Impact of Rational Decision Making and Bounded Rationality on Consumer Behaviour in FMCG Sector

DISSERTATION

EXECUTIVE SUMMARY
This report is based on the evaluation of rational decision making and bounded rationality
on customer behaviour in FMCG sector. It is one of the famous and fastest growing sector that
provide variety of products to customers in market place with the aim of satisfying their needs
and wants. In this, Tesco is a famous British multinational company that operate their business in
retail sector and also provide quality services to large number of customers in order to improve
their satisfaction level. This is the main reason that research will be carried out in which clear
aim along its objectives and questions is mentioned by the investigator to find out the issues.
Along with this, literature review is also completed on the basis of views and opinion of different
authors towards the selected research topic. Different research methodologies such as data
collection, research approach, research design, philosophy and many more that help investigator
to gather relevant data and information about the specified research area. All these are important
methods which used by investigator to undertake research activities in systematic manner.
Thematic analysis is also used by researcher to interpreted or analysis collected data to take
positive outcomes. At the end, recommendation and conclusion is also take a crucial part which
includes necessary improvement that required to implement. By these, whole research can be
easily completed in successful manner.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Overview of Research............................................................................................................1
Background of Research.........................................................................................................1
Rationale of Research.............................................................................................................2
Research Aim.........................................................................................................................3
Research Objectives...............................................................................................................3
Research Questions................................................................................................................3
LITERATURE REVIEW................................................................................................................5
Concept of bounded rationality in context of consumer behaviour.......................................5
Importance of analysing consumer behaviour for Tesco PLC...............................................6
Significance of rational decision making for a FMCG company...........................................6
Influence of external environmental factors on consumer behaviour....................................7
Potential influence of post Brexit on Tesco PLC and its impact on consumer behaviour.....8
RESEARCH METHODOLOGY...................................................................................................10
Type of investigation............................................................................................................10
Research approach................................................................................................................11
Research philosophy.............................................................................................................11
Research design....................................................................................................................12
Data collection......................................................................................................................12
Data analysis.........................................................................................................................13
Data sampling.......................................................................................................................13
Validity and Reliability........................................................................................................13
Ethical consideration............................................................................................................13
DATA ANALYSIS........................................................................................................................15
DISCUSSION................................................................................................................................44
Concept of bounded rationality in context of consumer behaviour.....................................44
Significance of rational decision making for a FMCG company.........................................44
Importance of analysing consumer behaviour for Tesco PLC.............................................44
Influence of external environmental factors on consumer behaviour..................................45

Potential influence of post Brexit on Tesco PLC and its impact on consumer behaviour...45
CONCLUSION AND RECOMMENDATION.............................................................................46
Conclusion............................................................................................................................46
Recommendations................................................................................................................47
REFLECTION AND ALTERNATIVE METHODOLOGY.........................................................48
Reflection.............................................................................................................................48
Alternative methodology......................................................................................................48
REFERENCES..............................................................................................................................49
APPENDIX ..................................................................................................................................51
Appendix 1: Cover Sheet for Research Proposal and Final Dissertation......................................51
Appendix 2: Dissertation Marking and Descriptors .....................................................................52
Appendix 3: Dissertation Research Checklist ...............................................................................59
Appendix 4: Important Contacts ...................................................................................................61

TOPIC - To evaluate the impact of rational decision making and bounded rationality over
the consumer behaviour in terms of FMCG sector in light of Brexit. A case study on Tesco PLC.
INTRODUCTION
Overview of Research
Rational decision making includes several steps to make choice among available
alternatives. It provides orderly path to solutions that results in optimal outcome which maximise
utility. On contrary, bounded rationality provides an idea to make decisions from the conceived
information which provide satisfaction to consumers by solving complex problems. Rational
decision making provides decision making techniques to address all desires by providing
information or factual data (Alós-Ferrer and Strack, 2014). Bounded rationality limits existence
of rational decision making as decisions based on rationality are depending on time constraints.
The rationale decision making is method for choosing among the possible choices which are
based on the facts and also reason. But bounded rationality limits the achievement of required
information or consumers get unreliable information regarding alternatives along with
consequences which reduces capabilities to evaluate information in order to make rational
decisions. The decision making under bounded rationality based on limited amount of efforts or
time consume to make the final decision.
Background of Research
Rational decision making is considered as a multi- step process for making better
decision between alternatives. This is based on the facts, logic, objectivity and analysis through
which individual can make a better decision towards the specified activity and aspect. Mainly, it
is a method for systematically selecting the possible choices taken by the people based on the
facts and valid reason. It directly impacts on the customer behaviour because while taking
decision consumers get various option to select the better one. It helps in maximizing benefits
and at the same time also minimize costs. For example, people want to buy useful and
satisfactory products at lower cost (Baldwin, 2014). This is the reason that they will judge the
benefits of certain objectives compared to similar object. In this, they will compare cost and
make decision accordingly. Rational decision making assumes that customers need full and
perfect information regarding products which they want to buy. They also measure the criteria to
collect and analysed the data in effective manner (Berndt, 2015). On the other hand, bounded
1

