European Unions rewards businesses and organisations, which reduce their CO2 emissions and penalises those that exceed limits. The chosen organization for this study is Tesco Plc that operates in the retail industry of UK. 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. Now the focus is on putting policy into practice in to UKs market. 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 policy also allows technological innovation and the European Commission makes sure that these innovations are in the European Unions fair competition policy. Market structures are basically the number of firms in the market that produce identical goods and services. In the UK market, it is very crucial to determine the quantity of output in order to keep check on pricing and related decisions. Market structures describe the competitive environment in which a firm operates. The company hugely relies on promotional offers to attract and retain customers. Get any needed writing assistance at a price that every average student can afford. (Octotutor, 2014). 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. You can use it as an example when writing It is estimated the 3.5 million British jobs are dependent on* Britain's membership of the EU. A market is the area where buyers and sellers contact each other and exchange goods and services. Tesco's share . Tesco has already proven that they are committed towards being eco-friendly, "Tesco Plc, the world's No.4 retailer, plans to spend over 100 million pounds with British green technology companies over the coming year as it steps up its drive to halve carbon emissions by 2020.". While the cohesion funds attempt to address this, there are still great differences across the EU in economic performance. Managerial Economics, 6th edition. It is common to differentiate these markets across the following seven . This may lead to pockets of deeply depressed areas in which people cannot find work and areas where the economy flourishes and wages increase. Market structure can be broadly classified into three distinct categories: Bullish Market Structure: A bullish structure is defined by a series of higher highs (HH) and higher lows (HL). Tesco was born and the first shop was opened in 1929 in north London. 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. Perfect competition describes a market structure where a large number of small firms compete against each other with homogeneous products. Tesco Plc (Tesco) is a multinational retailer of general merchandise. Tescos 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 the dominant supermarket it has fairly large competitors who also partly control the market. cookie policy. 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. Type your requirements and I'll connect Therefore, the general trend toward expansion and search for innovations allows the industry to grow. In a perfect competition there are few entry and exit barriers, in this type of competition the companies target the mass audience and they differentiate their product with minor changes in the product attributes (Homogenous). Research has shown that there are numerous market structures with unique pricing strategies in place. Because the Euro would have the enhanced credibility of being used in a large currency zone, it would be more stable against speculation than individual currencies are now. Thus, the supermarket industry in the UK could be described as an Oligopoly Market. they work with the EU on shaping policies. 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 the dominant supermarket it has fairly large competitors who also partly control the market. It has been providing its customers with many different products in one place and with convenience. The European Commission has wide powers to make sure businesses and governments stick to EU rules on fair competition. Views 1142. 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. 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. 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. European Union is a unique economic and political society which is in partnership between 27 democratic European countries. 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. Save time and let our verified experts help you. As a comparison the total value of UKs trade-in-goods imported to the UK from Member States of the EU in April 2010 was 15.3 billion and for May 2009 was 12.2 billion. It has changed because interest rates are set in each country at the appropriate level for it. 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 Euros international credibility. Delivering a high-quality product at a reasonable price is not enough anymore. An oligopoly market is characterized by a few firms producing the same product, and each firm's action influences the other firms. It can allow smaller companies to cooperate if this strengthens their ability to compete with larger ones such as Sainsburys and Tesco. Since 1995 alone, about 100,000 young Britons have spent time studying in another European country. Natural monopoly is where there are high fixed costs for example the energy industry like gas and electricity as well as water, telecommunications and the transportation industry like underground and rail. This will unleash a greater potential for growth. This task for Business environment is split in two parts. Value of International markets to UK Best Essay writing tips, 10 Tips on How to Write a Good Article Review, Best Tips on How to Write an Annotated Bibliography. In doing business with smaller firms, Tesco cannot use their bargaining power to impose conditions which would make it difficult for their supplier or customer to do business with its competitors. Though there are many companies operating chain retail shop . 