Due to the current economic conditions imposed by COVID-19, Tesco may suffer from a Many customers have been gained by Aldi and Lidl that used to shop at 2) http://www.premiumessays.net/articles/sample-essay-on-economic-factors-affecting-tesco/#sthash.fTqKLjuI.JqMxuNRK.dpbs This upward shift cost Tesco millions in extra pay for their employees. holidays and eating out. Functional positioning is associated with increased range and quality of functionalities of products and services. Furthermore, Tesco in the future may have to get rid of their cash machines if cash stops being used but in my opinion, I believe that we are years away from that ever happening. The UK government also proposed to adopt a fat tax to control obesity in the UK and limit the medical problems that come with it and therefore ease the stress on the NHS. A A highly competitive market is one in which an extensive amount of producers rival each other to fulfil the wants and needs of the members of the general public. Tesco has reported that their online orders have doubled and they have done well to meet the sudden surge in demand. If somehow UK market collapses then Tesco will be in a greater amount of risks. They recycle all the delivery cases and boxes they use for their product Tesco to transport goods over. and customer retention. This further consequences in a recession, which is a decline in financial activity. Therefore Tesco needed to cut spending on the due to their reputation. For example, there will be a rise in the cost of imported goods as it will be more challenging for companies like Tesco to transport goods over. This will cause Tesco's whole pricing structure to change. Many reviews say that the pay they receive for the work they have to do is good however the hours can be long, draining, and inconsistent. packaging. This shows one of the economic factors that apply to Tesco. This report analyses Tesco's retail segment in its primary market of the UK, the competitiveness of the retail industry, its strategic positioning in this market, and potential marketing strategies, using Porter's five forces analysis and SWOT analysis. Tesco has stores in different countries but still it is completely depending on the UK market. Also, perfect competition is where all buyers and sellers in the market are perfectly informed so monopolies are absent and the market price of a product is beyond the control of individuals and sellers. cater to a larger segment of people. ABC is a powerful tool to understand the components of a company's costs and their underlying causes. Fiscal policy can boost investments, create jobs, and contribute to economic growth. Specifically, we will be discussing the economic factors here. We focus on those characteristics which affect the nature of competition and pricing - but it is important not to place too much emphasis simply on the market share of the existing firms in an industry. But opting out of some of these cookies may affect your browsing experience. 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. This applies to Tesco as this will affect I write a summary of market structure and how it affects the pricing and output decision based on Keat, P., and Phillip Young. In Tesco case, they charge different products at promotional price in everyday basis. Tesco themselves have said, we need to adapt to changing customer Tesco as it means that more customers are likely to shop there as peoples attitudes towards They will have to consider the amount they have to spend on getting existing items they sell onto the shelves in their stores and determine whether it will be worth it because of increased taxes and transportation costs. Market structure relates to the feature of the market that influence the competition and product pricing. However, this can be detrimental to economic growth. age groups. changing so Tesco has to keep changing their strategy to keep up with the demand for many Tesco provide endless good deal placing in core good around non-foods to undercut levels of competition which actually Tesco marketing with good deal. Competitive advantage refers to factors that allow a company to produce goods or services The future has to be planned out by Tesco otherwise their company would crumble. This can likewise affect the number of employees at Tesco since the law will affect the amount of money they can pay out to employees. Because sales revenue is the key income for Tesco this affected them severely and took a substantial cut in the companies profits. This can once again affect the profits of Tesco and its brand image. image and lose profits. Corporate culture refers to the beliefs, attitudes and behaviours that determine how a company's employees and management interact and handle outside business transactions. It is important for Tesco to consider their competitors as they could surpass them when it comes to sales and customer retention. 6) http://123articlesworld.blogspot.com/2012/04/pestle-analysis-of-tesco.html After my personal research into the figures and sales of Tesco I can determine that they are the 3rd largest grocer worldwide, this indicates a huge level of buying power to ensure mainstream economics of scale. Another example of PESTLE analysis for Tesco is the advancements of Technology such as the Clubcard. It is mainly a functional structure as it focuses on the different departments in the business. In pure competition, price is set by supply and demand. Furthermore, upon further inspection of employee reviews, I can say that the company is helpful and provides a good benefits system that the workers appreciate. To counteract this, Tesco introduced its value range to attract customers which delivered low sales value and profit margins. As a result of uncertainty in the market, Tesco broadened its forecast of profits for this year to between 2.4bn and 2.6bn - less than the 2.84bn predicted by analysts. enough. 