The final main factor that Tesco competes with its competitors is ‘Availability’. Customers must be able to buy the product whenever they want easily without having to travel a hundred miles. Tesco has branches in each local area for the availability of customers. They will go to the store where they think they will get all this. Tesco wants to win customers which is why many of Tesco’s stores are open 24 hours a day. If there are too many empty shelves in Tesco’s stores than other businesses such as Asda then customers may go to those other businesses instead of coming to Tesco. Tesco has a website from which customers can order there shopping whenever they want; there is a delivery service for the orders.
‘Availability’ is also an important factor that Errol competes with. Errol has to make sure that during his garages opening times all his products and services are available to customers because if they are not then the customer will go to one of his competitors. This means that he will have to
order his spare parts for all cars from all the different countries depending on where the car is from before they run out.
Competition is about businesses trying to make the most profit. To make high profits a business needs customers. Different businesses selling similar or the same products/services fight with each other for winning customers.
B. Changes introduced by competitors of ‘Tesco’ or ‘Errol Anderson Motors’ can have an impact on their businesses, either by profits increasing or profits decreasing. If Safeway introduces a new way of selling, such as telephone orders or have appointed workers to give advice on what to buy, then customers may like their customer service better and so would go there instead of Tesco. This would result in Tesco losing its customers as well as the competition. If Tesco appoints workers just like Safeway it will need to recruit more staff and so pay more wages, but it may be the only way to win back its customers.
Asda and Sainsbury’s may decide to improve the quality of their own brand products but decide not to increase the price. E.g. they decide to be creative by using nice plastic re-usable containers as packaging for Pasta etc. Customers are likely to get attracted to their quality and so may decide to shop their instead. This would also result in a decrease in the number of sales of Tesco. If Tesco decide to improve their quality of packaging then they may need to find better suppliers. This means that they will have to pay more than they currently do. One of the local grocery stores right near a Tesco store may lower its prices than Tesco. More people will go there to do their food shopping and so Tesco may lose some of its customers. Tesco may decide to lower its prices too. As well as making less profit Tesco will have to change its price lists. Safeway decides to concentrate on marketing its products to particular market segments. This can be a treat to Tesco because they may not rely on market segmentation and so Safeway may manage to win customers.
If Kwit Fit reduce their prices on certain services then Errol may lose some of his customers. Errol may have to lower his prices to, to get back customers. He can introduce something new to attract customers if he wants. Maybe he can have some special offers and rewards.
All these changes introduced by competitors of Tesco and Errol often get them both worried because they do not want the store/business to shut down. The one thing that they both should bare in mind is that the have to respond to these changes in an effective reasonable manner.
C. When competitors make changes; Tesco and Errol Anderson Motors should remain calm and try not to take any serious action without thinking about it carefully. They should respond to these changes but only if they know that it is going to be effective to their business. They should always try and prevent their competitors from stealing their customers so that their competitors don’t get ahead of them.
When these changes take place both Tesco and Errol should try and match their competitors if it really is slowly the business down. This may help Tesco and Errol retain their existing customers. However if they want to win new customers they will have to do some forward thinking about how they can improve the business to beat competitors. This may mean doing some research, things like surveys and questionnaires to find out what customers want. Once Tesco and Errol Anderson Motors do this, they can then develop their businesses by coming up with new products and inventions to keep ahead of their competitors by winning new customers.
If Asda lower their prices it doesn’t mean that Tesco should lower their prices to. Instead they can introduce a new rewards system and something new that will attract customers to Tesco even if their prices are slightly higher then Asda. If they don’t want to do this they can lower their prices to match Asda but it may not help Tesco to go ahead of Asda because more customers may still not go to it as they both have the same prices. To solve this Tesco can reduce its prices even low then Asda to win new customers but only if it’s worth doing. Tesco don’t have to respond to this change of Asda if it isn’t affecting its business. Tesco may even decide not to respond to Asda’s change even if it is losing its customers because even if it does respond, its profits may not increase because in the process it will spend money. So Tesco can just wait and watch. Asda may increase their prices because even they may be making less profit too. Since Asda is an international competitor this change will affect many stores of Tesco. Tesco should think about opening more stores internationally in countries where there are no Asda stores.
