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Background History
The founder of Tesco, Jack Cohen found the company in the
year of 1919. Tesco was actually found from a variety of market stall in London’s
East End .Tesco is a public limited company , it is a retailing multinational
company who sell groceries and general merchandise retailer.
Now, Tesco have branches over 12 countries & more than
530,000 employees to serve millions of customers every day . Tesco tries their
best to provide the best service to their customer.
Market Structure
Tesco is under oligopoly market structure because there are
only a few similar companies. Oligopoly is where there are so little firms that
exist in the market and each action of a firms can greatly affect the market .
There is a mutual independence among the firms in the market on the profits
gained .The feature of Tesco is the tension between cooperation and self-interest.
Therefore, Tesco can change their prices according to their competitors like
giant , Jusco & etc when their customers don't know the actual price of the
goods . Tesco is actually trying to show their loyalty to customer .
Determinants Change of Demand
Tesco is basically selling normal goods that is a living
necessary goods for human . So this will eventually create a competition
between Tesco & the others similar company. Thus, they can change their
price, because customer will do survey , once they realize that either one
company is actually selling cheaper then they will definitely choose to go for
the cheaper one. Once Tesco change the price to lower, others similar company
will try to decrease their price as well because they don't want to lose
customer, but when Tesco increase the price , the others company will not
increase their price because the other similar company will gain more customer
from Tesco since Tesco is selling way expensive as customer always prefer
cheaper goods .
Therefore, the competition between Tesco & the others
similar company is really strong. They always need to get their own marketing
structure for their profits. Somehow marketing structure affect the outcome of
the economics and the profits they earns.
Tesco have their own population because they sell normal
necessaries goods. They have few level of the age group from a baby to child,
teenagers , adult & also senior citizen , because whatever daily needed
goods they need , they can find it easily from Tesco .
If customers expect the price of the goods will increase in
the future, customer will purchase those goods earlier with the price
that has not increase . For example, before some special day like Hari Raya ,
Chinese New Year , Deepavali , Christmas & etc , the price of cooking
oil , sugar , rice , flour will definitely increase due to the celebration .
Therefore, Tesco & others similar company will start to
have some sale and promotion for those special day to attract customer.
Besides that, Tesco must make sure they have sufficient
stocks to sell to the customers because when the demand of a good goes higher,
the supply of goods must increase in order to avoid loss of customers. For
example, if Tesco do not have enough stock to match the demand, this will cause
them losing customers as the customers will choose to go to other places to get
what they want. Therefore, Tesco must know the demand of their products in
order to give enough supply to their customers to avoid their customers buying
their competitors' products.
 
Determinants of change in supply
When the rent for Tesco is low, that means the production
cost of Tesco will decrease .
If the price of the product remains the same, supplier will
increase the supply profit.
If supplier expects that the future price of goods will
increase, supplier will try to increase the production, so that the supply of
goods will increase in future. This is because the rise in price of goods means
there is also rise in profit for suppliers.
The natural weather changes will also affect the supply. For
example, the others countries will face problem like tsunami , bad weather that
will affect the agriculture product therefore , the supply will decrease due to
this matter .
Same goes to Malaysia, if Malaysia have bad weather , some
local farmers will have to face the problem of lack of production , so the
supply will decrease .
As mentioned earlier, Tesco will have promotion or sales for
some special event or day, although they have promotion , they will still earn
profits because they use the concepts of selling cheaper to sell more in
quantity . They will even make extra profits during this period, there go for
their short run.
For the opposite way of short run, Tesco always have the
lowest price to make sure their long run make profits.
Advertisement / Services
Tesco have their own delivery services like customer can
purchase goods throughout the providing website. Customer can save up their
time by driving to Tesco. They can just choose what they want, select the item
and Tesco will delivery according to the provided address.
Tesco always have flyers and brochure to give away to every
housing area & also in front of the entries of Tesco, it makes customer can
easily get to know what goods is having promotion even though they didn’t bring
the given brochure or flyers . Tesco will also separate and make a compartment
area for the customer, so it’s actually make customer life easier to look for
those special promotion goods.
Tesco brochure & flyers will normally come along
together with newspaper from there, Tesco need no to hire extra employee to
just give away flyers & brochure.
Beside from that, Tesco have made they
up to date, they have their own apps special design for Apple &
Android.
Customer can search for the nearest Tesco with the mobile
phone apps & shop for over 1000's product from Tesco and also look for the groceries.
Customer can scan their club card in their selected stores
to check for the club cards rewards and vouchers as well.
This make customer feel more convenience to purchase goods
from Tesco .
Elasticity
That is Government Intervention in the running of business
for Tesco. Some specific items like sugar, rice, flour, eggs, cooking oil &
others necessity goods have the price regulation set by our government. Any
price that goes above or below the price ceiling & price floor is
considered as illegal. Either shortage or surplus of product in the market
it won’t affects the price of the specific goods.
Tesco can be price maker & also a price taker depending
on the items. Government will involve in the price setting whereby the company
do not have the right to go above or below. While for others items company can
be the price maker but deep consideration on rivals reaction on the price
changes have to be made . Therefore ,
the profits gain by the company is not based on the price set by the company
but the competition with the rivals.
In a summary, Tesco is an oligopoly business which it has a
few strong competitors in the market. Price is the main attraction of customer.
If Tesco is not selling at the lower price, customer will not choose Tesco but
will go to those similar company that selling cheaper . There goes to the
supply & demand. Government do the price regulation in order to avoid
people who don’t know the actual price but purchase in higher price . In my opinion , Tesco is a company which have
a great potential in the future to become the largest hyper in the whole market
.
Reference List http://www.tesco.com/ http://www.tesco.com/clubcard/ http://www.thefreedictionary.com/oligopoly http://www.tutor2u.net/economics/content/topics/monopoly/kinked_demand.htm http://www.tesco-careers.com/home/you/corporate-marketing/our-structure |
