was 9.3 billion. The market structure where the Tesco is operating, for example in the UK, there are many other players in the market which are offering the same products as the UK, hence the price and output of the products offered by Tesco is being decided by the supply and demand mechanism. If governments were obliged through a stability pact to keep to the Maastricht criteria for perpetuity, no matter what their individual economic circumstances dictate, some countries may find that they are unable to combat recession by loosening their fiscal stance. Market structures are the business orientated characteristics of a market; all businesses must focus on these characteristics of the market because these have an effect on the degree of competition in the industry and influence the business product or service pricing decisions. Competition regulators are important in business and are required to ensure equality and a fair deal for all, What is Tescos market structure? The transfer of money and fiscal competencies from national to community level would mean economically strong and stable countries would have to co-operate in the field of economic policy with other, weaker, countries, which are more tolerant to higher inflation. Tesco PLC organizational structure is decentralized, tall (hierarchical) and product-based. Under the new law, EU countries will have to reduce exposure to fine particles in urban areas by an average 20% by 2020. Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. The four common structures are: Perfect competition market. Actual monopoly is where the firm has somewhat majority of the market share in the industry, in this case Tesco is the most famous example, Tesco owns over 30.4% of the market share and is the leader in supermarket industry. In oligopoly there are many entry and exit barriers such as huge investments etc. For example, De Beers is known to have a monopoly in the diamond industry. The retail sector. If governments were obliged through a stability pact to keep to the Maastricht criteria for perpetuity, no matter what their individual economic circumstances dictate, some countries may find that they are unable to combat recession by loosening their fiscal stance. As of February 2017, the total shareholder's equity of Tesco was 6.414B ("Annual report," 2017). Among these three major entities, Tesco is the market leader in terms of global sales and its total market share. Research Paper Assistance Get Help With Research Papers, 5 steps of Essay Writing. Tesco Entering the Us Market. It is common to differentiate these markets across the following seven . How can the members have their say? The characteristics of perfect competition include: large number of buyers and sellers, easy entry to and exit from the market, homogeneous products, and the firm is the price taker. The Commission may agree to a company having a monopoly in special circumstances - for example where costly infrastructure is involved ('natural monopolies') or where it is important to guarantee a public service. Making it one of the best grocery store chains in the . Different Types of Market Structures. The OFT has a 5 step method of keeping a good eye on business and other organisations these 5 steps start with Analysis, Prioritisation, Prevention, Partnership and Evaluation, the details of all the steps are on their website under What we do. This may lead to pockets of deeply depressed areas in which people cannot find work and areas where the economy flourishes and wages increase. In this type of industry firms usually follows pull strategy and make huge efforts in marketing and advertising to attract its target customers, the products in the industry could be highly differentiated or even be similar but hard of getting a hold and this is why businesses use branding or homogenous. In economics, market structures can be understood well by closely examining an array of factors or features exhibited by different players. Competition allows technological innovation to flourish. Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. Competition regulators are important in business and are required to ensure equality and a fair deal for all. The final total value of UKs trade-in-goods imported for January 2009 to December 2009 remains at 147.3 billion. Markets and Market Structures. Your bank details are secure, as we use only reliable payment systems. Many fast food franchises fit all or most of these characteristics. Tesco PLC is a British grocery and general merchandise retailer that operates internationally with headquarters in Hertfordshire, England. All the sellers of the market are small sellers in competition with each other. The total 2010 year to date value of UKs trade-in-goods exported excluding May was 46.2 billion, which has been upwardly revised by 273.6 million. The loss of national sovereignty is the most often mentioned reason for the UK not joining the monetary union is the transfer of money and financial proficiency from national to community level would mean that economically strong and stable countries would have to co-operate in the field of economic policy with other weaker countries. The report structure also focuses on the competitive landscape of the Global Parchment Baking Paper Market, this report introduces in detail the market share, market performance, product situation . OFT (Office of Fair Trading) Among these firms, Tesco Inc. leads in terms of sales