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International Management Decision Making:Tesco plc - Essay Example

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The opening of the report consists of the brief background information on Tesco plc. The paper demonstrates the nature of competition in the retail grocery industry in the UK through market structure, market share, price/non-price competition, international competition and countervailing power…
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International Management Decision Making:Tesco plc
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Download file to see previous pages The paper describes the nature of competition in the retail grocery industry in the UK, within which Tesco plc dominates is an oligopoly, as “a situation of competition between the few, where a few large firms dominate an industry”. This fact was corroborated by Fabe in his published article on the UK Retail Grocery that indicates that “the market environment of the UK grocery retailer industry is more patterned after oligopoly. For instance, the presence of a few major firms in the industry such as Morrisons, Tesco, Sainsbury, Asda and Safeway, is a distinct feature of an oligopoly”. However, Evans and Baxendale disclosed that since Tesco’s market share has already exceeded 25%, as per the Competition Commission, a regulatory body that monitors organizations structures through market shares, its market structure should already be classified as a monopoly. The authors went to extensive discussions that aimed to discredit those who classify Tesco’s as a monopoly. It is therefore noteworthy to cite Fabe’s arguments that: “In its purest form monopoly is defined as a market structure where there is a lone producer of a product that has no close alternate producer and that is protected by consequential, if not prohibitive, barriers to entry. Accordingly, the pure monopolist faces the market demand for its good and is capable of choosing among the various price-quantity combinations on its demand curve with the single-minded goal of maximizing firm profits. This market structure is very different from the competition types as these market structures not only have a number of competing firms but barriers of entry are not present”.. Compared to other forms, the monopolistic market structure is the least apparent market structure in the UK grocery retailing industry” (Fabe: Task 2, 2011, par. 7). 1.2 Market Share As indicated the retail grocery industry in the UK is participated by hundreds of small firms, but the market share information attests concentration of customers to only four major firms, to wit: Tesco (30.4%), Asda (17.4%), Sainsbury (16.1%), and Morrisons (11.5%). Figure 1 below illustrates the market share of major retail grocery firms in the UK: Figure 1: Comparative Market Share in the Retail Grocery Industry in the UK Source: Brief Background Information, 2011, par. 2. 1.3 Price/Non-Price Competition The University of Delaware’s notes on the nature of pricing differentiated price versus non-price competition through its respective characteristics and features, to wit: Price Competition: “Match, beat the price of the competition. To compete effectively, need to be the lowest cost producer. Must be willing and able to change the price frequently. Need to respond quickly and aggressively. Competitors can also respond quickly to your initiatives. Customers adopt brand switching to use the lowest priced brand. Sellers move along the demand curve by raising and lowering prices” (University of Delaware n.d.) Non-Price Competition: “Emphasize product features, service, quality etc. Can build customer loyalty towards the brand. Must be able to distinguish brand through unique product features. Customer must be able to perceive the differences in brands and view them as desirable. Should be difficult (impossible) for competitors to emulate the differences (PATENTS) Must promote the distinguishing features to create customer awareness. Price differences must be offset by the perceived benefits. Sellers shift the demand curve out to the right by stressing distinctive attributes” (University of Delaware n.d.) Through the identified characteristics and for being classified as an oligopolist, Tesco plc therefore practices non-price compet ...Download file to see next pagesRead More
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