Business Environment: Jewelry, Organic Food, and Tesco - Essay Example

Explain the implications of the excess capa in the jewellery market for s. Use a demand and supply diagram to support your views. 10 marks Demand Supply diagram The diagram represents the scenario of demand and supply in jewellery market. Supply and Demand Diagram shows the Supply Line where there is a cyclic trend towards increase in the supply and the demand line projecting towards a downward slope and the intersecting Equilibrium Point is the balance between supply and demand and this can be attained only when there is uniformity in supply process and adequate consumer demand to purchase the entire supply. At the Equilibrium Point, the number of people that want to buy at that price ='s the number of people that want to sell at that price Implications of excess capacity in jewellery market The increase in demand and supply has led to over crowding because of the excess capacity in the Jewellery market. Some of the implications of excess capacity are stated below Phenomenal increase in the number of manufacturers and retailers rather than the demand for Jewellery and this gave the consumer group to have more options in accordance to their choice and taste. Smaller Jewellery markets were forced to retain their existing customers by compromising on the cost of Jewellery, there by struggling to be in business. High conglomerates have the capacity to project themselves in key locus points attracting customers and promote their Jewellery designs through advertisements to acquire the customer interest at the expected level achieving brand loyalty. The Supply factor out paces the demand of jewellery leading to reduction of prices, minimizing the ultimate corporate profit by a small percentage and increase in job cuts as a measure of sustainability. In Economic front, there arises a malign situation of Instability causing deflation due to excess capacity and weak demand. There is wide variety of options available in focus attributes of Jewellery like price, style, design and quality. Internet shopping has gained more momentum to facilitate more demands by enhancing the purchasing power at the door step with wide variety of options. Excess capacity also invited economic slowdown and have increased competitiveness among all the Jewellery shops. The jewellery and watches market is highly competitive in terms of both supply and retail. Recent years have seen the emergence of several luxury-goods and high-fashion conglomerates into the market, which possess strong brands that are supported by substantial financial resources. In addition to the above implications of excess capacity in Jewellery market, the major implication is the phenomenal change in customer buying behavior. To what extent might the traditional small jewellery and watch operators be considered to be suffering from unfair competition from 'luxury-goods and high-fashion conglomerates' 10 marks Traditional small jewellery and watch operators suffer a major setback in business because of the increasing competition from luxury goods and high fashion conglomerates. There are many instances where the traditional jewellery has lost its importance and the demand for the same is fading because of the evolution of new type of fashion jewellery. Some of the critical aspects for major setback for traditional jewellery Evolution of high fashion conglomerates in the jewellery industry paved way for changing consumer behavior and shift in the purchasing methods and dimensions. The conglomerates use their financial strength to identify key locations that are expensive for better customer segment reach. The traditional firms are a way behind in reforming their practices and are slightly reluctant to change any dimension of their jewellery setup. Whereas the conglomerates are ready to spend fortune on effective advertisement and branding techniques and deploy promotional strategies to attract customers and achieve brand loyalty paving way for effective customer retention. After the great depression, there has been a shift in consumer buying behaviour, their choice and preferences leading to more modified buying motives. With the effective marketing initiatives, the customer target base is attracted towards designs which are fashionable and simple for official purpose. There has been shift in preference to cosmetic jewellery from the traditional symbolic and sentimental jewellery. There are huge promotional campaigns conducted by high fashion conglomerates to sustain and be prominent among other competitive markets and the amount invested for the promotional campaign is huge. Traditional jewellery are known for their cut, antique design ,gold value and fashion jewellery and watches does not have any ethnic design for specific occasions. The above points reiterate the fact that traditional small jewellery and watch operators be suffering from unfair competition from 'luxury-goods and high-fashion conglomerates'. Using the data in the table identify and briefly explain the market structure that is likely to be present in 1. The computer/office equipment industry 2 marks 2. The meat products industry. 2 marks Five-firm concentration ratios in the EU Industrial sector Market share of the largest five firms in the industry (%) Computers / office equipment 71.2 Motor vehicles 62.9 Domestic electrical appliances 46.4 Meat products 5.7 Clothing 4.3 Market structure of Computers / office equipment The concentration ratio of the computers and office equipment is 71.2%.The type of market structure is Oligopolistic. Market structure of meat products and Industry The concentration ratio of the meat products and industry is 5.7%.The type of market structure perfect competition as the concentration ratio is less. Using your understanding of the motor vehicle and clothing industries, discuss the reasons why the motor vehicle industry is so highly concentrated compared to the clothing industries. 