If Safeway improve the quality of their products and customer services and make it really impressive that many of Tesco’s customers decide to go there. Tesco should try and come up with something that will attract customers rather then just matching themselves up with Safeway. A better idea would be to match up with Safeway and also do some forward thinking so that they can also come up with something attractive of their own. This is the best response because this could also help Tesco prevent itself from losing its customers in the future. Even though this may cost Tesco, it should recover the cost over all the customers that it will get. Tesco should avoid responding in a way that will make the business go into a loss. An example of a new invention/idea is: to concentrate on a particular market segment such as ‘Age’ and do research on it to come up with a suitable attractive item or service. Tesco may choose to design more clothing for Teenagers or even for all ages then it currently is. Tesco can also come up with a new way of selling, maybe a system like Argos but instead of the customer going there and ordering they can order on the telephone and then go and collect there shopping when it is ready. This can cut down the queuing time on checkouts. Before Tesco does anything it will need to do research maybe questionnaires to find out what the customers want. This change of Safeway will only affect the Tesco stores in the UK because Safeway is a national competitor.
If Kwit Fit have special offers on some of there services including ‘Tyre Changing’ and some of Errol’s customers decide to go there instead. Errol should wait and be patient; he shouldn’t cut down his prices because he will just go into a loss which is the same as just waiting with less business. If this goes on for too long, then Errol should respond in some way. He can diversify his business- sell the products and provide the services that he currently isn’t. This will keep him busy.
If the AA improve the quality of their services and Errol’s local customers to there when there’s something wrong with there cars instead, then Errol should try and match up with the AA. He may even consider opening more branches and becoming national.
“Economic Conditions”
D. Interest Rates is both the cost of borrowing money and also the reward for saving it, they are measured in percentages.
An exchange rate is the price at which one currency can be traded for another.
Inflation is a continued rise in the general level of prices and a fall in the value of money.
E. Increases and decreases in the interest rates can help control the economy because it makes a steady environment for both businesses and consumers.
If the interest rate is high then it will cost more if Tesco or Errol borrow money, however if Tesco or Errol have saved money then they will get more money back. This shows that interest rates affect businesses. If the interest rates are high then Tesco and Errol both would try and avoid borrowing money this would mean less business activities taking place, where as if they are low then they may invest money in new resources to increase production such as employing new employees. When the interest rates are high both Errol and Tesco may consider saving money because they will get more back. Because of high interest rates both Errol and Tesco may experience a fall in sales because consumers will spend less and will be saving more. Since it is expensive to borrow money when interest rates are high, less customers may buy their shopping on credit e.g. credit cards. If Tesco or Errol wants to borrow money to expand or because it wants to lower its prices further it may decide not to when the interest rates are high because it will cost more. Profit will go down when the interest rates are high. When the interest rates are low: the production of both Tesco and Errol Anderson Motors is likely to increase because there will be less savings made and so employment will be increasing. Errol and Tesco will carry out any expansion plans or may invest into the business to increase the production to increase the profits.
If inflation increases the value of money of both Tesco and Errol will decrease. This means that the value of all their assets will decrease and so the cost of buying products will be more expensive for them and the customers. Customers may not be able afford the expensive luxury items they used to buy anymore and so will buy more of Tesco’s own brand cheaper products. When inflation increases Tesco and Errol will have to change their prices, this means that they will have to reprint pricelists. If a customer of Tesco or Errol asks for the cost of an item in 6 months time, Tesco may not know what there price will be because of changes in the level of inflation. Tesco’s employees may decide to ask for pay rises because the value of money is low when inflation is high. All this may lead Tesco and Errol going into a loss in profits and so they may rise there prices to get their profits back. Customers will again be prepared to pay more because of their increase in wages. If the UK’s inflation rate is higher then other countries then Tesco branches in the UK will become less competitive to firms in other countries. It can be difficult to be competitive during inflation.