5) http://www.essay.uk.com/free-essays/business/tescos.php Tesco may suffer renewable energy sources because they can lead to lower operating costs. In consequence, there is not as much profit to be made and this is why they are overhauling the in-store bakeries. Such things include BREXIT, post-COVID-19, and the ban on sales for petrol, diesel, hybrid cars starting from 2035. The essay discusses from 3 major perspectives namely, operations strategy, operations design and operations management. Another way demand can decrease Tescos profits and affect them negatively is if the demand for a product drastically decreases and Tesco have a high stock of the item; Tesco will have to decrease the price of the product to sell it quicker therefore they would lose money to a decrease in demand. You need to consider how the business has responded to past changes and evaluate how it may react to future changes. Drawing upon Datamonitor (2010), Tesco is ranked third largest grocery retail company in the world, operating over 4,331 stores primarily within the USA, Europe and Asia. While Lidls sales increased by 12% is below Aldls it is still To make the market stable and avoid government intervention. dominates an industry. smartphones. Legal -Tesco has been engaged with financial services for a long time now and therefore has been affected by new laws and legislations that come into effect. Very low prices may . selection is positive in the way that it provides for the lower-income households but is also A be a rise in the cost of imported goods as it will be more challenging for companies like One example of Tesco responding to changes in the market is the changes in the company following the threatening growth of Aldi and Lidl. Customers that use the Clubcard can In short, the decisions taken in respect of price affect other marketing mix variable decisions. spend 30, get 5 off). But now its competitors are providing the substitute products of Tesco in the market. changes the number of disposable income consumers has to spend. The change to electric vehicles may affect customers as they might not get their For example, the Tesco stores in Thailand have competition against 108 Shop and 7-eleven to name a few. If Tesco did not cooperate with this and did not pay their employees then they would be fined heavily as it is the law. In business, there are different market structures in the external environment. Due to technological improvements over the years, customers buying behaviours are forever changing so Tesco has to keep changing their strategy to keep up with the demand for many things. better or more cheaply than it rivals. This cookie is set by GDPR Cookie Consent plugin. This is an environmental factor that applies to Tesco and how they have responded to it. implementing many safety features in their stores such as cleaning stations and plastic Original price, p = $1.20, Qd=100 units, TR = $1.20 x 100 =$120. Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than it rivals. they will be extremely affected by any slowdown in the UK food market. Next, they understand the problems and think of ways they can tackle the challenges. If the government decides to increase the taxes, then the customers would have to start saving and spending less on the products ordered by Tesco. The rise in cost may mean that Tesco will lose customers to the increase in the price of their products that they buy regularly. Some of the factors that influence the supply of the products and services for Tesco include the cost of production, external shocks such as hurricanes, pandemics, droughts, and technology. The definition of monopolistic competition is a market structure in which there are many firms selling differentiated products and few barriers to entry. In the long run, a firm's profitability will be determined by . This will cause Tescos whole pricing structure to change. Tesco is already set the prices according to the income of the demographic area of the store. In a monopoly, prices soar as one company controls the market with no competition. It used to be the market leader in the grocery business but now many small retailers came up and occupied the market. From its Clubcard scheme to an Aldi . Tesco has feared the German supermarkets Aldi and Lidl for a while as they are quickly Tesco does not single-handedly dominate the market they In total there will be 58 stores that will stop baking and 201 As different market structures result in different sets of choices facing a firm's decision makers, an understanding of market structure is a powerful tool in analyzing issues such as a firm's pricing of its products and, more broadly, its potential to increase profitability. Another way the extent Tesco has gone to, to respond to past changes in the market has paid off is when they price matched other competitors and even beat other prices so Tesco customers will need suede towards over supermarkets. Also, Tesco uses its many decisions they make. other to fulfil the wants and needs of the members of the general public. The market structure affects the supply of different commodities in the market. and mid to high priced items not being bought as frequently. However, Tesco may keep things the same such as cleaning stations located around their stores so the environment is healthier. This reason alone is why some customers will choose Tesco over any other retailer. The issue for Tesco is that part of the waste delivered to their stores is food contaminated and therefore cannot be recycled. biggest strengths they possess and take advantage of. Tesco says they care about their community have the utmost respect for their surrounding community and do many things in support of them. This is because tax-related fiscal policy They have diversified into different countries with about 1 million in the workforce all from different backgrounds and different age groups. This can adversely affect the sales revenue of certain products sold at Tesco. You will be choosing Tesco and you need to collect information about the business to complete the following tasks. This cookie is set by GDPR Cookie Consent plugin. Also, Aldi and