Market Structures: Tesco

This task for Business environment is split in two departs. For portion 1 I ordain be describing the 4 different mart structures that economist usu entirelyy talk approximately be perfect aspiration, noncompetitive challenger, oligopoly and monopoly. Using the 4 merchandise structures I allow illust tell utilization real life character studies and interpreters how a selected art of my choice has be befuddle gotd/ reacted to its merchandise structure and fin altogethery force how the much and some other regulatory bodies full point against anti competitive behaviours.In the second part of the assignment I ordain describe the value of international and EU merchandises to UK firms. My description pull up stakes include an evaluation of the pros and cons of UK joining the Euro along with that I will describe the impact of 2 EU policies on UK businesses. The business that I assume chosen for this assignment is Tesco this is beca practice session Tesco is a mult itrillion pound international business.Different guinea pigs of foodstuff structuresMarket structures are the business orientated characteristics of a market all businesses must focus on these characteristics of the market beca expend these turn in an effect on the degree of emulation in the labor and influence the business intersection or wait on determine decisions.Perfect competitionIn a perfect competition thither are few insertion and military issue barriers, in this type of competition the companies target the mass audience and they specify their product with minor changes in the product attri barelyes (Homogenous).Homogenous products are a meterised products or business e.g. aviation all airlines prove one wait on which is to get their guests from one location to their destination and virtually customers have no preference or specific type of airline that they want to extend with, most customers will just look for the cheapest airline.In such type of competit ion most of the companies use Push st enumerategy, i.e. Brobdingnagian efforts will be done through their sales team, the main focus is the product availability. In this type of competition the companies are forced to follow the competitive pricing strategy in order to survive in the sedulousness, i.e. the buyers have the causality to influence the equipment casualty of the product or run.Examples of a perfect competition to its c regressst definition are in the financial market comparable stock exchange, nones exchange market and the bonds/certificates market. As the companies are stand out to follow market prices the only way the company displace have advantage all over its competitors is by reducing its operating cost and subject fielding at optimum level of efficiency.Monopo runic competition at a lower place monopolistic competition, the market consists of numerous buyers and sellers who trade over a escape of prices rather than a single market price. A eye soc ket of prices occurs because sellers mass differentiate their offers to buyers. Either the physical products can be varied in prize, features, style or the accompanying services can be varied. Buyers moot different in sellers, products and will pay different prices for them. Sellers try to beget differentiate offers for different customer segments and, in addition to price, freely use branding advertising and personal selling to fixed their offers apart.In this crystallise of environment the businesses and trades people have reasonably engage over their prices because of the products differentiations. intimately commonality examples of monopolistic competitions are restaurants as in the right land and right type of food they can have their own less(prenominal)er portion of monopoly, professional solicitors, building and project managing firms and finally plumbers as thither are less of them and more(prenominal)(prenominal) required.OligopolyIn this type of competition the industry has a secondary poesy of sizable dominant allele firms that have a firm admit over the market. In oligopoly on that point are some entry and exit barriers such as huge investments and so forth In this type of industry firms usually follows pull strategy and exact huge efforts in marketing and advertising to attract its target customers, the products in the industry could be highly differentiated or even be mistakable but hard of getting a hold and this is wherefore businesses use branding or homogenous.Due to the low degree of competition theses big giants can decide on their own price which is most qualified for its target audience and these prices will be non-competition prices however there could be potential for collusion and price better so that each dominant business can enjoy their market share and have salary accordingly i.e. their profits margin will vary but pacify always high.Example of oligopolistic business industries are supermarkets such as Tesco which all owns 30.4% which is nearly 1/3 of the UK supermarket retail share market share, banking industry, chemicals industry, vegetable oil and susceptibility industry, medical drugs and similarly the bare-asss and media broadcasting industry. http//www.retail-week.com/data/kantar-worldpanel/tesco-market-share-up-as-it-piles-pres accredited-on-asda/5010942.article (Tesco market share)MonopolyA monopoly has high barriers to entry and firms have strong controls over their prices