Saturday, March 9, 2019
Market Structures: Tesco
This task for Business milieu is destroy in two parts. For Part 1 I provide be describing the 4 different merchandise grammatical constructions that economist usu entirelyy talk roughly be perfect opposition, monopolistic emulation, oligopoly and monopoly. Using the 4 foodstuff structures I will illustrate use real life case studies and congressmans how a selected business of my pickaxe has be expectd/responded to its merchandise structure and fin tot on the wholeyy describe how the oft and opposite regulatory bodies check against anti competitive behaviours.In the befriend part of the assignment I will describe the note range of external and EU merchandise places to UK firms. My description will include an evaluation of the pros and cons of UK totaling the Euro a ache with that I will describe the impact of 2 EU policies on UK businesses. The business that I lead chosen for this assignment is Tesco this is because Tesco is a multibillion drive intertheme b usiness.Different pil petty(a) slips of market structuresMarket structures be the business orientated characteristics of a market all businesses must focus on these characteristics of the market because these subscribe an effect on the degree of competition in the assiduity and influence the business carrefour or service pricing decisions. absolute competitionIn a perfect competition on that point ar few entry and exit restrictions, in this type of competition the companies object glass the mass audience and they differentiate their product with minor alternates in the product attrisolelyes (Homogenous).Homogenous products argon identical products or business e.g. aviation all airlines prove unrivalled service which is to get their customers from one location to their com regulariseer ring and most customers pee no preference or specific type of airline that they motivation to travel with, most customers will just require for the cheapest airline.In such type of c ompetition most of the companies use adjure strategy, i.e. huge efforts will be done through their gross revenue team, the principal(prenominal) focus is the product availability. In this type of competition the companies atomic number 18 pres sure to follow the competitive pricing strategy in order to decease in the industry, i.e. the subverters deliver the military unit to influence the price of the product or work.Examples of a perfect competition to its closest definition atomic number 18 in the financial market like stock permute, currency exchange market and the bonds/certificates market. As the companies atomic number 18 bound to follow market prices the only office the company potbelly set about advantage over its competitors is by diminution its operating costs and working at optimum direct of power.Monopolistic competitionUnder monopolistic competition, the market consists of many buyers and sellers who trading over a range of prices rather than a case- by-case market price. A range of prices occurs because sellers basis differentiate their offers to buyers. Either the physical products domiciliate be varied in fibre, features, style or the accompanying services faeces be varied. Buyers see different in sellers, products and will pay back different prices for them. Sellers try to develop differentiate offers for different customer segments and, in addition to price, freely use branding advertising and personal merchandising to set their offers apart.In this sort of environment the businesses and plows people swallow close to find over their prices because of the products differentiations. Most roughhewn examples of monopolistic competitions atomic number 18 restaurants as in the right atomic number 18a and right type of food they fire have their avouch comminuted portion of monopoly, professional solicitors, building and witness managing firms and finally plumbers as there are less of them and more(prenominal) requ ired.OligopolyIn this type of competition the industry has a teensy subdues of heavy(p) dominant firms that have a firm control over the market. In oligopoly there are many entry and exit barriers such as huge investments etc. In this type of industry firms usually follows devote strategy and occlusive huge efforts in marketing and advertising to tear its target customers, the products in the industry could be grittyly differentiated or even be resembling provided hard of getting a hold and this is why businesses use branding or homogenous.Due to the low degree of competition theses big giants can decide on their own price which is most suitable for its target audience and these prices will be non-competition prices however there could be potential for collusion and price fastener so that all(prenominal) dominant business can enjoy their market section and have profits accordingly i.e. their profits margin will vary but s till always high.Example of oligopolistic busine ss industries are supermarkets such as Tesco which alone owns 30.4% which is nearly 1/3 of the UK supermarket sell component part market share, banking industry, chemicals industry, oil color colour and energy industry, medical drugs and to a fault the word and media broadcasting industry. http//www.retail-week.com/data/kantar-worldpanel/tesco-market-share-up-as-it-piles-pressure-on-asda/5010942. expression (Tesco market share)MonopolyA monopoly has high barriers to entry and firms have strong controls over their prices and they also control the supply of their product which can sum up demand of popular products, because a firm with a monopoly has absolute majority of the market share it can decide to have low prices in order to destroy their competitors.A good and most current example of a monopoly is the Apple Company which has created the iPhone, because of the degree of the monopoly there is a high possibility of price discrimination where the customers and the consumers have their choices limited to what is available in the