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: With the learnings from Jack's now applied, the time is right to focus on ensuring we continue to deliver the best possible value for customers in . The market structure is the setting in which the enterprise receives competitive 'discipline' or through which the rule of competition is made effective. An oligopoly is most likely to have a kinked . (http://www.tescoplc.com/plc/about_us/map/). In a perfect competition market structure, there are a large number of buyers and sellers. In economics, market structures can be understood well by closely examining an array of factors or features exhibited by different players. Coca Cola Market Structure Analysis. Environment: In doing business with smaller firms, Tesco cannot use their bargaining power to impose conditions which would make it difficult for their supplier or customer to do business with its competitors. Natural monopoly is where there are high fixed costs for example the energy industry like gas and electricity as well as . No customs tax is charged on goods that are sold or transported between member states. Market Collapse: Tesco has stores in different countries but still it is completely depending on the UK market. In this sort of environment the businesses and trades people have somewhat control over their prices because of the products differentiations. Get expert help in mere Tesco is headquartered in Welwyn Garden City, Hertfordshire, England in the United Kingdom. ", Following are the 4 leading supermarket chains in the United Kingdom Tesco, Asda, Sainsbury's and Morrisons, these fantastic four have a combined share of 75.6 percent of the UK grocery market accord to the research done in the 12 weeks ending 1 November 2009 (Source: Kantar World pane) http://TNS_Worldpanel. EU Exports. The Figure 2 below illustrates a typical organizational structure within Metro, Superstore and Extra formats. Effective competition provides goods and services, automatically raises quality and customer choices increase with competition. The business that I have chosen for this assignment is Tesco; this is because Tesco is a multibillion pound international business. Most of the products available in Tesco are also available in other retailer store too. Contacting their MEP and cast vote at the European Parliament elections the European Parliament enacts EU laws: (www.europarl.europa.eu). Financial Turnaround: Thanks to the leadership of Dave Lewis, Tesco recovered from an annual loss of 6.4 billion in the annual report of 2015 to an operating profit of 1.9 billion in the annual report of 2020. In a perfect competition there are few entry and exit barriers, in this type of competition the companies target the mass audience and they differentiate their product with minor changes in the product attributes (Homogenous). While the cohesion funds attempt to address this, there are still great differences across the EU in economic performance. One central bank cannot set inflation at the appropriate level for each member state. Disclaimer: If you need a custom written term, thesis or research paper as well as an essay or dissertation sample, choosing Course Scholar - a relatively cheap custom writing service - is a great option. The major market forms are: Perfect Competition; Monopolistic Competition . 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. MARKET STRUCTURE Market structure is the interconnected characteristics of a market, such as the number and relative strength of buyers and sellers, degree of freedom in determining the price, level and forms of competition, extent of product differentiation and ease of entry into and exit from the . The market share of of the leading supermarkets in Great Britain (GB) from January 2017 to December 2022 has remained fairly stable. Market Structure Pricing and Output Decision. A range of prices occurs because sellers can differentiate their offers to buyers. collected. 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 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. Contacting their NGOs (consumer associations, environmental pressure groups, etc.) 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. Climate change is one of the gravest challenges facing humanity. More Jobs: There is no one big seller with any significant influence on the market. There may be a large number of firms, but most are small and relatively unimportant, while a small number of large firms produce most of the outputs of the . June 2010 showed a 9.6 per cent increase in imports compared to May 2010 and a 28.4 per cent increase compared to June 2009. Once in a lifetime a family might make one large purchase or transaction across a European border such as buying a holiday home or a piece of furniture. 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'. What is European Union? Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. (2017, Dec 26). Tesco is one of the largest commercial and grocery store chains in the world, while the Tesco online market share is the largest when we regard the European market.Not only is Tesco marketing strategy and business model very successful in terms of selling its products but it's also known to be extremely unique and professional in its ways of handling business and . Because the Euro would have the enhanced credibility of being used in a large currency zone, it would be more stable against speculation than individual currencies are now. To make these things happen, EU countries have set up bodies to run the European Union and adopt its legislation. The organization currently has three locations (La Jolla, Del Mar, and Encinitas).. Public goods are goods from which the whole community can take benefit without the need of purchasing them. What results so far? Since the war the UK economy has tended to have an economic cycle closer to the US than the EU. One legal structure of Tesco is the 'Corporate governance', the people in this sector deal with shareholders; they do this to make sure Tesco is achieving the strategies that the shareholders want them to achieve. Below I have listed the advantages and disadvantages which were discussed by the chancellor Gordon Brown at the times of between 1999 and the year 2002 when the waves of countries in Europe joined the European Union and the currency: (http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm). Tesco itself argues that it is an oligopoly, which suggests that they are also not flawed in the perfect rivalry category of the market structure. The European Parliament (representing the people of Europe), The Council of the European Union (representing national governments). In 2013, Tesco spent approximately 110 million on marketing efforts in traditional outlets. It is estimated that the currency cost of exports to small companies is 10 times the cost to the multi-nationals, who offset sales against purchases and can command the best rates. This means there is a few dominant firms in the market. The firm needs to establish its price and output levels to achieve its business objective of profit maximization. //= $post_title European policies Effective competition provides goods and services cuts prices, raises quality and expands customer choice, allows technological innovation. Making it one of the best grocery store chains in the . 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. Market structures show the relations between sellers and other sellers, sellers to buyers, or more. You have to be 100% sure of the quality of your product to give a money-back guarantee. It is one of the market leaders with the 3rd position in the market. In this structure, multiple management systems operate to ensure that everything gets done with perfection. Taxation Transport Justice, freedom Internal market Customs across a large geographical area. A multinational company like Tesco cannot merge with another giant if that would put them in a position to control the market, though practice this rule only prevents a small numbers of mergers going ahead. number: 206095338, E-mail us: Most common examples of monopolistic competitions are: restaurants as in the right area and right type of food they can have their own small portion of monopoly, professional solicitors, building and project managing firms and finally plumbers as there are less of them and more required. Explore how the human body functions as one unit in In turn, this has enabled us to consistently attract new customers to Tesco from our competitors over the last two years and we know they increasingly recognise the value they can find at Tesco. Tesco has over 4,000 stores across the world and out of those 4,000 Tesco has more than half of them in the UK around 2362 stores and this does not include all the Tesco metro and express stores. A monopoly has high barriers to entry and firms have strong controls over their prices and they also control the supply of their product which can increase demand of popular products, because a firm with a monopoly has majority of the market share it can decide to have low prices in order to destroy their competitors. 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. Pearson (KY) e-book. Due to the low degree of competition theses big giants can decide on their own price which is most suitable for its target audience and these prices will be non-competition prices however there could be potential for collusion and price fixing so that each dominant business can enjoy their market share and have profits accordingly i.e. As of February 2017, the total shareholder's equity of Tesco was 6.414B ("Annual report," 2017). In this type of competition the companies are forced to follow the competitive pricing strategy in order to survive in the industry, i.e. As a comparison the total value of UKs trade-in-goods imported to the UK from countries outside the EU in May 2010 was 14.0 billion and for June 2009 was 12.0 billion. Retrieved from https://phdessay.com/market-structures-tesco/, Hire skilled expert and get original paper in 3+ hours, Run a free check or have your essay done for you, Didn`t find the right sample? To compete with other organizations, cost-plus pricing is the most . Tesco PLC is a UK-based global supermarket chain and it has 7817 shops and 517,802 employees around the world. Tesco was founded in the East End of London, London in 1919. Order custom essay Types of Market Structures and Competition in UK 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. This should lead to more investment, more jobs and lower mortgages. Value of European markets to UK Understanding Market Structures. In the United States, Texas could not avoid a recession in the wake of the 1986 oil price fall, whereas demand for Sterling changed in the light of the new oil price, adjusting the exchange rate downwards. aviation