and they also control the supply of their product which can increase take aim of hot products, because a firm with a monopoly has majority of the market share it can decide to have low prices in order to destroy their competitors.A good and most current example of a monopoly is the Apple companion which has created the iPhone, because of the degree of the monopoly there is a high possibility of price disagreement where the customers and the consumers have their choices limited to what is avai lable in the market.There are terce different types of monopolies listed as belowPure monopoly in where the firm is the industry, for example Transport for London, the firm which owns all buses and chthonicground tubes in and around London, this is where consumers have no or very limited choice.Actual monopoly is where the firm has somewhat majority of the market share in the industry, in this case Tesco is the most famous example, Tesco owns over 30.4% of the market share and is the pull up stakeser in supermarket industry. infixed monopoly is where there are high fixed costs for example the energy industry like gas and electricity as well as water, telecommunications and the transportation industry like underground and rail.The disadvantages of a monopoly is that customer are exploited to high prices and potential supplies have limited choice for demand and this means that the consumers have less choice and again might have to pay higher prices than normal or the monopoly can e ven use very low price to push their competitors towards administration or bankruptcy.(http//66.102.9.132/ look to?q=cacheqGV5KxXiB80Jwww.bized.co.uk/educators/16-19/ economicals/firms/presentation/structure.ppt+market+structures&cd=2&hl=en&ct=clnk&gl=uk)What is Tescos market structure?Tescos market structure described by the media is believed to be a monopoly, Tesco has also been through the legal proceedings to prove their innocence, Tesco has accused of creation manipulative and gaining monopoly by building stores across towns and cities through the country and europium but realistically Tesco is an oligopoly, although Tesco is the dominant supermarket it has plumbly large competitors who also partly control the market.Tesco accused of Manipulative Monopoly (http//www.thisislondon.co.uk/standard/article-23658062-tesco-accused-of-manipulative-monopoly.do)A competition test to guard the power of the supermarkets was unveiled by the Competition missionary station last yr as part of a supplying shake-up designed to pass on competition in the multi-billion pound grocery market.But the tribunal agree with Tesco that the commission did non fully take account of the fact that the test, relating to planning decisions for larger stores, might have adverse effects for consumers, among other matters. (http//www.thisislondon.co.uk/standard/article-23658062-tesco-accused-of-manipulative-monopoly.do)How has Tesco responded to this structure?Monopoly Vs OligopolyTesco has over 4,000 stores across the world and out of those 4,000 Tesco has more than fractional of them in the UK around 2362 stores and this does not include all the Tesco metro and say stores. (http//www.tescoplc.com/plc/ most_us/map/)Tesco themselves say that it is an oligopoly, this is because Tesco is not the only supermarket in the UK, Tesco is the dominant shareowner but cannot be called a monopoly as there are umteen other firms which are in competition with Tesco e.g. Sainsbur y which owns 16.3% of the UK supermarket shares and Morrisons which owns 11.5%, this means the entry barriers to entry are very high because the industry is dominated by small number of large firms which control and own that share market. practically generation ( self-confidence of true(p) Trading)The Office of Fair Trading is the UKs consumer and competition authority and their mission is to make markets work well for consumers. OFT is a non- parsonial governance regulator that was established by government in 1973.Another organisation that does similar commerce to what Office of Fair Trading do, Ofcom is an in parasitical regulator and competition authority, for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services. Competition regulators are master(prenominal) in business and are required to ensure equality and a comely hold for all,How does OFT checks anti-competition?OFT plays a leading ro le in promoting and defend consumer interests throughout the UK, while ensuring that businesses are fair and competitive. This work is done apply the powers granted to the OFT under consumer and competition legislation.OFT gathers intelligence about markets and trader behaviour from a wide range of ejaculates and then they respond to complaints about markets from nominated consumer bodies, where the OFT is able to see potential problems, the OFT undertakes market studies and recommends to take action respectively.In a re centimeime investigation by the OFT has reviled that British Airways has been found guilty over the price of long-haul passenger fuel surcharges and has pay a penalty of 121.5m to be enforce by the OFT, therefore enabling the OFT to close its civil investigation and resolve this case. This penalty to the British Airways has been the highest ever imposed by the OFT for violation of competition law and this demonst place the determination of the OFT to deal power fully with anti-competitive behaviour.In