and profits. Tesco, a UK retailer that operates in the grocery sector. When the percentage change in the sales is more. If a community or even an individual has an important point to show to the union they must do some of the following starting with: Contacting their local MP European Union policies are part of national politics. One of the few reasons that the United Kingdom did not want to join the single European currency with the first wave of countries on 1 January 1999 is that according to the chancellor of the Exchequer at that time in 1999 who was Gordon Brown our current prime minister said that, "although the government supported the principle of the single currency Britain would not be ready to join at least until the second wave of countries" which occurred in 2002 and during that time he told the European Union that the country should begin to prepare for monetary union but up till now there have been no indications of the United Kingdom joining the European Union currency, Euros. Austria, Belgium, Czech, Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland. A perfect competition market is a structure that contains many different companies, which means that each company individually only has a small amount of influence over the entire market. - The industry is characterised by freedom of entry and exit. It follows a hierarchical structure, which truly matches the demand of the huge size of the company. In this sort of environment the businesses and trades people have somewhat control over their prices because of the products differentiations. Consumers would not have to change money when travelling and would encounter less red tape when transferring large sums of money across borders. Tesco is headquartered in Welwyn Garden City, Hertfordshire, England in the United Kingdom. The Commission also monitors closely how much assistance EU governments make available to business ('state aid'). Tesco makes biggest ever investment in hourly pay, taking the rate to over 11 an hour . Market structures are the business orientated characteristics of a market; all businesses must focus on these characteristics of the market because these have an effect on the degree of competition in the industry and influence the business product or service pricing decisions. Monopoly Vs Oligopoly 1093 Words5 Pages. The stability pact (the main points of which were agreed at the Dublin summit of European heads of state or government in December 1996) will force EU countries into a system of fiscal responsibility which will enhance the Euro's international credibility. Research has shown that there are numerous market structures with unique pricing strategies in place. The company hugely relies on promotional offers to attract and retain customers. The UK is growing reasonably well, Germany is having problems. How does OFT checks anti-competition? Tesco offers a wide array of food and non-food products . The price of goods and services in a firm depend on the levels of demand, cost conditions and competition . However, from a regulatory view, monopoly power exists when a single firm controls 25% or more of a particular market. Another organisation that does similar commerce to what Office of Fair Trading do, Ofcom is an independent regulator and competition authority, for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services. A good and most current example of a monopoly is the Apple Company which has created the iPhone, because of the degree of the monopoly there is a high possibility of price discrimination where the customers and the consumers have their choices limited to what is available in the market. Tesco trades on the London Stock Exchange and is part of the FTSE 100 index. Market structures describe the competitive environment in which a firm operates. Advantages: A single currency should end currency instability in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them. (https://www.uktradeinfo.com/index.cfm?task=noneufullreport) Under the system, European Union governments set limits on the amount of carbon dioxide emitted by energy-intensive industries and if they want to emit more CO2 than their quota, they have to buy spare permits but most supermarkets stores do not manufacture and this means that they will have to use eco friendly methods of business and equipment. To compete with other organizations, cost-plus pricing is the most . We use cookies to give you the best experience possible. The four leading supermarkets in the UK supermarket oligopoly are Tesco, ASDA, Sainsbury's, and Morrisons. The UK's retail sector involves a lot of spending by consumers both in shop and online. The report analyses the pricing strategies, cost curves, elasticity of goods and portfolio of goods that Tesco sells. Because Tesco is a big company would have a lot of legal structures to make sure that business is operating properly. By Sarah Vizard 10 Sep 2014. (http://europa.eu/pol/index_en.htm) Sustainable development has long been one of the overarching objectives of EU policy. The market share of of the leading supermarkets in Great Britain (GB) from January 2017 to December 2022 has remained fairly stable. From market stall to the UK's biggest supermarket. The disadvantages of a monopoly is that customer are exploited to high prices and potential supplies have limited choice for demand and this means that the consumers have less choice and again might have to pay higher prices than normal