Tesco: Company Description, Market Analysis, and Industry Nature

This report provides a description of Tesco, its products/services, and history. It also includes an analysis of the grocery market, market structure, and the nature of the industry in which Tesco operates.

Assessment 2
1

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Description of the company, its products/services and history..............................................3
Analysis of the market............................................................................................................5
Different market structure......................................................................................................7
Nature of the industry in which the company operates..........................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
2

INTRODUCTION
Business management can be defined as coordination and organising different business
activities in such a way so as to achieve the organisational goals and objectives. It is a useful
aspect within the company and allows it to manage the different resources in an effective
manner. As a result, the employees are motivated to perform efficiently and ensure that they are
committed to complete tasks that are assigned to them (Barry, 2017). Organisation chosen for
this report is Tesco, which is a British multinational retailer of general merchandise. The
company is headquartered in Welwyn Garden City, England. It was founded by Jack Chen in the
year 1919 and offers a wide variety of products at affordable rates. The report includes a
description about the company, its products/services and history. The grocery market has been
analysed for Tesco. It also analyses the market and industry the company has been operating in
as well as its market structure.
MAIN BODY
Description of the company, its products/services and history
Tesco is a multinational grocery and general merchandise retailer, that is headquartered
in England. Since the company was established, it has only grown and expanded in different
geographic locations across the world. The company is committed towards providing the quality
products to its customers at affordable rates. The company is the third largest retailer in the
world when measured by gross revenues. The company offers its products both through offline
stores as well as its online website. Tesco has been able to develop a market strategy that has
helped it in gaining a competitive advantage and stand out in the market (Bell, Bryman and
Harley, 2018). The company has got a strong brand image and a large base of customers that are
loyal to it. But, it keeps seeking different ways of improving the overall experience of its
customers. This is because the company understands the value of customers and that they can
influence the company significantly. The company operates a number of brands under its name,
like Tesco Bank, Tesco Mobile, Booker Group and so on.
The company offers a diverse range of products that include furniture, toys, books,
software, clothing etc. Tesco manufactures its own products and sells them based on different
geographic locations. The company aims to increase its overall profits by offering products at
lowest price possible. The vast product category ensures the satisfaction of different needs and
3

preferences of the customers across different locations. One of the many product ranges of Tesco
are groceries. It offers products like ice creams, fresh fruits and vegetables, milk, eggs, bread,
cereals, chocolates, biscuits etc. The company operates in a high competitive environment and
thus, keeps innovating its strategy in order to market its products. The groceries are offered at
lowest price possible in order to attract as many customers as possible. Apart from this, different
offers and discounts are offered on the products from time to time. The company also delivers
products if an order is placed online.
Tesco was founded by Jack Cohen in the year 1919 with the vision of making affordable
food available to everybody (Our history, 2020). The company got its name in the year 1924
when Jack sold first product of the brand. The product was named as “Tesco Tea” and the
company opened its first store in North London (Choi and Suh, 2017). The store sold dry goods
of great value as well as the company's first branded product. Tesco built its first headquarters
and a warehouse in the 1930s. The warehouse was considered to be the first modern warehouse
in England. This was when Tesco not only expanded in London, but in the neighbouring
countries as well. In 1946, the company introduced the concept of self-service along with a rapid
growth in the 1950s. The company started operating online in 2000 and has seen a rapid growth
of its business over the years. Today, the company operates a number of brands under its name
and offers a wide range of products across different geographic locations across the world. This
has led to an increase in the overall profitability as well as the customer base of the company.
4

From the above graph, it can be seen that there has been a slight decline in the overall
market share of Tesco. Implementing effective strategies can help it in increasing the same.
Analysis of the market
Market analysis can be defined as an assessment of the market, both quantitatively as
well as qualitatively. It includes analysing the competition, buying patterns of the customers,
various customer segments etc. Tesco is a leading retail company that has business operations in
different parts of the world (Cokins, 2017). It is considered to be a market leader in the UK retail
market with different brands under its name. Although there are a large number of companies
that operate within the supermarket industry, Tesco, Sainsbury, Asda, Morrisons and Safeway
are considered to be the key players. And ever since its inception, the company has been
operating in the grocery market. Although the company operates in various markets, the grocery
market is the one it has been operating from the start. The market structure of Tesco is Oligopoly
because the number of competitors are less, so the company is able to control the supply of its
products within the market. It is difficult for a new company to enter an oligopolistic market amd
there are several sellers who control a sign8ificant portion of sales within the market. The
company has a diverse business and having an oligopolistic market structure helps it in
understanding the preferences and demands of the customers effectively.
5
Illu
stration 1: Market Share of Supermarkets
Source : Asda overtakes Sainsbury's to become second largest supermarket,
2020