another case, The Royal Bank of Scotland or RBS has also paid a fine of 28.59 million about 2 months ago in demonstrate 2010, after admitting breaches of competition law between October 2007 and February or March 2008, the fine for the bank was reduced from 33.6 million to 28.59 million and this was done to recoil RBSs admission and agreement to co-operate.The OFT has a 5 step regularity of keeping a good eye on business and other organisations these 5 go start with Analysis, Prioritisation, Prevention, Partnership and Evaluation, the details of all the steps are on their website under What we do. (http//www.oft.gov.uk/ about/what/named2)How do other supervising bodies monitor anti-competition?As the OFT only supervises what happens in the fall in domain, there is the europiuman coupler which is active in a wide range of insurance areas, from human rights to transport and trade, the europiuman kernel monitors all of the 27 countrie s that are part of the union, using similar techniques as the OFT but on a much larger scale, the indemnity to monitor and control competition is said as A fair deal for all and this policy is described asEffective competition to provide goods and services boot outs prices, assembles quality and expands customer choice. Competition allows technological diversity to flourish. The atomic number 63an military mission has wide powers to make sure businesses and governments stick to EU rules on fair competition. But in applying these rules, it can take account of the interests of innovation, unified standards, or small business increase.(http//europa.eu/pol/comp/index_en.htm)United Kingdom supermarket share pursual are the 4 leading supermarket chains in the United Kingdom Tesco, Asda, Sainsburys and Morrisons, these fantastic four have a combined share of 75.6 portion of the UK grocery market accord to the research done in the 12 weeks ending 1 November 2009 (Source Kantar World pane) http//TNS_WorldpanelWhat is European Union?(http//europa.eu/abc/ prospect/index_en.htm)European Union is a unique economic and political nine which is in partnership between 27 democratic European countries.What are its aims?Some of the basic aims of the European Union are peace, prosperity and granting immunity for its 498 million citizens in a fairer, safer world.What results so far?Under the European Union the appendages can travel and trade freely without any constraints as long as the members are trading in euro (the single European gold).European Union policies ensure safer food and a greener environment, better animate standards in poorer regions, joint action on crime and terror, cheaper telecoms and communication, millions of opportunities to study oversea and moreHow does it work?To make these things happen, EU countries have set up bodies to run the European Union and adopt its legislation. The main ones are* The European Parliament (representing the people of Europe)* The Council of the European Union (representing national governments)* The European fit (representing the common EU interest).How can the members have their say?The European Union is not a perfect society but it is an evolving project and incessantly has to be improved. If a community or even an individual has an important point to show to the union they must do some of the side by side(p) starting with* Contacting their local MP European Union policies are part of national politics.* Contacting their MEP and cast vote at the European Parliament elections the European Parliament enacts EU laws (www.europarl.europa.eu)* Contacting their NGOs (consumer associations, environmental pressure groups, etc.) they work with the EU on shaping policies.The EU has developed a single market corpse of laws which apply to all member states, and ensures the free movement of people, goods, services, and capital, including the elimination of offer controls by the Schengen Agreement bet ween 26 European Union states which I have listed below. European Union executes legislations in justice and home affairs, and maintains common policies on trade, agriculture, fisheries and regional development.Austria, Belgium, Czech, Re humankind, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland. (http//www.axa-schengen.com/en/schengen-countries)Value of International markets to UKNon EU Exports* In June 2010 the entireness value of UKs trade-in-goods exported to countries outside the EU was 10.9 billion.* As a par the total value of UKs trade-in-goods exported to countries outside the EU in whitethorn 2010 was 9.4 billion and for June 2009 was 8.2 billion.* June 2010 showed a 15.5 per cent increase in exports compared to May 2010 and a 33.0 per cent increase in exports compared to June 2009.* The total 2010 family to day of the month value of UKs trade-in-goods exported excluding June 2010 was 45.5 billion, which has been down revised by 6.9 million.* The final total value of UKs trade-in-goods exported for January 2009 to celestial latitude 2009 was 101.5 billion.Non EU Imports* In June 2010 the total value of trade-in-goods imported to the UK from countries outside the EU was 15.4 billion.* As a comparison the total value of UKs trade-in-goods imported to the UK from countries outside the EU in May 2010 was 14.0 billion and for June 2009 was 12.0 billion.* June 2010 showed a 9.6 per cent increase in imports compared to May 2010 and a 28.4 per cent increase compared to June 2009.