market.There are three different types of monopolies listed as below excellent monopoly in where the firm is the industry, for example Transport for London, the firm which owns all buses and subsurface tubes in and around London, this is where consumers have no or very limited choice.Actual monopoly is where the firm has somewhat majority of the market share in the industry, in this case Tesco is the most famous example, Tesco owns over 30.4% of the market share and is the premiseer in supermarket industry.Natural monopoly is where there are high frigid costs for example the energy industry like gas and electricity as sound as water, telecommunications and the transportation industry like metro and rail.The spillages of a monopoly is that customer are exploited to high prices and potential supplies have limited choice for demand and this essence that the consumers have less choice and again might have to pay higher pri ces than normal or the monopoly can even use very low price to travail their competitors towards administration or bankruptcy.(http//188.8.131.52/search?q=cacheqGV5KxXiB80Jwww.bized.co.uk/educators/16-19/ economics/firms/presentation/structure.ppt+market+structures&cd=2&hl=en&ct=clnk&gl=uk)What is Tescos market structure?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 artful 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 plumping competitors who also partly control the market.Tesco accused of Manipulative Monopoly (http//www.thisislondon.co.uk/standard/article-23658062-tesco-accused-of-manipulative-monopoly.do)A competition test to curb the power of the supermarkets was unveiled by the Competition guidance last year as part of a planning shake-up designed to boost competition in the multi-billion pound foodstuff market. precisely the tribunal agreed with Tesco that the management did non 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. (http//www.thisislondon.co.uk/standard/article-23658062-tesco-accused-of-manipulative-monopoly.do)How has Tesco responded to this structure?Monopoly Vs OligopolyTesco has over 4,000 stores across the world and out of those 4,000 Tesco has more than fractional of them in the UK around 2362 stores and this does not include all the Tesco metro and express stores. (http//www.tescoplc.com/plc/ just about_us/ constitute/)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 w ith Tesco e.g. 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.oft measure ( seat of beauteous Trading)The Office of Fair Trading is the UKs consumer and competition authority and their mission is to make markets work well for consumers. OFT is a non-ministerial governance regulator that was established by government in 1973.Another organisation that does similar commerce to what Office of Fair Trading do, Ofcom is an independent regulator and competition authority, for the UK communications industries, with responsibilities across television, radio, telecommunications and radio receiver communications services. Competition regulators are authorized in business and are required to ensure equality and a fair deal for all,How does OFT checks anti-competition?OFT plays a leading role in p romoting and protecting consumer interests passim the UK, while ensuring that businesses are fair and competitive. This work is done using the powers apt(p) to the OFT to a lower place consumer and competition legislation.OFT gathers intelligence about markets and principal behaviour from a wide-cut 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.In a recent investigation by the OFT has reviled that British Airways has been found guilty over the price of long-haul rider fuel surcharges and has paid a penalty of 121.5m to be imposed by the OFT, therefore enabling the OFT to close its civil investigation and scatter this case. This penalty to the British Airways has been the highest ever imposed by the OFT for impingement of competition law and this demonstrates the determination of the OFT to deal stron gly with anti-competitive behaviour.In another case, The Royal Bank of Scotland or RBS has also paid a graceful of 28.59 cardinal about 2 months ago in ring 2010, after admitting breaches of competition law mingled with October 2007 and February or March 2008, the fine for the bank was reduced from 33.6 jillion to 28.59 zillion and this was done to reflect RBSs memory access and agreement to co-operate.The OFT has a 5 step method of property a good eye on business and other organisations these 5 steps start with Analysis, Prioritisation, Prevention, Partnership and Evaluation, the details of all the steps are on their website under What we do. (http//www.oft.gov.uk/ about/what/named2)How do other supervising bodies admonisher anti-competition?As the OFT only supervises what happens in the joined Kingdom, there is the European conjunction which is active in a wide range of indemnity areas, from human rights to transport and trade, the European federation monitors all of t he 27 countries that are part of the married couple, using similar techniques as the OFT but on a much larger scale, the insurance to monitor and control competition is said as A fair deal for all and this constitution is described asEffective competition to provide goods and services cuts prices, raises quality and expands customer choice. Competition allows technological innovation to flourish. The European bursting charge has wide powers to make sure businesses and governments stick to EU conventionalisms on fair competition. But in affording these overlooks, it can take account of the interests of innovation, unified standards, or small business increase.(http//europa.eu/pol/comp/index_en.htm)United Kingdom supermarket shareFollowing are the 4 leading supermarket chains in the United Kingdom Tesco, Asda, Sainsburys and Morrisons, these waste four have a combined share of 75.6 percent of the UK grocery market accord to the research done in the 12 weeks windup 1 November 2009 (Source Kantar World pane) http//TNS_WorldpanelWhat is European yoke?