Understand the Behaviour of Organisations in their Market Environment - Essay Example

Market Environment 3 Tesco Retailers Tesco is among the top retailers in UK that has won factor over its competitors due to its cost, as well as flexibility. This cost reduction is achieved using information technology in the running of an effective supply chain. Tesco manages to have the flexibility in its operations through offering its customers a wide range of commodities. Tesco also has a team that carries out research and creates new products (Seth & Randall, 2011, 234). They also employ new technologies fully, which has revolutionized Tesco’s operations. This has enhances shopping for consumers making it even more convenient by providing all products under the same roof. Tesco’s has been working towards building of a sustainable business model throughout the years. This has been done through diversification into new geographical areas as well as value added retailing (Datamonitor, 2011, 7). This has enabled Tesco to reduce its business risk as well as work toward increased sales through trade in growth markets. Similarly, value added retailing encourages consumers loyalty and assist to sustain revenue growth even in times of economic difficulties. However, with increased competition in the UK market, retaining customers would be a crucial concern for Tesco. This has a risk of causing loss of the market share (Finne & Sivonen, 2009, 298). Perfect Competition This is the existence of different buyers and sellers, which implies that prices vary in response to supply as well as demand (Wood, 2008, 187). The market is characterized with substitutes where increase in price of one commodity means a change to consumption of the existing substitute. Both the buyer and the seller are seen to have equal chances of influencing the price. There are two extremes in perfect competition, which include monopoly, as well as oligopoly market. Price and output in a perfect market is determined as shown below. The profit in the firm indicates the level of price and output in three different ways. For a firm to make profits, it will produce at a level where P> ATC, while experiencing losses P< ATC and for it to break even P= ATC. Monopoly In a monopolistic market, there is only a single seller with a number of sellers. The firm is the price maker and therefore, determines the level of output as well as price (Finne & Sivonen, 2009, 298). The firms aim is to maximize profit. Oligopoly Classical theory in economics has the assumption that a producer with some market power whose aim is to maximize profit will set Marginal Cost (MC) equals to Marginal Revenue (MR) (Finne & Sivonen, 2009, 298). This indicates that the larger the quantity sold the lower is the price. Any change in MC or MR will be indicated by the price. This, however, does not occur where a kink exists. As a result, MC in this case would change without a change in price or quantity. The advantage of this to consumers is that companies will not raise their prices in fear of losing customers (Seth & Randall, 2011, 234). However, even a fall in price will only gain a few customers. This indicates that the curve is price elastic in case of price increase and less for price decrease. In the end, competitive firms will enter the industry. Pestle Analysis Political factors Tesco is an international company with carrying out operations in 14 countries. This makes the organization susceptible to the various legislative and political environments in these countries. This necessitates the compliant to comply with these laws to avoid conflicts with the authorities. In most countries, governments encourage foreign companies to consider local candidates for various posts in the organizations, to ensure locals benefit from their investments. This, therefore, means that Tesco employs a wide pool of individuals to satisfy their labor requirements. Tesco will be compelled to follow the legislation on employment adopted in the country where its stores are located. Economic Factors Economic factors are crucial in the operation of an organization. This is because it determines factors like demand, price and consequently the profit the organization will realize. The economy is also crucial because of other underlining factors like inflation, levels of unemployed locals among others, which may be significant in influencing a company’s bottom line. The economy cannot be controlled by an organization, despite the fact that it influences the company’s performance. This means that the company faces risks if the economy of the countries it operates from is affected adversely. Social Factors This involves demographic changes. Social factors also involve customer behavior and attitudes towards a product or organization. This is crucial for Tesco since it relies on the public as a consumer base. Therefore, the organization needs to create a positive perception socially. Technological factors Embracing new technologies can be beneficial to an organization as well as the user. Use of advanced technology has enhanced customer satisfaction in Tesco. The various technologies applied in Tesco are Electronic Shelf Labeling (ESL), Electronic Point of Sale (EPS), Radio Frequency Identification (RFI), Radio Frequency Identification (RFI), and Self Checkout Machines (SCM). This brings conveniences to customers as commodities are at their disposal. This helped in enhancing Tesco’s stocking and distribution procedures. Legal factor The various laws specified by distinct Governments directly affect Tesco. Food Retailing Commission, for instance, enforced standard pricing for goods. This implies that retailers would not make price changes without notice. Companies regularly change prices to attract customers. Tesco declined the prices of promoted goods and increased those of other products, which were politically right pricing laws. Environmental factors Organizations need to create products while displaying social responsibility. This would be implemented through minimizing pollution, minimal utilization of resources. Minimal environmental pollution is the essential aspects to be adopted by companies such as Tesco. 