* The total 2010 year to date value of UKs trade-in-goods imported excluding June 2010 was 67.5 billion.* The final total value of UKs trade-in-goods imported for January 2009 to December 2009 remains at 147.3 billion.(https//www.uktradeinfo.com/index.cfm?task=noneufullreport)It can be concluded that UK has less exports to th e non EU zone compared to the European market, in June 2010 total value of goods exported to Europe was 11.3Billion compared to the total value of goods exported to the international market which was 10.9Billion.International business traffic is an important feature of the UK deliverys survival almost 50% of UKs export is in the Non European Union zone, there fore international market has a vital role to play in UKs prudence.The imports of UK data shows that the import from the non European Union zone is increasing i.e. from 14.0 billion to 15.4 billion, hence the UK economy is dependent on the import of essential raw and prepared materials today the service sector is more and more important to the UK economy as a result of the weakening of the manufacturing sector directly imports are crucial and that is why using the international market the UK economy is on the growth as the export data depicts that UKs export is increasing from 8.2 billion to 10.9 billion.Value of European m arkets to UKEU Exports* In May 2010 the total value of UKs trade-in-goods exported to subdivision States of the EU was 11.3 billion.* As a comparison the total value of UKs trade-in-goods exported to Member States of the EU in April 2010 was 11.6 billion and for May 2009 was 9.3 billion.* May 2010 showed a 2.9 per cent settle in exports compared to April 2010 and a 21.3 per cent increase in exports compared to May 2009.* The total value of UKs trade-in-goods exported for January 2009 to December 2009 was 124.2 billion, which has been upwards revised by 48.5 million.* The total 2010 year to date value of UKs trade-in-goods exported excluding May was 46.2 billion, which has been upwardly revised by 273.6 million.EU Imports* In May 2010 the total value of trade-in-goods imported to the UK from Member States of the EU was 14.7 billion.* As a comparison the total value of UKs trade-in-goods imported to the UK from Member States of the EU in April 2010 was 15.3 billion and for May 2009 was 12.2 billion.* May 2010 showed a 4.2 per cent decrease in imports compared to April 2010 and a 20.8 per cent increase in imports compared to May 2009.* The total value of UKs trade-in-goods imported for January 2009 to December 2009 was 162.7 billion, which has been upwardly revised by 238.0 million.* The total 2010 year to date value of UKs trade-in-goods imported excluding May was 59.2 billion, which has been upwardly revised by 96.7 million. (https//www.uktradeinfo.com/index.cfm?task=euearlypub)The single market benefits the firms, by do it easier & cheaper to do business in other EU countries. No customs tax is charged on goods that are sold or transported between member states. The EU also tries to make each market as similar as possible to ensure fair competition across national inchs.Free Movement of CitizensEuropean citizens have the immunity to live, work, study, and travel in any other EU country. Since 1995 alone, about 100,000 new-made Britons have spent time studying in another European country.More JobsIt is estimated the 3.5 million British jobs are dependent on* Britains rank of the EU. (Source UK Jobs Dependent)UK joining the Euro (Pros & Cons)Below I have listed the advantages and disadvantages which were discussed by the chancellor Gordon Brown at the times of between 1999 and the year 2002 when the reels of countries in Europe joined the European Union and the bullionAdvantages1. A single specie should end currency instability in the participating countries (by irrevocably fixing exchange evaluate) and reduce it outside them. Because the Euro would have the parentd credibility of world used in a large currency zone, it would be more invariable against speculation than individual currencies are now. An end to internal currency instability and a reduction of external currency instability would modify exporters to project future markets with greater certainty. This will unleash a greater potential for growth.2. Consumer s would not have to change money when travelling and would visualise less red tape when transferring large sums of money across borders. It was estimated that a traveller visiting all twelve member states of the (then) EC would lose 40% of the value of his money in dealings charges alone. Once in a lifetime a family might make one large purchase or transaction across a European border such as buying a holiday home or a piece of furniture. A single currency would help that transaction pass smoothly.3. Likewise, businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations. Businesses, involved in commercial transactions in different member states, would no longer have to face administrative costs of history for the changes of currencies, plus the time involved. It is estimated that the currency cost of exports to small companies is 10 times the cost to the multi-nationals, who offset sales against purchases and can command the best rates.4. A single currency should result in lower interest rates as all European countries would be locking into German monetary credibility. The stability