Exchange rates are important to both Errol and Tesco because they both purchase most of their supplies from foreign countries. Tesco also sells its products in other countries. When the pound is strong Tesco and Errol both can buy more dollars (any other currency) with that same pound. This is good for them because it would be cheaper since they both import most of their products from other countries. When the pound is expensive foreign buyers may not be able to afford UK’s goods, this is bad for Tesco because its sales may decrease since less foreign people will buy products from them. Tesco doesn’t have many foreign buyers so it would really be affected. Stronger pounds can help the profits of both Errol and Tesco stores in the UK. The pound being strong is bad for exporters because they can buy fewer dollars (any currency) for that one pound.
F. If the interest rates increase, Tesco should try and avoid borrowing money for its business activities because this is what it normally does. I would suggest for it to use its profits as capital or the money it saved up. It would be a good time to invest money into bank because Tesco will get more interest. Since it will be expensive for borrowing money, customers may not spend as much money on luxury items and other expensive products that they normally buy from Tesco. They may buy more cheaper own brand products. This will lead into Tesco making less profit. Tesco should consider employing less workers and spending less on things like advertising to save money for things like more special offers to attract customers. Special offers are what the customers may be on a look out for, as they to will be trying to spend less.
If the interest rates decrease than I would suggest Tesco to carry out any expansion plans or any business activities it may want to carry out, to try and win new customers to increase its production. I would suggest Tesco this because it will be cheaper to borrow money. Tesco should invest its money into the business instead of keeping it in the bank because it will get less interest (reward for saving it). Investing money into the business will help Tesco increase production because the money will go to developing the business.
When inflation rises I would suggest Tesco to develop its own brand products because customers may not buy many luxury brand items. This is because the value of money will decrease and so people will have less to spend. I would suggest Tesco to advertise its own brand products to increase their publicity because there are people out there who have negative thoughts of them. This will help Tesco recover some of the profit that it will not make because of inflation. When employees ask for pay rises Tesco should give discounts in the shop instead. Tesco should try and avoid borrowing money because it will cost more because the value of money is less. Tesco should never become less confident because its profits are going low. It shouldn’t worry about the fact that it will have to keep changing its price lists when inflation levels change. Tesco should not do any financial planning when inflation is high because it won’t know what value that money will have in the future.
When the exchange rate (currency) of the pound increases, I would suggest Tesco to buy less imported goods because they will be more expensive as they will be able to purchase fewer products from that same one pound (this is when the currency of the pound is weaker). I would suggest Tesco to buy goods from UK farmers if it is cheaper. It should consider buying its own farms, to grow its own products for its stores. It may be impossible to grow all products in the UK. Also when the value of the pound falls (has a higher currency) foreign buyers will be able to buy more products in the UK with their currency. They will find it cheaper and so may buy products from Tesco. If Tesco wants this to happen then it will have to advertise its business to make them aware that it exists.
When the currency of the pound decreases this means that the pound is stronger. Tesco should try and import as many of its products as possible because it will be cheaper. Also when the value of the pound rises, Tesco may lose some of its foreign customers because it will be expensive for them.
When the interest rates increase I would suggest Errol to: not borrow money because it will cost him more. If he has savings then he should use them instead. Errol’s customers who were going to spend a lot on their cars may postpone their appointments with him because if they keep that money in the bank they would get a higher reward for it or maybe because borrowing money would be expensive. Customers may also not buy expensive products from him, so Errol should try and get cheaper products even if they don’t have a good quality.
When inflation levels rise Errol should consider having some sort of special deals with his customers because it may encourage them to buy his products or services. Errol has to do this to attract customers because they would have less money to spend. Errol may even have to reduce his charges and do some advertising.
When the value of the pound increases I would suggest Errol to import most of his supplies because it would be cheaper for him. Since he will get the items cheaper, he can lower his prices to win new customers.