10 marks Motor Industry has a higher degree of concentration ratio i.e. 62.9% as compared to the clothing industry which has the concentration ratio as 4.3% Motor Industry has definitely an edge over clothing industry because of the reasons listed below The market share of motor industry is comparatively higher than the clothing industry because of the increasingly growing demands of downstream consumption industries across the globe There is scope of the rapid development in all fields aligned as sub group with the motor industry such as consumer electronics, industrial automotive system, household electric appliance, office automation system, communication etc.Clothing industry does not have a variety of sub functional units or dependent units and hence its market share is small. Motor Industry has strong market demands as compared to textile industry and geographical advantages like plant location and reliability on machines leading to perfection. The industry concentration, market competition and product quality will be the key influencing factors for profit making in both the industries .Clothing industries have more challenges in terms of reform of the enterprises, the change of export policies as well as the issues on trade barriers and raw material cost as compared to the motor industry. Motor Industry is highly concentrated due to critical factors like Demand and Conditions, Support and Relevant Industries, Enterprise Strategy, Structure and Competition, Functions of Government. Clothing Industry is primarily dependent on Demand, Cost, Variety and Target customer base. Most important causative for larger market share for Motor Industries is the competitive edge towards Product Structure Adjustment and Independent Brand Creation as a element of development. This strategy is lacking in Clothing Industry. Section 2 Discuss the benefits to Tesco of establishing supermarkets in the central and Eastern European countries of the EU. 15 marks Tesco is a known player for grocery multiple chains focusing on organic food sales in UK and Central Europe has a leading stock of about 1000 to 1500 organic lines. Important strategy adopted by TESCO is to focus towards higher quality and increasing safe product based on the expected standards set by suppliers. The derived benefits on the strategic management approach by TESCO are Higher product quality and safety are being used to woo consumers, as competitive arms against the remaining small shops and markets; Standardization of products reducing cost and allowing more efficiency of product flow in the procurement system Establish private standards on the attributes of local supply in conformity with the private standards of European retailer market with a centralized purchase concept.This concept facilitates better monitoring ability . Selection of the qualified specialized wholesalers, and preferred supplier programs of selected producers, raised the capacity of TESCO to set higher standards than is possible buying from general-line wholesalers who buy from and sell to a wide variety of firms TESCO has been successful in increasing the Target Customer base, achieving customer reliability and loyalty TESCO has dominance in international competitiveness of the supply chains and increasing the demand through effective supplies. TESCO has standardized process for running super market chain and comply with the "Super market code of practice. TESCO has a strong market growth and has attracted top brands like some major international food companies such as Heinz, Master foods, Muller Dairy, Gerber, RHM, Arla and Unilever Best foods. TESCO has partnered with many leading suppliers as a measure to increase demand and supply. TESCO has partnered with wide range of organizations to improve CR performance, share data, knowledge and ideas and deliver specific programmes. They include: British Retail Consortium Business in the Community Cancer Research UK Carbon Disclosure Project The Climate Group Confederation of British Industry Some of the Key benefits include The roll-out of front-of-pack Guideline Daily Amount (GDA) labeling to own-brand products in countries including Turkey, South Korea and Poland, where 33% of products are now labelled. Delivering improved nutritional content of over 900 products in the UK. Projected Corporate social Responsibility by supporting communities in crisis, from the Dominican Republic to China, Malaysia and the UK. In total we gave over 250,000 in donations to people affected by extreme weather conditions such as hurricanes and floods and raising a record 4.55 million for our UK charity of the year, the British Red Cross. TESCO has expanded rapidly by providing job opportunity for lot of people for their retail Fresh & Easy stores with good benefits and attractive compensation. The benefits to Tesco of establishing supermarkets in the central and Eastern European countries of the EU is clearly evident from the above points To what extent might Tesco's success be even greater if the UK were to adopt the euro 15 marks There will be drastic improvement in TESCO success path if UK adopts euro. Some of the key success parameters are TESCO can run business on standard currency and throw away the fear of massive currency devaluation because of sterling and pound. This enhances the financial stability of the company. If UK adopts Euro, then there is feasibility for a transparent economic policy projecting a fair value of profit and wealth to TESCO. Euro has projected trends of stability and growth pact which enables sustainability of business for TESCO.If UK adopts euro, then there is a chance to protect smaller economies. TESCO as a supply chain retailer aims at integration of business among its supply chain store outlets and the same is possible UK adopts euro. This increases the possibility of concept of single currency promoting freedom if movement of goods and services and projecting a outward dominance in a single market as a whole. TESCO will increase its profitability and business projection on sales if UK adopts euro .The main reason will be the single monetary policy evolution if euro is adopted. TESCO will have a secured business and achieve financial globalization and increase the size of mobile capital funds across the small countries reaping more profitability and security UK adopting euro is a protectionist device for TESCO to gain monopoly over market share and scale from third largest retail supply chain to the first largest retail supply chain. Other qualitative corporate social responsibility benefits for TESCO if UK adopts Euro are Attainment of public recognition of good practice on corporate social and environmental responsibility, informing the investment community, government, consumers and other key stakeholders Providing guidance on which key social, environmental and ethical issues companies might be expected to address from the perspectives of a cross-section of civil society organizations Creating space for constructive dialogue and mutual learning on contentious issues; The above points reiterate the extent of TESCO's success if UK adopts euro as currency. 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