Topic based on Tesco

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Jack Cohen in 1919 and the name Tesco was first appeared in the shop in Edgware in 1929 since the company has grown they were implementing their innovation in different business. In this cut throat competition, Tesco innovations and re-innovates the new product as per the marketing environment in comparison with its fellow competitors. Healthy competition gives the best outcome of the product like price and quality. The main aim is to maximize customer's value as a source of competitive advantage.

The important objectives of Tesco are to retain customer satisfaction and maintain number 1 Retail Company in the UK, to maximise sales and profit and to provide reasonable price to the consumers. To execute these objectives it has to face number of different constraints such as scarcity of resources, quality, brand name, technologies etc. Before management takes any decision manager has to plan in such a way it should have good impacts in the future. Due to intense and cut throat competition in the market for products, managers seek value maximization in their managerial decisions. Managers who pursue goals contrary to the desire of stock holders to maximize the value of their business is at risk of being replaced further there is a high correlation firms profits and managerial compensation so before making their decisions managers must first analyse their cost benefit analysis. Due to some changes in demand and cost, there is disequilibrium in the market; hence it is called the fractional theory of profit. The monopoly theory of profit states that some firms are protected from competition because of high barrier to entry. An economy of scale high capital requirements patents or import protection allows firms to build above normal profit.

Market is

Perfect competition

Market is characterised by sellers and buyers and nature of the product sold will be identical, there will be number of substitutes for the product. The barriers of entry of new firms is restricted and price is determined by demand and supply, Tesco sets the price in such a way that all can afford.

Examples of perfect competition:

Financial markets - stock exchange, currency markets, and bond markets

Advantages of Perfect Competition:

High degree of competition - when there is competition in the market, all the producers wants to utilise the resources to the fuller extent in an efficient way.

Price = marginal costs

Normal profit made in the long run

Firms operate at maximum efficiency

Consumers benefit

Imperfect or Monopolistic Competition

There will be only one producer and seller for the particular product with no competition, price will be high on the product due to economic, social or political factors, No identical products are sold, unlimited number entries of buyers and sellers.

Examples - restaurants, professions - solicitors, etc., building firms - plasterers, plumbers, etc

Duopoly means two. Market is ruled by two competitors dominating the entire industry
The duopoly market is ruled by two firms who are the dominators of the entire industry. There is a high barrier to the industry and there is a scope for abnormal profits as there is no or less competition.
Monopoly means individuals where 25% of market share are occupied, price cannot be changed at frequent travels and it is fixed, it controls the price, supply and output. Choices will be limited to the consumers, possibility of price description


Natural Monopoly - high fixed costs - gas, electricity, water, telecommunications

Oligopoly - Competition

The one of the important model is, "Kinked Demand Curve Analysis" and it is based on expectations and an organisation expects two types of possibilities. They are optimistic and pessimistic. It expects that the competitors will match the price cuts but not price increases, so these expectations will give its demand curve a kink, it always sets the output where its marginal costs equal its marginal revenue, there is a discontinuity in the composite marginal revenue. According to the Kink analysis the output does not change even though marginal cost varies between MC1 and MC2. Price and output will be constant even though there is a change in the costs.

Cost and Demand Analysis

In Oligopolists, cost is not a fixed term it is unstable and agreement on prices becomes difficult. The identical figures are demand and average curves which are assumed, marginal cost differs, firm's fixes the price by negotiation and the resulting price does not reflect to stable equilibrium. Prices differ due to difference in the competitive strategy, locations, quality management, etc. The other difference can be labour and capital intensive. When demand curve changes, price curve also changes if costs are identical, when both costs and demand vary firms will go for the same price.

Kinked Demand Curve diagram is based on pessimistic Oligopolist where Tesco relates.

Tesco's core business objective is to satisfy the needs, wants, tastes and preferences of the customers. It overall beats the high competition in the market by producing the best quality to consumers. Every organisation has its own plans and works only with the setting right goals at right time. Plans are to maximise sales and profits, maintains No 1 retail store in UK. Targets competitors and remains as a market leader, provides goods/services that are cheap and affordable to public. Business plans and modules are followed to achieve respective goal. Each objective has deadlines to meet so they have to meet their set objective within the stipulated period of time. Production and sales are the 2 aspects where Tesco focuses.

Production: Tesco focuses on the goods produced and quality matters where sales increases by making profits. Quality levels are maintained in all the stages of production .The company more than 1000 products under their own brand Tesco. Comparatively these products are mainly targeted customer daily wants. These are the following exact market economics to market their products.

Sales: Tesco sells its own products and also different brands. In comparison with other products Tesco products are more cost effective. It is one of the emerging sub brands in the UK which offers the customers to minimise their shopping time. New innovations have been introduced in the form of advanced technology for the customers to generate and pay their own receipts by themselves.

Economics theory helps managers to provide functional rules that will help in the efficient use of scarce resources in the organisation. The economic environment is a factor in which the business organisation functions and decision makers should be able to set the economic factors that effects their decisions. Managerial economics explains and foretells the economic consequences of such decision. Hypothesis theory is based on shareholders and managers.

The Profit maximization Hypothesis

The most economic theory deals with maximizing expected profits and managers have the same objectives, Hypothesis theory discusses about minimizing cost and maximizing profits. All the necessary deviations will be traced from share holders to monitor managers and discover the cost and demand situation. It explains shareholders and managers cost and demand analysis.

Productivity and efficiency: To gain profits in the long run the production has to be increased and customers has to be satisfied. Tesco changes the taste and preferences of the customers as per the current and existing marketing strategies. Production should take place with no stoppages and it should be in an efficient way.

The market structure is based on the following factors

  • Pricing
  • Supply
  • Barriers to Entry
  • Efficiency
  • Competition
  • Degree of competition in the industry
  • High levels of competition - Perfect competition
  • Limited competition - Monopoly
  • Degrees of competition in between
  • Determinants of market structure


Price means setting the right value for the right product and it not stable for every product in the market. It depends on the market environment, straight forward calculation of input and output determines the marginal cost. Price has never been fixed and it keeps on changing as per the changes in the market. Scope of implementing the product depends on the brand name and value of the product.

Competitors play an important role in the pricing strategy. Price is variable and scope of implementing the product into the market depends upon the branding and the value of the product and it may face the role of the other company in the same field and also includes that if piece of a product reduced. It will initiate a repulsive range which will strike the price of a product to a higher level in the same field. It's been a very flexible element of pricing strategies that is to upgrade the pricing of an element that floats around the market and which has direct impact on the revenue and income. The main course of pricing is to create trends to stimulate the influence of setting price of a product that which has an impact of different policies of the market in pricing of the product.

Competitor-oriented pricing:

Competitor oriented pricing method involves in setting price of the product by competitive bidding basis. When the buyer and the supplies mutually agree with the price set for the product.

Pricing strategies

Marketing managers should not consider the price alone, as he has to consider other factors like product, place and promotion. He has to validate all the possibilities of future factors when fixing the price for the product. Before fixing the price of the product, as it is expresses itself to the customer that low price tag on it, which defines the quality of the products.

Terms of pricing

Tesco compares prices with its competitors by creating matches between products which are similar in terms of brand and quality. Manufacturer brands like Walkers, Kellogg's, and Coca Cola are compared on an exact match basis. It fixes better price and expects better customers.

When comparing own brand products with competitors it also compares them on similar quality ex. Tesco Express compares value with their equivalent products which has value, Standard with their equivalent Standard products and Finest with their equivalent Finest product. It has brought Price Check box which compares the other rate of the product that available in the market through online ,which makes the customers to save their valuable time and money


Tesco is one of the best retailers in UK


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