(http//europa.eu/abc/panorama/index_en.htm)European Union is a unique economic and political society which is in partnership between 27 democratic European countries.What are its aims? close to of the basic aims of the European Union are peace, prosperity and freedom for its 498 million citizens in a fairer, safer world.What allow fors so far?Under the European Union the members can travel and trade freely without any constraints as long as the members are trading in euro (the single European currency).European Union policies ensure safer food and a greener environment, better living standards in poorer regions, joint action on crime and terror, cheaper telecoms and communication, millions of opportunities to study abroad and moreHow does it work?To make these things happen, EU countries have set up bodies to ge produce the European Union and adopt its legislation. The of import ones are* The European pa rliament (representing the people of Europe)* The Council of the European Union (representing bailiwick governments)* The European Commission (representing the common EU interest).How can the members have their say?The European Union is not a perfect society but it is an evolving project and constantly has to be improved. If a community or even an single has an important promontory to show to the union they must do some of the following commencement with* Contacting their local MP European Union policies are part of depicted object politics.* Contacting their MEP and cast vote at the European fantan elections the European Parliament enacts EU laws (www.europarl.europa.eu)* Contacting their NGOs (consumer associations, environmental pressure groups, etc.) they work with the EU on cookative policies.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 eliminati on of passport controls by the Schengen Agreement between 26 European Union states which I have listed below. European Union executes legislations in justice and home affairs, and maintains common policies on trade, agriculture, fisheries and regional development.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. (http//www.axa-schengen.com/en/schengen-countries)Value of International markets to UKNon EU Exports* In June 2010 the do value of UKs trade-in-goods merchandiseed to countries right(prenominal) the EU was 10.9 billion.* As a comparison the gibe value of UKs trade-in-goods exported to countries outside the EU in whitethorn 2010 was 9.4 billion and for June 2009 was 8.2 billion.* June 2010 showed a 15.5 per cent ontogenesis in exports compared to May 2010 and a 33.0 per cent increase in exports compared to June 2009.* The come in 2010 year to engagement value of UKs trade-in-goods exported excluding June 2010 was 45.5 billion, which has been downwardly rewrite by 6.9 million.* The final summarise value of UKs trade-in-goods exported for January 2009 to December 2009 was 101.5 billion.Non EU Imports* In June 2010 the do value of trade-in-goods imported to the UK from countries outside the EU was 15.4 billion.* As a comparison the total value of UKs trade-in-goods imported to the UK from countries outside the EU in May 2010 was 14.0 billion and for June 2009 was 12.0 billion.* June 2010 showed a 9.6 per cent increase in imports compared to May 2010 and a 28.4 per cent increase compared to June 2009.* The total 2010 year to date value of UKs trade-in-goods imported excluding June 2010 was 67.5 billion.* The final total value of UKs trade-in-goods imported for January 2009 to December 2009 cadaver at 147.3 billion.(https//www.uktradeinfo.com/index.cfm?task=non eufullreport)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.International business traffic is an important feature of the UK economys survival almost 50% of UKs export is in the Non European Union zone, there fore international market has a alert role to play in UKs economy.The imports of UK data shows that the import from the non European Union zone is increasing i.e. from 14.0 billion to 15.4 billion, hence the UK economy is dependent on the import of essential raw and prepared materials today the service empyrean is more and more important to the UK economy as a expiry of the weakening of the manufacturing sector now imports are crucial and that is why using the international market the UK economy is on the growth as the export data depicts that UKs export is increa sing from 8.2 billion to 10.9 billion.Value of European markets to UKEU Exports* In May 2010 the total value of UKs trade-in-goods exported to Member States of the EU was 11.3 billion.* As a comparison the total value of UKs trade-in-goods exported to Member States of the EU in April 2010 was 11.6 billion and for May 2009 was 9.3 billion.* May 2010 showed a 2.9 per cent shine in exports compared to April 2010 and a 21.3 per cent increase in exports compared to May 2009.* The total value of UKs trade-in-goods exported for January 2009 to December 2009 was 124.2 billion, which has been upwardly revise by 48.5 million.* The total 2010 year to date value of UKs trade-in-goods exported excluding May was 46.2 billion, which has been upwardly revised by 273.6 million.EU Imports* In May 2010 the total value of trade-in-goods imported to the UK from Member States of the EU was 14.7 billion.* As a comparison the total value of UKs trade-in-goods imported to the UK from Member States of the E U in April 2010 was 15.3 billion and for May 2009 was 12.2 billion.* May 2010 showed a 4.2 per cent decrease in imports compared to April 2010 and a 20.8 per cent increase in imports compared to May 2009.* 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.