Management Economics Report: Tesco's Market Analysis and Strategies

This report offers a comprehensive analysis of Tesco, a leading British retail firm, focusing on its market operations and economic strategies. It begins by introducing Tesco and its baby product line, then delves into the market analysis, highlighting its oligopoly market structure within the UK supermarket industry. The report examines Tesco's historical evolution, from its early days to its current international presence, and discusses the characteristics of its previous monopolistic market structure. It explores the dynamics of government interventions and their impact on Tesco's business decisions. The report emphasizes the importance of market structure, pricing strategies, and product differentiation in maintaining a competitive edge. It concludes with insights into how different market structures optimize the company's operations and the significance of government regulations in ensuring ethical business practices and societal benefits. The report is a valuable resource for understanding Tesco's market position and the broader implications of management economics in the retail sector.

MANAGEMENT
ECONOMICS

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Presenting the company and its product......................................................................................3
Analyzing the market it has been operating since its inception..................................................4
Market structure in which company operates and the characteristics of the previous market
structure.......................................................................................................................................5
Nature of industry in which company operates...........................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Management economics mainly deals with the application of all the economic tools and
methodologies in order to solve many problem in a business so that manager take a better
decision and also act as a link between practice and theory. In the same way, current study will
also help to understand the importance of economic and the chose firm for this report is Tesco
and its product line is baby product. Report will describe the company and its product, further
analyse the market in which it has been operating. Also study will describe whether the company
operate in different market structure in its history and then describe some government
intervention as well.
MAIN BODY
Presenting the company and its product
Tesco Plc is consider one of the top British Retail firm in UK and due to its best quality
of the product and services, company sustain the brand image at international level. As per the
revenue generated by the company, it is known as ninth largest retailer firm in the world and
third largest retailer firm as per the gross revenue. Tesco was founded in 1919 by Jack Cohen
and currently the company occupy the market share up to 28% in all over the world. In 90s, the
company operating in 11 countries but till now, it is operating in 30 more different countries
which clearly shows that Tesco has a brand image at international level and that is why, the
company is still looking to establish in emerging market as well.
Product:Tesco is offering range of products in its different stores such that Tesco Extra
shops offer extra product as compared to superstore. Such that it is deal with the different variety
of products i.e. baby product lines, women wear, men wear and eatables, furniture, home
decorators. Recently the company is indulge into financial market which shows its
diversification strategy. In addition to this, Tesco open its new store such that Tesco Express
where customer collect all food item as per their convenience. Also, the company’s supply chain
and its network is wide such that it clearly shows that there are range of product in which
company is dealing in order to make sure that it provide high quality of product with low and
minimum range.
History:The brand was first appeared in 1924 with a label of his owner name Tesco.
After experimenting with his first permanent indoor market stall in November 1930, Jack open

his store name as Tesco in September 1931. In addition to this, in 1956, the company open its
self- service store which is open till 2010and then the first supermarket in 1956. Therefore, from
1950 onward, Tesco start expanding its business at international level and till now, it has around
800 shops with different products (Azar and Vives, 2019). Another evidence of its history shows
that company follows diversification strategy which means company offer totally new product in
new market. For instance, in 2001, Tesco become involved in Internet Grocery retailing in US
where it obtain 35% of its market share and it keep looking forward to operate in such types.
Analyzing the market it has been operating since its inception
There are different market structure in which different company is operating, but among
all, Tesco is operating in Oligopoly market structure. Such that the supermarket industry in UK
is also known as an oligopoly market because there are three characteristic of this market i.e. few
but major competitor, firm sell either identical and differentiated product and industry has a
significant barriers to entry.
As Oligopoly is imperfect type of competition which can be applied to UK supermarket
industry. Therefore, the entire industry is operating in the oligopoly market structure and in UK
there are some companies who are dominate to the whole market and follow oligopoly market
structure. Further, the big four firm is operating in this such that Tesco, Asda, Sainsbury and
Morrison. Thus, as per the secondary data, around 6391.1 crore GBP revenue is earned by the
company in 2019 and it also occupy 28.4% of the market share which is high among all the other
four companies (Brander and Song. 2019).
As Tesco comply with all the three characteristic of Oligopoly market structure such that
price is not an essential factor in the competition and in the same way, Tesco keep the price of its
baby product line low in order to follow this. Also, quoted firm also uses marketing mix in order
to promote their product within market and it also make sure that it pay close attention to the
features of product in order to meet the demand of customers (Ara and Zhang, 2019). As it is
also analyzed that many market is dominated by the brands and by providing unique quality of
product to their customers with a unique formulation assist to attract range of customers. Such
that Tesco uses the best variety of products and now it diversify the business such that clothing,
financial services, telecom and car insurance, soon it also enlarge the business as per the demand
of customers.