The above graph shows a large increase in the overall shopping within the United
Kingdom. The overall sales of Tesco are reported to be higher than any of the other companies
(Wheelen and et. al., 2017). Tesco has been operating within the grocery market ever since it was
established. The grocery market within the United Kingdom has changed over the years and this
is a result of various factors. The grocery market of the United Kingdom is worth billions of
dollars and has significantly grown over the years. Grocery stores continue to evolve based on
the changing buying behaviours of the customers. When the respective company, Tesco was
established, there was no such concept of a grocery store (Davis and Comeau, 2020). The
groceries were sold through stalls wherein people would buy grocery items and pay the owner of
the stall. The concept of a grocery store was initially introduced in the 1930s. The grocery stores
during the early 60s and 70s were compact and this is when a lot of small grocery stores opened.
During the 70s, the grocery stores started offering a wide range of products, from cereals
to daily items etc. So, during this time, stores that offered wide rage of products gained
popularity among the customers. The 80s saw a growth in the number of local or regional
6
Illustration 2: Supermarkets' Sales
Source : Coronavirus: Aldi, Morrisons, Waitrose and Asda lift some restrictions, 2020

grocery chains. Small grocery stores that had been successful, started expansing their business by
starting operations in other cities in order to cater to the needs of the customers across various
geographic regions. The grocery market during the 1950s had stores that only operated during
the day time, unlike today wherein some mega grocery stores operate till late at night time. Some
of them even operate for 24 hours a day (Eckhaus, Klein and Kantor, 2017). At that time, the
grocery market used to operate only during weekdays. Today, the rise in e-commerce has made it
easier for the customers to shop for groceries whenever they feel like and have the need.
Although, organic farming had taken off in the 1970s, the grocery market took some time
to catch on with the same. Today, people who prefer organic food have the option of order it
online and even going to the store and purchasing the same. Today, not only large grocery stores,
but almost every grocery store offers various organic food choices to the customers. Nearly 40-
50 years ago, products that were either grown or sourced locally, were found at different stalls at
the side of the road or in the farmer markets (17 Ways Grocery Stores Have Changed Over the
Past 50 Years, 2020). Today, those stalls have grown out to be large stores like Tesco, Aldi etc.,
that not only sell locally sourced products, but a variety of other products under their names as
well. Stores operating in the grocery market in the 1970s and 80s, sold products that had plain
packaging and poor quality. Whereas, today the grocery market has grown so much that stores
offer high quality products that have an innovative packaging.
Different market structure
Initially, when Tesco was established, it operated in a monopolistic market, wherein a
large number of small companies compete against each other in order to increase their
profitability (López-Robles and et. al., 2019). Entry and exit in a monopolistic market is easy as
compared to other market structures. But gradually, the company grew and started operating in
an oligopolistic market structure. Firms that operate in such a market sell products that are highly
differentiated from each other. The characteristics of a monopolistic market structure are
explained below -
Single Supplier and Unique Product – There is usually a single firm that supplies a
particular product and thus, constitutes the complete industry. But, in order to be a single seller
within the industry, it is important for the firm to offer product that is unique and not sold by any
other company. There should also be no substitutes for the product that the company offers.
7

Barriers to Entry – A monopolist sets up significant barriers within the market and if a
new firm enters the market, the monopolist will lose its control over the supply of its products.
This means that there are no differences between a firm as well as the industry.
Price Maker – Since there is only a single company selling the product in the market, it
can become the price maker of the product within the industry. As a result, the customers have to
accept whatever price is set by the company.
Specialised Information – This is another feature of the monopolistic market structure
and the producer of the product usually has specialised information pertaining to the same. This
can include information about the patents, trademark and copyright (Mamabolo, Kerrin and
Kele, 2017). This information may or may not be available to other firms in the industry.
Buyers are Price Takers – The buyers within the industry do not have the power to
influence the complete market price of the product based on the amount that they consume. As a
result, they have to buy the product at what ever price it is sold.
No new Firms can enter the market – In a monopolistic market structure, there is no
threat of entry of a new firm. This is because there is only one firm producing the product for the
customers.
Therefore, it can be said that a monopolist company has complete control over the
production as well as supply of products within the industry. This gives the company a power
within the market. Also, it is important for the buyers within the monopolistic market to possess
complete information about the product, its price as well as characteristics (Nisula and Pekkola,
2018). This can help them in making a right decision about buying the product or not. The reason
behind this is that the firm can charge high price for the product as is is the sole producer of the
same. Also, the revenue made by Tesco annually is nearly 52 billion pounds.
Nature of the industry in which the company operates
a)
Tesco currently operates in an oligopolistic market structure, but it initially started off its
business within the monopolistic market as it was a small business. Opertaing in a different
market structure, like pure monopoly is more optimal for Tesco. This is because it has gained a
strong hold within the market since it was established. Also, in a pure monopoly market
structure, a single company controls the market. The company can sell its own products in the
market. This will help it in gaining a competitive advantage against competitors and a high level
8

