Management Economics Assessment 1 - Tesco's Coffee Product Analysis

Management Economics
Assessment 1

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Describing the business and its main product and service.......................................................3
2. Identifying demand and market equilibrium on the different factors......................................4
3. Factors influencing the Price Elasticity of Demand................................................................5
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management economics is defined as the branch of the economics which involves the
application of the different economics methods. The project is based on the Tesco company
which the British multinational company. This report will outline the chosen product of the
company and why this product has chosen. This project provides critical evaluation of data for
guiding the policy into an international, national and organizational context. It will provide an
application of different economical concepts for influencing the decision of organization.
Analysation will be done of impacts from government policy on the marketers which will affect
the managerial decision.
MAIN BODY
1. Describing the business and its main product and service
Tesco Plc is the British Multinational retail grocery store having its headquarter in
Welwyn Garden City in England. It is the third largest retailer in the world by measuring the
gross revenues. It has its shops in the different five countries across Europe and it is the market
leader in the UK in the groceries. The market share of the company is around 28.4%. The
organization deals in the variety of products and its main products are bananas, corned beef,
fresh beef, berries, chicken and eggs, citrus fruits, coffee, cocoa, cotton, milk palm oil, etc. The
organization has expanded its business and used to sell more than 270 products in their grocery
store. It was founded in 1919 by Jack Cohen by having the market stalls in Hackney, London.
The company has diversified its business into different areas like clothing, retailing of books,
electronics, toys, petrol, financial services, etc.
The product of the company for doing the project is coffee as this product is the most
consumable product for the people. This product is one of the best and traded product around the
UK. The largest volume of the coffee for the organization comes from the Vietnam which is
followed by Brazil. The company is certified in order to sell the best coffee in the market and
makes it to develop in the sustainable market.
This product is chosen because this product comes in the necessity of the goods. As some
people are addicted to have coffee so this will maintain the demand of the products in the market
(Tirawatnapong and Fernando, 2018). This product has also sold at the time of the pandemic
because it comes in the basic necessity goods. This will maintain the demand of the coffee and
by this the company will be earning good profits as it is the leading grocery store.

2. Identifying demand and market equilibrium on the different factors
Demand is defined as the desire of the customers in order to purchase the goods and
services at the given price. This can be of two types that is demand in the market for specific
goods or aggregate demand that means demand for the total goods in the economy.
Market equilibrium is the stage in which the market demand and market supply is at the
same point that is equilibrium point (Acay, Bas and Abdeljawad, 2020). Equilibrium point means
when the supply is exactly gone according to the demand in the market. The organization must
have the equilibrium point in order to maintain the profitability and productivity in the market
(Dzhabarova and et.al., 2020).
Price of substitutes: Substitutes are the products which can be used if the real products is
not available or its expensive. The prices of the substitutes goods shifts the demand curve of the
company (Edalatpour and Al-e-Hashem, 2019). The best substitutes of the coffee is tea. People
can have tea instead of getting coffee or if the prices of coffee increases the customers may shift
to the tea. The increase in price of the substitutes will increase the demand of the coffee and vice
versa. There is no such gap of prices in the substitutes products. The prices of the substitute that
is tea is not increasing hence it does not affect the demand of the coffee in the grocery store
(Gupta, Ivanov and Choi, 2021). The organization must maintain the quality of the product so it
makes the customers to have their product only. This makes the organization to keep safe its
products which may get affected by the prices of the substitutes.
Price of complements: The complementary goods are the products that adds the value in
the main product. The prices of the complementary goods may affect the demand curve of the
product as the products will not be able to consume without availability of the complements
(Maas and et.al., 2020). The best complement of the coffee is milk. As many people used to
prefer to have the milk and coffee together. In the pandemic there is rise in the prices of the milk
but it is the necessity god people have to buy this in order to fulfil there basic needs. The price of
the complement that is milk is increased but it will not affect the demand of the product as it is
the necessity goods. The milk is the perfect complement of the coffee as it is consumed with one
another. There is inverse relationship between the demand and supply of the complements. The
increase in price of the complement will decrease the price of the product.
Consumer Income: Consumer income refers to the income that the person earns either
from doing work or by doing investments. When the income of the consumer increases it will