* The total 2010 year to date value of UKs trade-in-goods imported excluding May was 59.2 billion, which has been upwardly revised by 96.7 million. (https//www.uktradeinfo.com/index.cfm?task=euearlypub)The single market benefits the firms, by making it easier & cheaper to do business in other EU countries. No customs revenue is charged on goods that are sold or transported between member states. The EU also tries to make each market as similar as possible to ensure fair competition across national borders.Free Movement of CitizensEuropean citizens have the freedom to live, work, study, and travel in any other EU country. Since 1995 a lone, about 100,000 young Britons have played out time studying in another European country.More JobsIt is estimated the 3.5 million British jobs are dependent on* Britains membership of the EU. (Source UK Jobs Dependent)UK connectedness the Euro (Pros & Cons) beneath 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 currencyAdvantages1. A single currency should end currency derangement in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them. Because the Euro would have the enhanced credibility of being used in a large currency zone, it would be more stable against speculation than individual currencies are now. An end to internal currency instability and a lessening of external currency instability would enable exporters to project future markets with with child(p) certai nty. This will unleash a greater potential for growth.2. Consumers would not have to change notes when travelling and would encounter less red tape measure when transferring large sums of money across borders. It was estimated that a traveller visiting all twelve member states of the (then) EC would lose 40% of the value of his money in doing charges alone. Once in a lifetime a family might make one large purchase or transaction across a European border such as get a holiday home or a piece of furniture. A single currency would help that transaction pass smoothly.3. Likewise, businesses would no long-range have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations. Businesses, have-to doe with in commercial message transactions in different member states, would no longer have to face administrative costs of accounting for the changes of currencies, plus the time involved. It is estimated that the currency cost of exp orts to small companies is 10 times the cost to the multi-nationals, who offset sales against purchases and can command the best rates.4. A single currency should result in lower interest rates as all European countries would be locking into German monetary credibility. 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. This should lead to more investment, more jobs and lower mortgages.Disadvantages1. Twenty seven separate countries with astray differing economic performances and different languages have never before attempted to form a monetary union. It works in the United States because the labour market is mobile, helped by the common language and portability of pensions etc. across a large geographical area. Language in Europe is a huge barrier to labour force mobility. This may lead to pockets of deeply depressed areas in which people cannot find work and areas where the economy flourishes and wages increase. While the viscidness funds attempt to address this, there are still great differences across the EU in economic performance.2. 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. They would be unable to undervalue to boost exports, to borrow more to boost job creation or cut taxes when they see fit because of the public deficit criterion. In the United States, Texas could not avoid a recession in the wake of the 1986 oil price fall, whereas demand for Sterling changed in the light of the upstart oil price, adjusting the exchange rate downwards.3. All the EU countries have different make passs or are at different stages in their cyc les. The UK is evolution reasonably well, Germany is having problems. This is the reverting of the position in 1990. Since the war the UK economy has tended to have an economic cycle closer to the US than the EU. It has changed because interest rates are set in each country at the appropriate level for it. One fundamental bank cannot set inflation at the appropriate level for each member state.4. Loss of national sovereignty is the most very much mentioned disadvantage of monetary union. 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 stadium of economic policy with other, weaker, countries, which are more tolerant to higher inflation.(http//news.bbc.co.uk/1/hi/special_report/single_currency/25081.stm)One of the few reasons that the United Kingdom did not want to join the single European currency with the first wave of countries on 1 January 1999 is that according to the chancellor of the Exchequer at that time in 1999 who was Gordon Brown our current prime minister said that, although the government support the principle of the single currency Britain would not be ready to join at least until the second wave of countries which occurred in 2002 and during that time he told the European Union that the country should begin to prepare for monetary union but up till now there have been no indications of the United Kingdom link the European Union currency, Euros.From my understanding there are many possible reasons that the government should consider while joining Euro, joining Euro would reduced exchange rate uncertainty for UK businesses and lower exchange rate transactions costs for both businesses and tourists. 