Solved Organisational Behaviour - Assignment
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Added on 2021-05-06
Solved Organisational Behaviour - Assignment
Added on 2021-05-06
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Over time we have gained significant insight concerning the environment whereby business activities unwind, allowing us to categorise the different market structures and the role they have on determining the competitiveness of industries and organisational behaviour. Following, we will be looking at these market structures and their effect on the behaviour of two behemoth-firms:Apple and Tesco,we will then use Porter’s five forces model to assess the competitivenessof their market structure, as well as discussing how they develop in a highly competitive and globalized market.“Perfect competition”is a structure where barriers for entry and exit do not exist, there are manysellers, and they sell identical products to well-informed buyers. Organisations in this structure are considered price takers; under the assumption that consumer looks after their own interest, consumers know how much they are supposed to pay. Opposite to perfect competition, is a “Monopoly”,where one organisation trades a unique good or service. Customer do not have options available, so this firm influences the price of good and services to make super-normal profits, this looks attractive for new entrants, but due to high barriers of entry and exit, the firm continues to set prices and make super-normal profits due to lacking competition.An“Oligopoly”is a market dominated by a few big firms, offering identical yet heavily differentiated products or services. Organisations in this structure are interdependent, in some Oligopolies, organisations liaise with each other to set prices that work for them or join acartelto increase their market share. This structure has high barriers of entry and exit, due to high set up costs and capital needed to invest in product differentiation, such as through advertising.The combined characteristics of perfect competition and a monopoly conform to a “MonopolisticCompetition”.Information is available for customers to make an informed decision prior to purchase. Organisations in this market decide the price of their products, and as there are no major barriers for entry or exit, it is a highly competitive market. Due to this, firms work hard to differentiate their products by showcasing unique characteristics, not only to offer choices for customers but to charge higher prices, they are price setters.Following, we will use Porter’s five forces model to analyse the competitiveness of these organisation’s market structure, and how this ultimately affects their behaviour.MOBILE PHONE INDUSTRY:Rivalry among existing competitors: Due to high barriers of entry and exit, there are few competitors with a significant market share. Companies have the capital to invest heavily in advertising and non-price competition and they all share as part of their strategy innovation and encouraging customer advocacy. Firms file lawsuits and create patents to minimise the risk of new entrants and reduce the market share of competitors, ergo the rivalry in the industry ishigh.Threat of new entrants: High barriers of entry and exit due to the high costs of production, infrastructure, high level of specialisation. Strong presence of existing firms in the market and the capital invested in branding and marketing strategies, incumbent firms have strong customer
advocacy, making it unattractive for new companies, thus the threat of new entrants islow to medium.Threat of substitutes: Threat of substitutes islowas the innovative gadgets brought by this industry cannot be replaced unless consumers decided to move back to the old days without smartphones.Bargaining power of buyers: The internet facilitates information to buyers and the ability to shoparound. Due to the industry’s innovative nature, whoever has the most attractive invention gets more demand. Competitors invest in marketing and advertising, differentiating their products andmaking them stand out, so the bargaining power of buyer ismedium to medium to high.Bargaining power of suppliers: Suppliers supply components and raw materials to produce their products. Organisations require unique, trusted, and efficient suppliers which reduce the chances of companies with high standards to switch to another provider. Most firms, unless having own operating systems, will require a contract with a unique product supplier. Based on this the bargaining power of suppliers ismedium to high.SUPERMARKET INDUSTRY:Rivalry among existing competitors: There are few big competitors in the industry and they directly affect each other. Due to the lack of differentiation in products, customers can switch to another chain if cheaper. Firms highly engage in non-price competition and work in encouraging customer advocacy which costs significant capital. Some firms might engage in price wars, affecting other firms that must match prices to not lose sales. Based on this the rivalry within the market ishigh.Threat of new entrants: Threat of new entrants is relativelylow. Firms in the market are already big enough, with enough money to invest in advertising, existing contracts with suppliers and marketing campaigns. Big firms can take advantage of the economy of scales thus their prices will be more competitive than small independent businesses.Threat of substitutes: The threat of substitutes islow to medium. Although consumers can substitute supermarkets by shopping in small local markets and corner shops, these still do not offer the variety and competitive prices big firms do.Bargaining power of buyers: The power of buyers ishigh; customers have access to free information and there is high price sensitivity, customer can easily buy elsewhere without switching costs.Bargaining power of suppliers: The bargaining power of suppliers islow.There are several providers and they do not sell unique products. Farm products such as milk and vegetables are likely to have similar prices around providers, Supermarkets can shop around aiming to make more profit.
Apple’s market share in the mobile phone industry is currently at 28.19% (Statscounter, 2020) and Tesco’s market share of grocery stores in the UK is of 27% (Kantar, 2020). Regulative standards consider both organisations a monopoly, but as they share the market with other few competitors, they belong to an Oligopoly. This makes visible why these organisations invest significant capital in marketing, advertising, and engaging in non-pricing competition. Although there is a tough rivalry between them and other firms, they are also interdependent. Apple considers the strategy of other competitors, but instead of engaging on price wars, they take pridein the uniqueness of its products and highly differentiate their brand under this concept. Similarly, Tesco also looks at what competitors are doing, for example, Tesco to recover market share decided to reduce the price for hundreds of their products calling the offer “Aldi Price Match”, while implementing customer experience enhancers, such as self-checkout and “traffic lights” during Covid, to differentiate themselves over discount stores.Back in 2010, before the socioeconomic situation in Venezuela worsened, Apple’s market share (15.22%) almost tripled Samsung’s (4.22%). Nowadays, Samsung is leading the market (35.17%), while Apple (7.7%) is falling behind from brands who target customers with an affordable range of phones, such as Xiaomi (20.2%) and Huawei (8.33%). This implies that Apple’s “one-size-fits-all-approach” (Hovivian, 2019), that brought incredible success in most developed economies under their branding of quality over quantity, seems to be stopping them from achieving dominance over competitors in developing economies, where price sensitivity overrules product differentiation.The above data serves as evidence of the benefits of product customisation to meet the demand and price sensitivity of a country; by offering a cheaper range of products, even the newest competitors can find themselves leading over incumbent firms. This year Apple got access to India through the opening of an online store, making accessible for Indian customers to obtain aniPhone. Apple for the first time is customising its approach to suit the Indian population, contraryto their known approach in developed economies, the firm is launching the Apple SE, an affordable iPhone that fits Indian’s demographic, aiming to overtake this crucial part of the global market, this move although jeopardized by the recent pandemic shows encouraging resultsas their market share has gone up 0.73% from last year (2.61%). Tesco, back in 2006, when Poland’s economy saw a significant rise of GPD to 6.131 (theworldbank, nd), was second in the Polish market with 6.3%, just behind Biedroka with 12.9%. Naturally, the country’s conditions of growing employment and wages resulted in less price sensitivity, thus Tesco’s standard approach that focused on product differentiation showed effective due to more customer’s valuing unique features over price. The firm recently announced the close of their market in Poland, mainly due to failure to implement an adequate strategic approach to the market’s demography. In 2019 Poland saw a decreased of GPD 4.541, the lowest recorded since 1994. Although Poland has always been a price-sensitive market, at this point discount stores were soaring in attractiveness due to more customers being influenced by price over product uniqueness. Competitors such as Lidl used promotions and discounts as high of 70% (Harper, 2019) while Tesco stuck to its standard approach focussed on customer experience, not engaging on price wars with discount stores, resulting in the firm leaving this market.
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