Lecturer:        Business Environment                 Student:

Contents Page


Different types of market structures        

Perfect competition:        

Monopolistic competition:        



What is Tesco’s market structure?        

How has Tesco responded to this structure?        

OFT (Office of Fair Trading)        

How does OFT checks anti-competition?        

What is European Union?        

Value of International markets to UK        

Value of European markets to UK        

European policies        

Impact of European Union’s Competition policy on Tesco        

Competition policy:        


Organisation behaviour, Market environment and international dimensions


This task for Business environment is split in two parts.  For Part 1 I will be describing the 4 different market structures that economist usually talk about are perfect competition, monopolistic competition, oligopoly and monopoly. Using the 4 market structures I will illustrate using real life case studies and examples how a selected business of my choice has behaved/responded to its market structure and finally describe how the OFT and other regulatory bodies check against anti - competitive behaviours.

In the second part of the assignment I will describe the value of international and EU markets to UK firms.  My description will 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 have chosen for this assignment is Tesco; this is because Tesco is a multibillion pound international business.

Different types of market structures

Market structures are the business orientated characteristics of a market; all businesses must focus on these characteristics of the market because these have an effect on the degree of competition in the industry and influence the business product or service pricing decisions.

Perfect competition:

In a perfect competition there are few entry and exit barriers, in this type of competition the companies target the mass audience and they differentiate their product with minor changes in the product attributes (Homogenous).

Homogenous products are identical products or business e.g. aviation all airlines prove one service which is to get their customers from one location to their destination and most customers have no preference or specific type of airline that they want to travel with, most customers will just look for the cheapest airline.

In such type of competition most of the companies use Push strategy, i.e. huge 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 industry, i.e. the buyers have the power to influence the price of the product or services.

Examples of a perfect competition to its closest definition are in the financial market like stock exchange, currency exchange market and the bonds/certificates market. As the companies are bound to follow market prices the only way the company can have advantage over its competitors is by reducing its operating costs and working at optimum level of efficiency


Monopolistic competition:

Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price.  A range of prices occurs because sellers can differentiate their offers to buyers.  Either the physical products can be varied in quality, features, style or the accompanying services can be varied.  Buyers see different in sellers, products and will pay different prices for them.  Sellers try to develop differentiate offers for different customer segments and, in addition to price, freely use branding advertising and personal selling to set their offers apart.

In this sort of environment the businesses and trades people have somewhat control over their prices because of the products differentiations.  Most common examples of monopolistic competitions are: restaurants as in the right area and right type of food they can have their own small portion of monopoly, professional solicitors, building and project managing firms and finally plumbers as there are less of them and more required.


In this type of competition the industry has a small numbers of large dominant firms that have a firm control over the market.  In oligopoly there are many entry and exit barriers such as huge investments etc.  In this type of industry firms usually follows pull strategy and make huge efforts in marketing and advertising to attract its target customers, the products in the industry could be highly differentiated or even be similar but hard of getting a hold and this is why businesses use branding or homogenous.

Due to the low degree of competition theses big giants can decide on their own price which is most suitable for its target audience and these prices will be non-competition prices however there could be potential for collusion and price fixing so that each dominant business can enjoy their market share and have profits accordingly i.e. their profits margin will vary but still always high.

Example of oligopolistic business industries are: supermarkets such as Tesco which alone owns 30.4% which is nearly 1/3 of the UK supermarket retail share market share, banking industry, chemicals industry, oil and energy industry, medical drugs and also the news and media broadcasting industry.  (Tesco market share)


A 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 demand of popular 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 Company which has created the iPhone, because of the degree of the monopoly there is a high possibility of price discrimination where the customers and the consumers have their choices limited to what is available in the market.

There are three different types of monopolies listed as below:

Pure monopoly in where the firm is the industry, for example Transport for London, the firm which owns all buses and underground 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 leader in supermarket industry.

Natural 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 even use very low price to push their competitors towards administration or bankruptcy.


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What is Tesco’s market structure?

Tesco's 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 being manipulative and gaining monopoly by building stores across towns and cities through the country and Europe but realistically Tesco is an oligopoly, although Tesco is the dominant supermarket it has fairly large competitors who also partly control the market.

Tesco accused of 'Manipulative Monopoly' ()

“A ‘competition test’ to curb the power of the supermarkets  was unveiled by the Competition Commission last year as ...

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