Tesco Analysis

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1. MARKET STRUCTURE The market in which Tesco operates is supermarkets. Although this is a highly competitive one Tesco holds a disproportionate amount of power. The figures below indicate that Tesco holds over a third of the market share, and even double the amount of Asda 's market share, the second leading supermarket. Market share is ‘the percentage or proportion of the total available market or market segment that is being serviced by a company ' (Wikipedia 2006). SUPERMARKET SHARE Tesco: 30.6% Asda: 16.6% Sainsbury 's: 16.3% Morrison 's: 11.1% Somerfield: 5.4 Waitrose: 3.7% Iceland: 1.8% (Source TNS cited by BBC 2006) Therefore it may give a more accurate picture in saying that the market structure in Tesco 's case…show more content…
This also means that when people 's income increases, the demand for the substitute product falls. However a rise can be seen in the demand and luxury goods. Tesco purposely makes their packaging for Tesco Value very basic in order for customers to opt for their Tesco Finest product range. Therefore these types of products can be said to have large income elasticity of demand. The majority of the products that Tesco sells are elastic goods, such as electrical goods. Elastic goods demand changes depending on the price. However Tesco does sell inelastic products, which are necessities such as milk as customers still need to buy these. Inelastic means that the demand for the product does not change, even if there is a change in price. (Begg and Ward, p134, 2004) This graph is specific to an oligopoly and shows the change in quantity demanded in relation to the change in price for both elastic and inelastic goods. Total Revenues will be increased, if the firm decreases their price but increase their quantity. Due to the fact that the costs remain the same, the revenue line on the graph can be seen to be steeper than the costs meaning that the profit is higher. The graph therefore also indicates the point where the firm is able to make the most amount of profit, in relation to the price they set and the quantity they produce. Due to the fact that they are in an oligopoly market, Tesco 's decisions would be mainly

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