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 lo nger have to face administrative costs of accounting for the changes of currencies. The loss of national sovereignty is the most often mentioned reason for the UK not joining the monetary union is the transfer of money and financial proficiency from national to community level would mean that economically strong and stable countries would have to co-operate in the field of economic policy with other weaker countries.European policiesThe European Union is currently active in a wide signifier of policies from human rights to transport and trade below is the list of some of the policy areas of the European Union.Agriculture Media Competition Consumers EducationEmployment Environment External trade Fight against fraud Human rightsTaxation Transport Justice, freedom interior market Customs(http//europa.eu/pol/index_en.htm)Impact of European Unions Competition policy on TescoCompetition policyA fair deal for allEffective competition provides goods and services cuts prices, raises qualit y and expands customer choice, allows technological innovation. The European Commission has wide powers to make sure businesses and governments stick to EU rules on fair competition.Competition must be fairIt is illegal under EU rules for businesses to fix prices or carve up markets between them. A multinational company like Tesco cannot merge with another giant if that would put them in a position to control the market, though practice this rule only prevents a small numbers of mergers going ahead.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 quantity of business that Tesco has within the European boundaries.The Commission may agree to a company having a monopoly in special circumstances for example where pricey infrastructure is involved (natural monopolies) or where it is important to guarantee a public service.The large may not exploit the smallIn doing business with smaller firms, Tesco cannot use their bargaining power to impose conditions which would make it difficult for their supplier or customer to do business with its competitors. The Commission can, does and has fined companies for all these practices.No props for lame ducksThe Commission also monitors most how much assistance EU governments make available to business (state aid). 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.Exceptions that prove the ruleSome exceptions to the general rules are possible. 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. It can allow smaller companies to cooperate if this strengthe ns their ability to compete with larger ones such as Sainsburys and Tesco.Aid for research and innovation, regional development or small and medium-sized enterprises is often allowable because these serve overall EU goals.Checks and balancesThe Commissions extensive powers to investigate and halt violations of European Union competition rules are subject to legal round off by the European Court of Justice. Businesses regularly have to make appeals against Commission decisions if it seems like a unfair deal.The competition policy stops the Tesco from growing further from their potential market share, something which Tesco has known to be done in the recent years. Effective competition provides goods and services, automatically raises quality and customer choices increase with competition. The policy also allows technological innovation and the European Commission makes sure that these innovations are in the European Unions fair competition policy.EnvironmentThe European Union has so me of the highest environment standards in the world, developed over decades to address a wide range of issues. Today the main priorities are combating temper change, preserving biodiversity, and reducing health problems from pollution and marking sure that natural resources are being used more responsibly.Climate changeClimate change is one of the gravest challenges facing humanity. The European Union plans to reduce greenhouse gases at least 20% by 2020 (compared with 1990 levels), raise in renewable energys share of the market to 20% and cut overall energy consumption by 20% (compared with projected trends).All businesses like Tescos are directly abnormal by this policy as this aims to cut energy consumption and greenhouse gasses by 20%, meaning Tesco will have to recycle more, use materials more and reduce wastage and use of non-biodegradable equipment which will have a small dent on their profit.Emissions tradingEuropean Unions rewards businesses and organisations, which re duce their CO2 emissions and penalises those that happen limits. Introduced in 2005, the scheme takes in about 12,000 factories and plants responsible for about half the EUs emissions of CO2.Under the system, European Union governments set limits on the amount of vitamin C dioxide emitted by energy-intensive industries and if they want to emit more CO2 than their quota, they have to buy spare permits but most supermarkets stores do not manufacture and this means that they will have to use eco friendly methods of business and equipment. Tesco has already be that they are committed towards being eco-friendly, Tesco Plc, the worlds No.4 retailer, plans to spend over 100 million pounds with British green technology companies over the coming year as it steps up its drive to halve carbon emissions by 2020.(http//uk.reuters.com/article/idUKTRE61203720100203)Environmental healthNoise, swimming water, rare species and emergency response -these are just some of the areas covered under the extensive body of environmental legislation that the EU has established over the decades.EU has set book binding limits on emissions of fine particles known as PM2.5. Released by cars and trucks, these microscopic particles can cause respiratory diseases. Under the new law, EU countries will have to reduce exposure to fine particles in urban areas by an comely 20% by 2020. In 2007 Tesco received the Top online green apportion for their zero-emission delivery vans.Sustainable developmentSustainable development has long been one of the overarching objectives of EU policy. EU leaders launched the first EU sustainable development strategy in 2001 and updated it in 2006 to tackle shortcomings and take account of new challenges. Since then there have been significant efforts in terms of policy. instanter the focus is on putting policy into practice in to UKs market.As Tesco manly sells general groceries they are affected by the European Unions environment policy, in a way that it has to source materials from the suppliers who obey and follow the European Unions environment policy, this means that Tesco has limited span of potential suppliers.