3.2 Sky TV BSkyB is a dominance force as a Media facility in the UK. Pay TV competitors who include Virgin Media and BT do not have the ability to acquire any content but have to pat Sky for access. Sky TV had 10.25m subscriber in 2011 while Virgin Media had 3.76m (Sacchetti, 2009, 78). This base of subscribers implies that with Sky comparing to other pure UK companies, competition is impossible. In the last decade, however, BSkyB did not always have this dominance. It is just undergoing a recovery from some rather turbulent conditions. The company was at its lowest financial position with accumulated debts. Its massive amounts of goodwill had proved to be worth nothing. It spent the next years paying out debts as well as writing off the vast share of goodwill (Ritter & Braun, 2005, 183). BSkyB also turned around its receivables, which acted as a great source of cash throughout the retrenchment period. This gave the company a crucial lesson where it no longer utilizes much leverage. This move has been of benefit to the company as well as the shareholders. Pricing and Non-Pricing Strategies BSkyB has demonstrated a clear comprehension of its competitive advantage within the industry. It has also shown an understanding of the changing trends in the industry. This is indicated in its reinvestment from cutting back office expenses to programming (Van Bael & Bellis, 2005, 117). They have achieved this by quick response to arising issues and development of product reliability. It has also managed to transfer its service to online. The company acquired the set top box maker, which was an essential part of the strategy. However, this moved could be classified as a major step into technology as it would seem to become redundant. Replicating the company’s statistics, this move is a difficult thing (Datamonitor, 2011, 7). It is, however, assumed that the company may have used around ?200m of expenses in the past three years. This is a respectable figure considering that the subscribers have grown significantly since that period. BSkyB has moved into the on demand area that is a clear sign of comprehending the changes in the industry. They came up with the SkyGo that is not an on demand area but allows subscribers to access SkyTV at any place (Ritter & Braun, 2005, 183). This could also be through any devices including mobile devices as well as online. There is also the NowTV that allow those people who are not subscribed to access the SkyTV. This is done through a pay as you go feature or a base of subscriber, which requires no contact or facility. This, however, has a negative impact of threatening a substantial segment of BSkyB’s existing business. It could also cannibalize the already existing subscribers (Van Bael & Bellis, 2005, 117). On the other hand, the move maximizes BSkyB’s key advantage over its competitors, the Virgin Media and BT, fastest access to the best content. This move is aimed at allowing advanced penetration into the market. It also strengthens BSkyB’s advantage by expanding the subscriber base through the content (Datamonitor, 2011, 7). The main concern is if the will allow BSkyB to maintain the currently held advantage. If this happens, then it implies that Sky runs the entire industry and is an indicator of the management comprehension of the industry as well as BSkyB. Conclusion BSkyB is a strong figure in the UK market within the industry that offers considerable economies of scale (Ritter & Braun, 2005, 183). The company is fully exploiting this advantage even with the rising changes. The changes and how the company manages to adjust with them is probably the most beneficial aspect to the company. Therefore, benefits for BSkyB can only be derived from increased competition, as it is the strongest player holding the greatest number of subscribers. List of References Barnes, D. (2008), Operations management: an international perspective, London [u.a.], Thompson Learning. Datamonitor, (2011), British Sky Broadcasting Group plc, Retrieved on July 3, 2012 from Datamonitor, (2011), Tesco plc, Retrieved on July 3, 2012 from http://www.academia- research.com/filecache/instr/t/e/703712_tesco_history_inc_swot_1_.pdf Datamonitor, (2011), Wm Morrison Supermarkets Plc, Retrieved on July 3, 2012 from ,http://www.academia- research.com/filecache/instr/m/o/703712_morrisons_history_and_swot.pdf> Finne, S., & Sivonen, H. (2009), The retail value chain how to gain competitive advantage through Efficient Consumer Response (ECR) strategies, London, Kogan Page. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=262772. Fitzgerald, S, W, (2012), Corporations and cultural industries: Time Warner, Bertelsmann, and News Corporation, Lanham, Md, Lexington Books. Ritter, L., & Braun, W. D, (2005). European competition law: a practitioner's guide, The Hague, Kluwer law international. Russo, F. (2006), European Commission decisions on competition economic perspectives on landmark antitrust and merger cases, Cambridge, Cambridge University Press. Sacchetti, S, (2009), Knowledge in the development of economies: institutional choices under globalization, Cheltenham, Elgar. Seth, A., & Randall, G, (2011). The grocers the rise and rise of supermarket chains, London, Kogan Page, http://www.books24x7.com/marc.asp?bookid=42007. Van Bael, I., & Bellis, J.-F, (2005), Competition law of the European Community, The Hague [u.a.], Kluwer Law Internat. Wood, R, (2008), Into the value zone: gaining and sustaining competitive advantage, Lanham, University Press of America. Read More