pact (the main points of which were agreed at the Dublin upside of European heads of state or government in December 1996) will force EU countries into a system of pecuniary responsibility which will enhance the Euros international credibility. This should lead to more investment, more jobs and lower mortgages.Disadvantages1. xx seven separate countries with widely differing economic performances and different languages have neer before attempted to form a monetary union. It works in the United States because the labour market is mobile, helped by the common language and portability of pensions etc. across a large geographical area. Language in Europe is a huge barrier to labour force mobility. This may lead to pockets of deeply depressed areas in which people cannot come across work and areas where the economy flourishes and wages increase. While the cohesion funds attempt to address this, there are still great differences across the EU in economic performance.2. If governments were obliged through a stability pact to keep to the Maastricht criteria for perpetuity, no matter what their individual economic circumstances dictate, some countries may find that they are unable to combat ceding back by loosening their financial stance. They would be unable to devalue to supercharge exports, to borrow more to boost job creation or cut taxes when they see fit because of the public deficit criterion. In the United States, Texas could not avoid a recession in the wake of the 1986 oil price fall, whereas demand for Sterling changed in the light of the new oil price, adjusting the exchange rate downwards.3. All the EU countries have different cycles or are at different stages in their cycles. The UK is growing reasonably well, Germany is having problems. This is the reverse of the position in 1990. Since the war the UK economy has tended to have an economic cycle closer to the US than the EU. It has changed because interest rates are set in each country at the divert level for it. One central bank cannot set inflation at the appropriate level for each member state.4. Loss of national reign is the most often mentioned disadvantage of monetary union. The transfer of money and fiscal grapplencies from national to community level would mean economically strong and stable countries would have to co-operate in the field of economic policy with other, weaker, countries, which are more tolerant to higher inflation.(http//news.bbc.co.uk/1/hi/ special(a)_report/single_currency/25081.stm)One of the few reasons that the United Kingdom did not want to join the single European currency with the scratch wave of countries on 1 January 1999 is that according to the chancellor of the exchequer at that time in 1999 who was Gordon Brown our current prime minister said that, although the government supported the principle of the single currency Britain would not be ready to join at least until the second wave of countries which occurred in 2002 and during that time he told the European Union that the country should take to prepare for monetary union but up till now there have been no indications of the United Kingdom joining the European Union currency, Euros.From my understanding there are many possible reasons that the government should consider while joining Euro, joining Euro would reduced exchange rate uncertainty for UK businesses and lower exchange rate transactions costs for some(prenominal) businesses and tourists. Eliminating exchange rates between European countries eliminates the risks of unforeseen exchange rate revaluations or devaluation, further those businesses who involved in commercial transactions in different member states would no longer have to face administrative costs of accounting for the changes of currencies. The los s of national sovereignty is the most often mentioned reason for the UK not joining the monetary union is the transfer of money and financial proficiency from national to community level would mean that economically strong and stable countries would have to co-operate in the field of economic policy with other weaker countries.European policiesThe European Union is currently active in a wide variety of policies from human rights to transport and trade below is the list of some of the policy areas of the European Union.Agriculture Media Competition Consumers Education habit Environment External trade Fight against fraud Human rights tax revenue Transport Justice, freedom Internal market Customs(http//europa.eu/pol/index_en.htm) collision of European Unions Competition policy on TescoCompetition policyA fair deal for allEffective competition provides goods and services cuts prices, raises quality and expands customer choice, allows technological innovation. The European Commission has wide powers to make sure businesses and governments stick to EU rules on fair competition.Competition must be fairIt is illegal under EU rules for businesses to fix prices or cut up up markets between them. A multinational company like Tesco cannot join with another giant if that would put them in a position to control the market, though practice this rule only prevents a small numbers of mergers going ahead.If Tesco plans to merge with its competitor, Tesco needs approval from the European Commission, the EUC (European Union Commission) mark their decision depending on the amount of business that Tesco has within the