rationality also play a significant role in providing ideas to make a decision by including the
conceived information which help in providing satisfaction to customers by making better
judgement through solving complex problem and situation as well. It also include limits
existence that is related with the rational decision making which is based on the rationality that is
depend on time constraints.
Mainly, rational decision making is related with time constraints and also works on the
assumption in which decision maker get proper information towards the alternative options and
cognitive ability or resources that may aid in maximising the benefits. Whereas, bounded
rationality include limits that contribute in attaining required information regarding the
alternative option in FMCG sector. As consumers has wider scope to select the better option by
making rational decision. In this context, decision making under bounded rational is related with
the limited efforts or time in which consumers have to take final decision to select the best one.
Both aspects are crucial for business organisation and customers because it largely affect their
decision and also support them to improve the chances of increasing profitability level of the
company at market place.
This research is based on Tesco plc, which is a British multinational groceries company
founded in 1919 by Jack Cohen with the aim of establishing its competitive brand image. After
Brexit, it has been evaluated that Tesco negatively impacted as increased overall cost of its
products and services which was difficult for customers to pay. This will negatively impact on
profitability level of the company at market place (Brounen, Kok and Quigley, 2013). In context
of FMCG sector, rational decision making and bounded rationality play a crucial role in making
better decision in which customers has certain option in products and services. This is the reason
that customers get largely affected towards both aspects. Thus, it is important for the company to
set their product range as per customer’s needs and wants so that they can easily satisfy their
requirements.
Rationale of Research
Current research is based on the evaluation the impact of rational decision making and
bounded rationality on the customer’s behaviour in regards to FMCG sector in light of Brexit.
This topic plays a crucial role in evaluating the actual behaviour of consumers in which they
make best decision from alternative options. With the help of this, they can easily improve the
chances of attaining certain benefits by reducing the cost (Caplin and Dean, 2015). As both
2

factors play a significant role in develop the better solution or decision to select best option. This
is because individual get limited time, sources and capability to make positive judgement from
certain alternatives. In this regards, the main reason behind selecting this topic is to enhance
skills and knowledge of researcher in order to attain positive and reliable outcomes at the end of
the research. This type of research provide brief knowledge about the particular topic and area in
which research is carried out. With the help of this, researcher can easily enhance their
knowledge and also can attain success in future project activities by exploring their ideas and
opinions.
Research Aim
Research aim is one of the important and crucial part of research activities as it provides a
statement in which research issues are mentioned. Mainly, it provides a better direction to the
investigator to undertake research in better manner (Coimbra Carvalho and Afonso Mazzon,
2013). This will improve the chances of attaining valid and accurate information to resolve the
issues present in the research. In this context, the aim of this research report is “To evaluate the
impact of rational decision making and bounded rationality over the consumer behaviour
in terms of FMCG sector in light of Brexit”. A case study on Tesco PLC.
Research Objectives
 To examine the concept of bounded rationality in context of consumer behaviour.
 To ascertain the importance of analysing consumer behaviour for Tesco PLC.
 To identify the significance of rational decision making for a FMCG company.
 To identify the influence of external environmental factors on consumer behaviour
 To evaluate the potential influence of post Brexit on Tesco PLC and its impact on
consumer behaviour.
Research Questions
 Understand the concept of bounded rationality in context of consumer behaviour?
 What is the importance of analysing consumer behaviour for Tesco PLC?
 What could be considered as the significance of rational decision making for a FMCG
company?
 Explain how external environmental factors affects consumer behaviour?
3

 What influence has been there of post Brexit on Tesco PLC and its impact upon
consumer behaviour?
4