of power as well. This would be an optimal choice for the company because there are only few
sellers who control the sales.
The nature of the industry in which Tesco operates, is highly competitive. This is because
the preferences of the customers keep on changing and as a result, firms continually try to
innovate their products in order to satisfy the needs of the customers and gain their trust (Ritter
and Lettl, 2018). Firms operating in a pure monopoly market structure, always try to grasp
opportunities that they come across and attract as many customers as possible. Not only this,
oligopoly firms ease out the process of shopping for a product for the customers. Also, there is a
variety of products available to the customers.
b)
Government intervention can be defined as any action that is taken by the government of
a country which can affect its overall market economy. It is suggested that there should be a
greater intervention as it is good for the society. The primary reasons behind this is that it will
help in correcting any market failures and also, achieve a more equal distribution of income
within the society. Government intervention ensures that there is maximum utilisation of the
available resources which can contribute to the overall economic development of the nation.
There are chances of inequality in the market, therefore a greater intervention of the government
can help in eliminating the same.
If there will be no intervention of the government, the firms operating in the market will
exploit their power and thus, pay low wages to the employees (Waxman, 2017). They are also
likely to charge high prices from the customers. This can create an imbalance within the market.
Therefore, the reason why a greater government intervention is suggested is because it can help
in promoting healthy competition between the firms. Apart from this, it will also promote a
greater equality in the income, which is considered as a fair thing to do.
CONCLUSION
From the above report, it can be concluded that business management is an important
aspect for a firm. This is because it can help it in managing the different business activities in an
effective way. Different firms operate in different market structures. These can include
monopoly, oligopoly market structures etc. An organisation can have a monopolistic market
structure during its inception, but it can change to another market structure in the future. This is
because the market structure of the firm depends on the size of the firm. There are advantages as
9

well as disadvantages of different market structures. Apart from this, government intervention
can help in maintaining equality within the society as well as promote competition among the
firms. It cam also promote an equality in pay which can be helpful for the workers.
10

REFERENCES
Books & Journals
Barry, W. S., 2017. Airline Management: Business Management in Transport 3 (Vol. 2).
Routledge.
Bell, E., Bryman, A. and Harley, B., 2018. Business research methods. Oxford university press.
Choi, D. R. and Suh, G.H., 2017. A study on the effects of small business management result by
the Korean government: Focus on SEMAS. The Journal of Business Economics and
Environmental Studies. 7(3). pp.33-43.
Cokins, G., 2017. Strategic business management: From planning to performance. John Wiley
& Sons.
Davis, C. H. and Comeau, J., 2020. Enterprise integration in business education: Design and
outcomes of a capstone ERP-based undergraduate e-business management course.
Journal of Information Systems Education. 15(3). p.8.
Eckhaus, E., Klein, G. and Kantor, J., 2017. Experiential learning in management education.
Business, Management and Education. 15(1). pp.42-56.
López-Robles, J. R. and et. al., 2019. 30 years of intelligence models in management and
business: A bibliometric review. International journal of information management. 48.
pp.22-38.
Mamabolo, M. A., Kerrin, M. and Kele, T., 2017. Entrepreneurship management skills
requirements in an emerging economy: A South African outlook. The Southern African
Journal of Entrepreneurship and Small Business Management. 9(1). pp.1-10.
Nisula, K. and Pekkola, S., 2018. How to move away from the silos of business management
education?. Journal of Education for Business. 93(3). pp.97-111.
Ritter, T. and Lettl, C., 2018. The wider implications of business-model research. Long Range
Planning. 51(1). pp.1-8.
Waxman, K. T. ed., 2017. Financial and business management for the doctor of nursing
practice. Springer Publishing Company.
Wheelen, T. L. and et. al., 2017. Strategic management and business policy (p. 55). Boston, MA:
pearson.
Online
17 Ways Grocery Stores Have Changed Over the Past 50 Years. 2020. [Online]. Available
through:<https://blog.cheapism.com/grocery-stores-then-and-now/#slide=8>.
Asda overtakes Sainsbury's to become second largest supermarket. 2020. [Online]. Vailable
through:<https://www.bbc.com/news/business-47784817>.
Coronavirus: Aldi, Morrisons, Waitrose and Asda lift some restrictions. 2020. [Online].
Available through:<https://www.bbc.com/news/business-52102906>.
Our history. 2020. [Online]. Available through:<https://www.tescoplc.com/about/our-history/>.
11