European boundaries.The Commission may agree to a company having a monopoly in special circumstances for example where costly infrastructure is involved (natural monopolies) or where it is important to guarantee a public service.The large may not exploit the smallIn doing business with smaller firms, Tesco cannot use their talk terms power to impose conditions wh ich would make it difficult for their supplier or customer to do business with its competitors. The Commission can, does and has fined companies for all these practices.No props for gimpy ducksThe Commission also monitors closely how much assistance EU governments make available to business (state aid). This aid can take many forms loans and grants, tax breaks, goods and services provided at preferential rates, or government guarantees which enhance the credit rating of a company compared to its competitors but in this case this does not apply to Tesco till today as Tesco is already on top of its game.Exceptions that prove the ruleSome exceptions to the general rules are possible. The European Union Commission can allow companies like Asda and Morisons to cooperate in developing a single technical standard for the market as a whole. It can allow smaller companies to cooperate if this strengthens their ability to compete with larger ones such as Sainsburys and Tesco.Aid for researc h and innovation, regional development or small and medium-sized enterprises is often allowable because these serve boilers suit EU goals.Checks and balancesThe Commissions extensive powers to investigate and halt violations of European Union competition rules are subject to legal review by the European Court of Justice. Businesses on a regular basis have to make appeals against Commission decisions if it seems like a unfair deal.The competition policy stops the Tesco from growing further from their potential market share, something which Tesco has cognise to be done in the recent years. Effective competition provides goods and services, mechanically raises quality and customer choices increase with competition. The policy also allows technological innovation and the European Commission makes sure that these innovations are in the European Unions fair competition policy.EnvironmentThe European Union has some of the highest environment standards in the world, developed over decades to address a wide range of issues. at present the main priorities are combating climate change, preserving biodiversity, and reducing health problems from pollution and crisscross sure that natural resources are being used more responsibly. humor changeClimate change is one of the gravest challenges facing humanity. The European Union plans to reduce greenhouse gases at least 20% by 2020 (compared with 1990 levels), raise in renewable energys share of the market to 20% and cut overall energy consumption by 20% (compared with projected trends).All businesses like Tescos are directly touch on by this policy as this aims to cut energy consumption and greenhouse gasses by 20%, meaning Tesco will have to recycle more, reuse materials more and reduce wastage and use of non-biodegradable equipment which will have a small dent on their profit.Emissions tradingEuropean Unions rewards businesses and organisations, which reduce their CO2 emissions and penalises those that exceed limits. In troduced in 2005, the scheme takes in about 12,000 factories and plants responsible for about half the EUs emissions of CO2.Under the system, European Union governments set limits on the amount of carbon dioxide emitted by energy-intensive industries and if they want to emit more CO2 than their quota, they have to buy spare permits but most supermarkets stores do not manufacture and this means that they will have to use eco favourable methods of business and equipment. Tesco has already proven that they are committed towards being eco-friendly, Tesco Plc, the worlds No.4 retailer, plans to fall over 100 million pounds with British green technology companies over the coming year as it steps up its drive to halve carbon emissions by 2020.(http//uk.reuters.com/article/idUKTRE61203720100203)Environmental healthNoise, swimming water, rare species and emergency response -these are just some of the areas covered under the extensive body of environmental legislation that the EU has estab lished over the decades.EU has set binding limits on emissions of fine particles known as PM2.5. Released by cars and trucks, these microscopic particles can cause respiratory diseases. Under the new law, EU countries will have to reduce exposure to fine particles in urban areas by an average 20% by 2020. In 2007 Tesco sure the Top online green award for their zero-emission delivery vans.sustainable developmentSustainable development has long been one of the overarching objectives of EU policy. EU leaders launched the first EU sustainable development strategy in 2001 and updated it in 2006 to face shortcomings and take account of new challenges. Since then there have been large efforts in terms of policy. Now the focus is on putting policy into practice in to UKs market.As Tesco manly sells general groceries they are affected by the European Unions environment policy, in a way that it has to source materials from the suppliers who obey and follow the European Unions environment p olicy, this means that Tesco has limited get across of potential suppliers.