Essay. This work is done using the powers granted to the OFT under consumer and competition legislation. The main competitors are Tesco, Sainsbury's and Asda, making the three firm concentration ratio high. 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. TESCO SUSTAINABILITY REPORT CASE STUDY 4 Source: Thus, Tesco Inc. operates in an oligopoly market structure and competes with Asda and Sainsbury. 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. Retail in the UK. But the tribunal agreed with Tesco that the commission did not fully take account of the fact that the test, relating to planning decisions for larger stores, might have adverse effects for consumers, among other matters. A concentration ratio is a way . Firstly, there are several sellers but only a few big companies who have a large market share in the industry. Best tips on how to write a literature Review? cookie policy. 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. You will get a personal manager and a discount. It can be concluded that UK has less exports to the non EU zone compared to the European market, in June 2010 total value of goods exported to Europe was 11.3Billion compared to the total value of goods exported to the international market which was 10.9Billion. In addition, faced with the saturation of domestic market, high competition and self-development demand, Tesco expanded oversea markets in time and translated its store format to international market such as Turkey, China and Poland. 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. What results so far? The decisions are made by Tesco after taking into considerations the . The policy also allows technological innovation and the European Commission makes sure that these innovations are in the European Unions fair competition policy. Pure monopoly in where the firm is the industry, for example Transport for London, the firm which owns all buses and underground tubes in and around London, this is where consumers have no or very limited choice. Some exceptions to the general rules are possible. (http://news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm) Monopoly Vs Oligopoly How can the members have their say? Sustainable development has long been one of the overarching objectives of EU policy. In oligopoly there are many entry and exit barriers such as huge investments etc. This should lead to more investment, more jobs and lower mortgages. 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 . This work is done using the powers granted to the OFT under consumer and competition legislation. Tesco PLC is a British grocery and general merchandise retailer that operates internationally with headquarters in Hertfordshire, England. Twenty seven separate countries with widely differing economic performances and different languages have never before attempted to form a monetary union. Tesco's mission statement is "to be the champion for customers - to help everyone who shops . 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. May 2010 showed a 2.9 per cent decrease in exports compared to April 2010 and a 21.3 per cent increase in exports compared to May 2009. A single currency should result in lower interest rates as all European countries would be locking into German monetary credibility. Explore how the human body functions as one unit in Some of the basic aims of the European Union are peace, prosperity and freedom for its 498 million citizens in a fairer, safer world. 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. 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. In the United States economy most markets can be classified into four different markets structures. I write a summary of market structure and how it affects the pricing and output decision based on Keat, P., and Phillip Young. In the business model of Tesco, we have seen that it has organized its business model with the best strategies. (http://www.tescoplc.com/plc/about_us/map/) The Council of the European Union (representing national governments) Abstract. It shifted from Brick & Mortar to Brick & Click stores. Founded in 1919 by Jack Cohen, Tesco has emerged to become the biggest retailer in the UK and more than 80 million shopping trips are made to Tesco stores each week (Annual Report, 2015). 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. (http://www.oft.gov.uk/ about/what/#named2) It has been providing its customers with many different products in one place and with convenience. Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. What is Tescos market structure? European Union's rewards businesses and organisations, which reduce their CO2 emissions and penalises those that exceed limits. Each paper is composed from scratch, according to your instructions. It operates in twelve countries by 2005. Pure monopoly in where the firm is the industry, for example Transport for London, the firm which owns all buses and underground tubes in and around London, this is where consumers have no or very limited choice. The different sorts of market structure include monopoly market, perfect competition market, monopolistic market, duopoly market, and . 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. Understanding Market Structures. 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). 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. In this sort of environment the businesses and trades people have somewhat control over their prices because of the products differentiations. But the tribunal agreed with Tesco that the commission did not fully take account of the fact that the test, relating to planning decisions for larger stores, might have "adverse effects for consumers", among other matters. A single currency should end currency instability in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them. The observed change has affected Tesco, the market shares of which grew by 4.5% to reach a total of 22.3% ("Tesco reclaims top spot," 2018). 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. 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. 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: The EU has developed a single market system of laws which apply to all member states, and ensures the free movement of people, goods, services, and capital, including the elimination of passport controls by the Schengen Agreement between 26 European Union states which I have listed below. Market structure decides the interaction of buyers with the producers. 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. An oligopoly market is characterized by a few firms producing the same product, and each firm's action influences the other firms. This is because in the . 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. More Jobs: They would be unable to devalue to boost exports, to borrow more to boost job creation or cut taxes when they see fit because of the public deficit criterion. In 2007 Tesco received the Top online green award for their zero-emission delivery vans. This aid can take many forms loans and grants, tax breaks, goods and services provided at preferential rates, or government guarantees which enhance the credit rating of a company compared to its competitors but in this case this does not apply to Tesco till today as Tesco is already on top of its game. Businesses regularly have to make appeals against Commission decisions if it seems like a unfair deal. 