all airlines prove one service which is to get their customers from one location to their destination and most customers have no preference or specific type of airline that they want to travel with, most customers will just look for the cheapest airline. United Kingdom supermarket share the buyers have the power to influence the price of the product or services. their profits margin will vary but still always high. The European Commission (representing the common EU interest). Sometimes it is hard to do all the work on your own. In economics, market structure is a term that describes the state of a market, with respect to competition. All businesses like Tesco's 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. In 2007 Tesco received the Top online green award for their zero-emission delivery vans. These companies surpassed the revenues generated by Tesco Plc. It was estimated that a traveller visiting all twelve member states of the (then) EC would lose 40% of the value of his money in transaction charges alone. UK Supermarket Oligopoly - Key takeaways. European Union is a unique economic and political society which is in partnership between 27 democratic European countries. Now the focus is on putting policy into practice in to UK's market. 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 'Office of Fair Trading' is the UK's consumer and competition authority and their mission is to make markets work well for consumers. Tesco is operating within an oligopoly market where the market is highly dominated by a very little number of big companies. If Tesco plans to merge with its competitor, Tesco needs approval from the European Commission, the EUC (European Union Commission) marks their decision depending on the amount of business that Tesco has within the European boundaries. Therefore, one can say that market . support@phdessay.com. The imports of UK data shows that the import from the non European Union zone is increasing i.e. The total value of UKs trade-in-goods imported for January 2009 to December 2009 was 162.7 billion, which has been upwardly revised by 238.0 million. European Union policies ensure safer food and a greener environment, better living standards in poorer regions, joint action on crime and terror, cheaper telecoms and communication, millions of opportunities to study abroad and more. An end to internal currency instability and a reduction of external currency instability would enable exporters to project future markets with greater certainty. This is the reverse of the position in 1990. How does it work? - 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. Monopoly: Today the main priorities are combating climate change, preserving biodiversity, and reducing health problems from pollution and marking sure that natural resources are being used more responsibly. Businesses regularly have to make appeals against Commission decisions if it seems like a unfair deal. Tesco PLC is the leading English distribution group. 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 European Union Commission can allow companies like Asda and Morisons to cooperate in developing a single technical standard for the market as a whole. 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. 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 RBS's admission and agreement to co-operate. European Union executes legislations in justice and home affairs, and maintains common policies on trade, agriculture, fisheries and regional development. In oligopoly there are many entry and exit barriers such as huge investments etc. Using the 4 market structures I will illustrate using real life case studies and examples how a selected business of my choice has behaved/responded to its market structure and finally describe how the OFT and other regulatory bodies check against anti competitive behaviours. TESCO SUSTAINABILITY REPORT CASE STUDY 4 Source: Thus, Tesco Inc. operates in an oligopoly market structure and competes with Asda and Sainsbury. In a recent investigation by the OFT has reviled that British Airways has been found guilty over the price of long-haul passenger fuel surcharges and has paid a penalty of 121.5m to be imposed by the OFT, therefore enabling the OFT to close its civil investigation and resolve this case. To find the main sources of competitive advantage that Tesco has over its competitors an analysis of the structure of the industry should be under-taken (Porter, 1980). This essay was written by a fellow student. When aiming to acquire competitive advantage, Tesco has three options: cost leadership, product diversification or niche strategy . This assignment reflects the market analysis for TESCO PLC, which is one of the leading retail and super market chain in the world. The Business Model of Tesco. Tesco is the third largest global retailer in the world which just behind Wal-Mart and Carrefour (Baidu, 2010). Since then there have been significant efforts in terms of policy. Tesco has to focus on labor costing now in order to have a sound financial condition. Likewise, businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations. 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. No customs tax is charged on goods that are sold or transported between member.. Be understood well by closely examining an array of factors or features exhibited by different.... Practice in to UK Understanding market structures are basically the number of small firms compete against each other with products... 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