When company uses oligopoly market structure, prices seems to be rigid and that is why,
company did not face any issue which affect the business in opposite manner. Also, a branded
good also have an unique formulation and design which can appear thousands of customers that
helps to meet the branded good. Therefore, it can be stated that to stay ahead in the competition,
company actually decreases the product price and that is why, it keep attracting new customers
towards it (Guo and et.al., 2020). As, due to price rigidity, firm actually like to improve their
profit, there is a need to improve the existing product and provide innovative products as well.
Therefore, it shows that Tesco have this features and that is why, it keep providing the products
at best price in order to meet the define aim and objective of the company.
Market structure in which company operates and the characteristics of the previous market
structure
From the above discussion it is clear that the market structure is defined as the nature and
the degree of the competition which is being faced in the market for selling the goods and
services (Thisse, 2019). Hence, it is very essential for the company to follow all the rules and
regulations which are being levied on the market structure in which Tesco is operating. Earlier in
the history the company was operating in the monopolistic market structure. This is majorly
because of the reason that earlier Tesco was the only company which was dealing in the baby
product range and after the increase of the market of Tesco many other companies also started
coming in this industry. And after this the monopoly market structure converted in the oligopoly
market structure. This is majorly because of the reason that in the present business environment
the companies are dealing in same and identical manner. Thus, this converted the single
company dealing in the baby products. Thus, this made the other companies also motivated that
they also invest in the same product line as the current trend is of using the latest trend of the
using the baby products.
Thus, because of this reason that retail market structure changed an particularly earlier it
was having the monopolistic market but with increase in the globalization and modern culture
the trend changed and many other companies also started dealing in the baby product line. This
converted the monopolistic market structure in the oligopolistic market structure. The major
characteristic of the previous market structure are as follows-
The major characteristic is that the in this type of market structure there is single seller
and large number of buyers (Sun and et.al., 2017). Thus, this is the market structure which can

yield a maximum amount of profit for the company. Thus, the company can run and get
successful in this type of structure to a great extent.
Another major characteristic of this type of market is that the goods are unique and this is
majorly because of the reason that when it comes to monopoly then it is clear that the goods or
the service is unique and because of this reason only the people are liking the product and no
other company in coming in doing the business (Thisse and Ushchev, 2018).
One of the other major characteristic of the monopolistic market is that there are high
barrier to the entry in the monopolistic market. This is majorly because of the reason that as there
is single operator in the monopoly market then the company do not allow other companies to
enter within the market.
(Source: UK supermarket market share. 2019)
Nature of industry in which company operates
Is operating in different market structure more optimal for company
Yes the operations of the company in the different market structure are optimal for the
company. This is majorly because of the reason that when the company operates in the different
market structure then the company has a wide variety of the consumers and the different market
share. Thus, this will increase the working capacity and productivity of the company. This is due

