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economic analysis of tesco

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ECONOMIC ANALYSIS OF TESCO Introduction The aim of this report is to analyse the economics and competition that exists with the expansion of a firm in this case Tesco, which is one of the UK's leading retailer. In order to effectively analyse the company I will be using the article, which states "tesco in every town". The article basically illustrates how the expansion and the opening of new big retail stores are causing a lot of competition for smaller retail outlets like off license shop, and how they affect the economy. The following will be discussed and analysed in relation to the article: Demand, Supply and production, Costs, Competition, some major economic problems and Solution /strategy to problems Firms' background (Tesco) Tesco is the biggest retailer in Britain, where it employs more than 250,000. The third-largest retailer in the world, it made an underlying pre-tax profit of more than �2 billion ($3.5 billion) last year on sales of �37 billion.it has a market share of 29% compared to that of its rival Asda 17.1% and sainsbury 15.9%. It is still growing at home, but is also expanding abroad, with investments in Poland, Thailand, South Korea, Ireland and recently into the USA. Demand Most of the tesco stores are located almost on evry major shoppin centre's and high street. ...read more.


trolleys, tills are constant and when demand is high the fixed factors still remains constants. * The store might open for an extra hour during the bank holidays etc, this affects the total cost of Tesco producing extra output. though the marginal cost is low as the total fixed cost is constant, the only cost is labour and this is low as staffs are paid a few extra pounds * Tescos price elasticity is elastic, tesco consumers respond to increase or decrease in price of goods. When the there is a sale or reduction in price of a product the demand for the product is higher and when the price is increased the consumer's look for substitute products. E.g. Pepsi and tesco cola. COMPETITION * The Tesco store is located in almost every area or strategic location but there are also various other stores around most of the areas tesco shops are located in but tesco's main competition comes from other bigger retail shops like marks & Spencer and other big supermarkets like Asda's, Sainsbury and morisson and few more other retail outlets. * Tesco and stores like M n S both sell similar products meaning consumers can buy products from both stores but Tesco's advantage over their rivals is price. Marks and Spencer products cost higher than tesco products. ...read more.


This is done by employing some staffs to go around the shelves and take records of products that are not available on the shelf and reporting their findings to the store manager who can then get in contact with the store room or suppliers to get products needed. The solution is an easy process and would not increase cost; this solution should be easily implemented in a short run, taking up to a month. If the solution is used, it would increase output and also demand, shifting the demand curve to the right. Conclusion Tesco being one of the largest retail stores in UK has several competitors both small and large stores. Which I have illustrated. It is inevitable for smaller stores to feel dominated by some of these bigger stores and in other to overcome these competition would have to consider want their customer needs are and make sure they are met. And also by stepping up the quality and price of product I also identified two major problems with possible solutions, if Tesco identifies this problems as an economic problem to the store and make use of the solutions, it will help the store economically and improve the services and profits of the store. All two solutions can also be easily implemented and would not cost the store major capital. Reference Worthington I. and Britton C. (2004) The Business Environment, 5th ed, FT PRENTICE http://www.economist.com/world/britain/displaystory.cfm?story_id=10063999 www.tesco.com/corporateinfo/ http://www.guardian.co.uk/business/2007/nov/01/supermarkets.viewpointcolumn ...read more.

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