Lidl do not get any extra market share as they did in the last recession in 2008. Unemployment is one of the economic factors that are responsible for affecting the companys profitability. Many corporations face tremendous pressure from federal authorities to deal with Tesco operates 923 in national and . The name was drawn from the initials of the company's tea supplier (T.E Stockwell), and Cohen's own name. The structure of a market refers to the number of businesses in a market, their market shares and other features which affect the level of competition in the market. One internal that applies to Tesco is corporate culture. In legislation, the government's monopoly regulation and buyer power reduction policies will restrict entry into this sector with such restrictions as licence requirements and access quotas for raw materials. technology. Tescos online store is a fantastic opportunity that they can keep expanding into, especially because of the current worldwide pandemic more people are staying at home and was for their food to be delivered. This website uses cookies to improve your experience while you navigate through the website. Aldi and Lidl in 2018 were continuing to take For example, Tesco sell fish cheap on Monday, but charge lower price at vegetable on Tuesday. their shops. This can be a negative as it also gives other companies the advantage. Tesco has and should continue to measure consumer behaviour and respond to it appropriately as there are social factors that will affect them. The increase in VAT resulted in a decrease in customer spending and therefore Tesco received fewer sales. its electricity by 2030. Furthermore, the new Jacks brand would aim at the Furthermore, another advantage of oligopoly is that It takes a Tesco will have to offer a lower price to suppliers to make up for the increase in other prices. For example, a real-life business that recycles is Tesco. Confidentiality is not the only thing that must be incorporated inside the agreement. structure with a small number of firms, none of which can affect the others from having In economics, market structure is a term that describes the state of a market, with respect to competition. How does market structure affect pricing? Legal, if there is any policy changes happen in the structure of the Tesco it will affect the organizational . could eat into the profits at Tesco and use valuable time. profitable. It is determined by the number of firms in the market and the barriers to entry. P4 achieved. On the other hand, A credit crunch is caused when banks carelessly lend money out. the cost of production, external shocks such as hurricanes, pandemics, droughts, and such as Sainsburys, Asda, and Aldi. 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. Tesco has an hierarchical structure. To compete with other organizations, cost-plus pricing is the most suitable pricing strategy for Tesco. Leading market share - Amongst the big four supermarkets, Tesco dominates the grocery retail market of Great Britain with 27.9% of market share. One internal that applies to Tesco is corporate culture. During this recession, Tesco lost an estimated 22 million to Asda and 10 million to each Aldi and Morrisons. Most of the products available in Tesco are also available in other retailer store too. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. brand awareness. Factors that affect competitive advantage include: Differentiation - This affects Tesco because it can set them apart from competitors the increase of contactless payment methods. Furthermore, Tesco in the future may have to get rid of their cash Also, some 24 hours Tesco stop offering the all-day service as many customers reported it to be a bad experience and the demand was just not enough for Tesco to continue. Furthermore, Tesco has multiple retail awards for keeping up their standards and providing the best retail service whilst keeping in mind their corporate responsibilities. oligopoly, monopoly, perfect competition, and imperfect competition. Tesco has responded to the substantial change by implementing many safety features in their stores such as cleaning stations and plastic boards that stop any harmful particles from transferring from one person to another. Tesco Culture Analysis. This is an example of how competitors prices can affect Tesco positively. This withdrawal will cause many factors that will affect Tesco to change. 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 number of hours that the employees work and the working conditions are additionally included inside this so the worker recognizes what is in store from them working at Tesco. BREXIT will be a key factor that Tesco has already considered and will further have to make One more way that Tesco has responded to changes in the market is the price matching scheme that they have launched due to a coronavirus-forced-recession. carbon footprint. Research from www.yourmoney.com has found that one of the UKs biggest and most popular cities, Sheffield, has 54% of people who are inclined to spend their money now. I believe that the political and legislation are the most important factors to Tesco because if This encourages people to save their Clubcard points so they can This constantly creates new opportunities for them to broaden out. According to Tesco annual report, its revenue is 57.8 Billion in fiscal year 2021. the control of individuals and sellers. This will cause Tescos whole pricing structure to change. have to consider the amount they have to spend on getting existing items they sell onto the Unemployment is not controllable and this is why it is a major concern for the company. This approach they are following is where they first listen to the stakeholders about their issues and things they have to say. Finally, Tescos market share may be impacted because of the They also encourage their customers to make For example, when VAT was raised in 2010, Sir Terry 2. The type of structure will influence a company's behaviour and the level of profits it can generate.