to the reason that requirement of every market structure is different and this will result in the
business to be large and with wide variety of the services and the product for the consumers.
Hence, this will develop the range of the business and in turn this will also increase the
profitability and productivity of the company to a great extent (Islam, 2019).
Thus, this will help the company in increasing the area and range of the business to even
in different other sectors as well and this will also increase the goodwill and popularity of the
company to a great extent. Hence, in the end it can be said that the when the company will
operate in the different market structure then the company will grow to higher level and this will
add on to the market share of the company in this highly competitive business environment.
Suggestion relating to greater or lesser government intervention
The government interventions are referred to as the rules and regulations and legislation
which the government of the company has levied in the running and operating of the business.
For the company to be successful in its operations it is very essential for the company to make
proper and effective use and compliance with the rules and regulation will give a direction to the
employees that how they have to work and in what manner. The rules and regulations and the
government intervention within the company and its working also builds up a trust and
authenticity for the consumer to believe in that the working of the company is correct and
ethical.
Thus, if the government intervention will be high then this will also be good for the
society as well. This is pertaining to the fact that when the company works as per the rules and
regulations provided by the government then this is also beneficial for the company. This is
majorly because of the fact that the government has made many provision and regulations
relating to the protection and safeguarding of the society and the environment. This is done in the
form of maintaining of the Corporate Social Responsibility by the company under which the
company gives away a part of profit in the development and betterment of the society and the
environment.
Also, the government intervention bounds the company in managing all its operations
and the business activities within the direction of the society and its protection and safeguarding.
Hence, the government intervention also makes sure that the company is working in ethical and
morally correct manner (Bertoletti and Etro, 2017). Also this ensures that the company is giving
proper quality of the goods and services to the consumers without any of the fraudulent or high

prices. This is to make sure that the consumers are not cheated by the company and they are
given all the goods and services in against of the nominal price to be charged by the consumers.
Also, even if the prices are charged high then this is also not good practice and for this also the
consumer can use some of the government rules and regulation like they can go in the consumer
court and can file a suit against the company. Hence the application of the government
intervention is very beneficial for the company as this will increase the consumer loyalty towards
the company to a great extent.
CONCLUSION
In the end it is said that the management of economic is very essential for the betterment
and success of the company. This is majorly because of the fact that this will increase the
working efficiency of the company to a great extent. In the present report the profit of the
company was discussed which was baby product by Tesco. Also the discussion highlighted the
fact that the company is currently operating in the oligopoly market structure but it was earlier
operating in the monopolistic market structure. Also, further the discussion highlighted that
major characteristic of monopolistic market is the single seller, unique product and many others.
In the end the discussion was made on the fact that government intervention is good for the
better working of company within the society.

REFERENCES
Books and Journals
Ara, T. and Zhang, H., 2019. Tariffs, Vertical Oligopoly and Market Structure: Empirical
Investigation. Research Institute of Economy, Trade and Industry (RIETI).
Azar, J. and Vives, X., 2019. General Equilibrium Oligopoly and Ownership Structure. Available
at SSRN 3501611.
Bertoletti, P. and Etro, F., 2017. Monopolistic competition when income matters. The Economic
Journal. 127(603). pp.1217-1243.
Brander, J. and Song&, V., 2019. Financial Structure and Oligopoly: The R&D Effect
(Preliminary and Incomplete).
Guo, H. and et.al., 2020. Constraining the oligopoly manipulation in electricity market: A
vertical integration perspective. Energy. 194. p.116877.
Islam, M.S., 2019. Elimination of Excess Capacity in Monopolistic Competition: An Alternative
Approach. International Research in Economics and Finance. 3(1). p.1.
Sun, B., and et.al., 2017, July. Will the Monopolistic Market Structure Produce Market Power? a
direct measure of market power of Internet platform enterprises. In Proceedings of the
2nd International Conference on Crowd Science and Engineering (pp. 14-18).
Thisse, J.F. and Ushchev, P., 2018. Monopolistic competition without apology. In Handbook of
Game Theory and Industrial Organization, Volume I. Edward Elgar Publishing.
Thisse, J.F., 2019. Monopolistic competition with apology.
Online
UK supermarket market share. 2019. [Online]. Available through: <
http://ercouncil.org/2019/chart-of-the-week-week-12-2019/>