TESCO PLC AND THE NATURE OF MARKETS IN WHICH IT OPERATES - Essay Example

As one of the biggest players within the UK retail grocery industry, Tesco’s market share was 30.5% back in December 2009. In line with this, Tesco’s close competitor includes: Asda (16.9%), Sainsbury (16.9%), and Morrisons (12.3%). Having only four major players in the market, the market structure of retail grocery industry in UK is oligopoly. Within an oligopolistic market that targets many buyers, the industry is commonly dominated by only a very few numbers of sellers that offer homogenous products to its target consumers (Arnold 2008, p. 512). One of the very few factors that can trigger the development of oligopoly is the fact that a lot of companies are entering into merger and acquisitions as a result of tight market competition caused by globalization.

The problem with oligopoly is that a very few number of competitors within the industry can enter into collusion making them able to dictate the market price of heterogenous products they are selling in the market (Gans 2005). Considering that market consequences of a few-firm concentration ration, a lot of economists believe that a market that is characterized by oligopoly is almost similar to the market consequences associated with anti-competitive domestic or international market activity.

Although it is possible for players within an oligopoly market to dictate the market price of goods, this is not true in the case of Tesco and its competitors. Since grocery and merchandise retailers are selling homogenous products, its target customers will always have the opportunity to decide where to regularly purchase their weekly consumption of grocery items. In line with this, Tesco’s existing customers can anytime decide to purchase their grocery items from Asda, Sainsbury, Morrison, Waitrose, M&S, Somerfield, Aldi, Lidl, and Netto among other small-scale supermarket throughout the United Kingdom (Tesco 2010 b).

There is a strong price competition within the grocery