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. All the EU countries have different cycles or are at different stages in their cycles. - 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. across a large geographical area. Tesco offers a wide array of food and non-food products . 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. Oligopolies lie between the definitions of perfect competition and pure monopoly. The total 2010 year to date value of UKs trade-in-goods exported excluding June 2010 was 45.5 billion, which has been downwardly revised by 6.9 million. 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. Is made up of the wholesale sector which this means it supplies the shops which the consumers go to for their desired goods and services. Being in the Top 50 retailers globally as of 2021, Tesco's annual revenue worldwide in 2020 was 58.09B, a 9.1% decline from 2019 (due to the Pandemic & disposing of its Asia operations, to focus on the core business in Europe). In this type of competition the companies are forced to follow the competitive pricing strategy in order to survive in the industry, i.e. The multinational retailer employs more than 360 thousand people. The policy also allows technological innovation and the European Commission makes sure that these innovations are in the European Unions fair competition policy. 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. The main objective is to find out the market position of Tesco in relation to the other competitors in the market. Cohen believed in the business model "stack 'em high, sell 'em low". . A market structure is the environment in which a business operates and relies on factors like how competitive the market is, how easy it is for a new company to enter the market and how differentiated each company's products are. Buyers see different in sellers, products and will pay different prices for them. The UK's retail sector involves a lot of spending by consumers both in shop and online. The oligopoly market structure is perhaps the most prevalent type anywhere in the world and hence deserves a careful study. These companies surpassed the revenues generated by Tesco Plc. 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: Tesco was founded in the East End of London, London in 1919. Competition regulators are important in business and are required to ensure equality and a fair deal for all, It is estimated the 3.5 million British jobs are dependent on* Britain's membership of the EU. Climate change is one of the gravest challenges facing humanity. EU has set binding limits on emissions of fine particles known as PM2.5. But in applying these rules, it can take account of the interests of innovation, unified standards, or small business development. 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. In economics, the term "market" does not mean a particular place but the whole area where the buyers and sellers of a product are spread. A single currency would help that transaction pass smoothly. Contacting their MEP and cast vote at the European Parliament elections the European Parliament enacts EU laws: (www.europarl.europa.eu) your own essay or use it as a source, but you need 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. When aiming to acquire competitive advantage, Tesco has three options: cost leadership, product diversification or niche strategy . Thus, the supermarket industry in the UK could be described as an Oligopoly Market. 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). There is a lack of competition. Tesco management aims to reduce the cost of purchases and operational costs through and a set of other measures in order to pass the cost advantage to customer as the main brand value. Since then there have been significant efforts in terms of policy. In May 2010 the total value of UKs trade-in-goods exported to Member States of the EU was 11.3 billion. In recent years, Tesco has had to change their business model as well as their services to stay a market leader and differ-entiate from the competition. In May 2010 the total value of trade-in-goods imported to the UK from Member States of the EU was 14.7 billion. 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. Markets and Market Structures. The EU also tries to make each market as similar as possible to ensure fair competition across national borders. 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 . European Unions rewards businesses and organisations, which reduce their CO2 emissions and penalises those that exceed limits. Therefore, one can say that market . The objective of this report is to analyze on the market structure of the retail industry in the UK. 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). An oligopoly is a market structure with a small number of firms, in which none can prevent other from having a significant influence in the industry. Not only is Tesco one of the most valuable brands in the . 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. 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. Market structures are basically the number of firms in the market that produce identical goods and services. 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. 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. An end to internal currency instability and a reduction of external currency instability would enable exporters to project future markets with greater certainty. (http://www.axa-schengen.com/en/schengen-countries). The chosen organization for this study is Tesco Plc that operates in the retail industry of UK. Free Movement of Citizens: (http://europa.eu/pol/index_en.htm) Tesco and InterContinental plc are two UK businesses which get affected by market structures to adjust their output and pricing decisions. European Union is a unique economic and political society which is in partnership between 27 democratic European countries. The market structure is the setting in which the enterprise receives competitive 'discipline' or through which the rule of competition is made effective. European Union executes legislations in justice and home affairs, and maintains common policies on trade, agriculture, fisheries and regional development. Perfect competition: Order custom essay Types of Market Structures and Competition in UK Taxation Transport Justice, freedom Internal market Customs 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. 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. No customs tax is charged on goods that are sold or transported between member states. 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. A market structure is a tool used to determine the pricing power of certain products in diverse firms. 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. Though the number of sellers in . In such type of competition most of the companies use Push strategy, i.e. The Commission also monitors closely how much assistance EU governments make available to business (state aid). Tesco, we have seen that it has been providing its customers with many products. Place and with convenience are forced to follow the competitive pricing strategy in order to survive the... 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