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Economic analysis of tesco Essay

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 i?? 2 billion ($3. 5 billion) last year on sales of i?? 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

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Demand Most of the tesco stores are located almost on evry major shoppin centre’s and high street. Some of their smaller storeslike tesco expressand metro are also located in strategic areas like opposite an underground station or in a town that has no other big supermarket. The location of a store like tesco has diffeent efects this has a major effect on the demand mainly because there are various types of consumers who come into the storeBranded products caters to those with personal taste where choice is important,so taste is important consumer income plays a major role in consumption of products at Tesco.

For example consumer who would normally purchase a Tesco baked beans because they earn lower income, would do the opposite if there is an increase in income and purchase the branded baked beans, Heinz. due to the increase in income, this has lead to an increase in the quantity demanded which makes the demand curve shift to the right for branded product. an increase in income which leads to the fall in demand of the unbranded products makes the product inferior ( Tesco baked beans). demand curve for branded product after income increase

Due to consumers wanting to shop at times that are convenient for them, the store opens 24hours bringing the convenience of round the clock shopping to the public. Some stores are located in a very busy area, which means lots of people shop at the store, the major problem here is most shelves are found to be empty after the rush hour, having been bought during the rush hour. People who shop after the rush hour, find it annoying as most of the items they want to buy are absent from the shelve, this is an economic problem for the store because their output has been decreased by having less items available after the rush hour.

Solution for this problem: Fast tracking: This enables them to easily monitor products that are out of stuck and reduce its unavailability. 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.


Worthington I. and Britton C. (2004) The Business Environment, 5th ed, FT PRENTICE http://www.economist.com

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