or the monopoly can even use very low price to push their competitors towards administration or bankruptcy. - All firms are price takers - All firms have a relatively small market share - Buyers know the nature of the product being sold and the prices charged by each firm. Tesco's mission statement is "to be the champion for customers - to help everyone who shops . The major market forms are: Perfect Competition; Monopolistic Competition . (http://www.oft.gov.uk/ about/what/#named2). UK Supermarket Oligopoly - Key takeaways. Oligopoly is defined as a concentrated market. United Kingdom supermarket share Therefore, the general trend toward expansion and search for innovations allows the industry to grow. Sellers try to develop differentiate offers for different customer segments and, in addition to price, freely use branding advertising and personal selling to set their offers apart. ?>, Order original essay sample specially for your assignment needs, https://phdessay.com/market-structures-tesco/, Similarities & Differences of Perfect Competition and Monopolistic Competition, Monopoly, Oligopoly, Perfectly Competition, And Monopolistic Competition, Monopoly, Perfect Competition, Imperfect Competition, Analysis and Comparing the Physical Storage Structures and Types, Organisational Types and Management Structures, Analysis Of Different Types Of Competition Economics Essay, get custom This means there is a few dominant firms in the market. OFT gathers intelligence about markets and trader behaviour from a wide range of sources and then they respond to complaints about markets from nominated consumer bodies, where the OFT is able to see potential problems, the OFT undertakes market studies and recommends to take action respectively. The OFT has a 5 step method of keeping a good eye on business and other organisations these 5 steps start with Analysis, Prioritisation, Prevention, Partnership and Evaluation, the details of all the steps are on their website under 'What we do'. UK joining the Euro (Pros & Cons) June 2010 showed a 15.5 per cent increase in exports compared to May 2010 and a 33.0 per cent increase in exports compared to June 2009. The competition policy stops the Tesco from growing further from their potential market share, something which Tesco has known to be done in the recent years. In another case, The Royal Bank of Scotland or RBS has also paid a fine of 28.59 million about 2 months ago in March 2010, after admitting breaches of competition law between October 2007 and February or March 2008, the fine for the bank was reduced from 33.6 million to 28.59 million and this was done to reflect RBSs admission and agreement to co-operate. It has changed because interest rates are set in each country at the appropriate level for it. The main characteristic of the oligopoly market . The total value of UKs trade-in-goods exported for January 2009 to December 2009 was 124.2 billion, which has been upwardly revised by 48.5 million. Monopolistic competition: Equity is the element of the capital structure of the company that is sourced through the issuance of shares or profits claimed by stockholders (Arnold, 2013). In March 2015, UK consumers spent around 34 billion. 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. Under the European Union the members can travel and trade freely without any constraints as long as the members are trading in euro (the single European currency). Since 1995 alone, about 100,000 young Britons have spent time studying in another European country. Sainsbury which owns 16.3% of the UK supermarket shares and Morrisons which owns 11.5%, this means the entry barriers to entry are very high because the industry is dominated by small number of large firms which control and own that share market. In this type of competition the companies are forced to follow the competitive pricing strategy in order to survive in the industry, i.e. Tesco themselves say that it is an oligopoly, this is because Tesco is not the only supermarket in the UK, Tesco is the dominant shareholder but cannot be called a monopoly as there are many other firms which are in competition with Tesco e.g. The Price elasticity of demand measures the responsiveness of the quantity of goods sold to the changes in the products price. Therefore, one can say that market . Either the physical products can be varied in quality, features, style or the accompanying services can be varied. (2017, Dec 26). Copy. Agriculture Media Competition Consumers Education So all the firms in such a market are price takers. Eliminating exchange rates between European countries eliminates the risks of unforeseen exchange rate revaluations or devaluation, further those businesses who involved in commercial transactions in different member states would no longer have to face administrative costs of accounting for the changes of currencies. Even in store level, there are as many as four layers of management in some large stores. In 2013, Tesco spent approximately 110 million on marketing efforts in traditional outlets. their profits margin will vary but still always high. All businesses like Tescos are directly affected by this policy as this aims to cut energy consumption and greenhouse gasses by 20%, meaning Tesco will have to recycle more, reuse materials more and reduce wastage and use of non-biodegradable equipment which will have a small dent on their profit. 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