P4 UNIT 29
Competitors in the retail industry
The business I am going to talk about is Tesco and their competitors; Morrison's, Asda, Sainsbury's. In
terms of price and quality, these food retailers are in the middle of the spectrum.
Tesco currently the leading food retailer, owning just under a third of the market shares. Tesco's
currently owns 30% of the market in the UK, where as Asda owns 18 %, Sainsbury's own 17 % and
Morrison's own 4 %.
The barriers to entry are limitations and setback for a business. The biggest barriers for Tesco include;
market structure, threats of substitutes and buyer power
Because Tesco owns a large proportion of the market share they need to ensure that they are constantly
ahead with technology and constantly have new unique selling points in order to stay on top. Tesco also
face threats to substitute products that are sold at a lower price but are a similar quality. Buyer power is
due to consumers having a variety of stores to shop from. The store that usually wins the consumer over
is usually the one closest to their home as it is the most convenient and saves time. As a result Tesco
tries to ensure that they have stores in as many regions as possible so that they can be the closest store
to the consumer.
Tesco use a range of pricing strategies that fall into three categories; competitive based, customer based
and cost based.
Tesco use market pricing which is when retailers price their goods based on supply and demand. This
helps Tesco ensure they never sell out of their most popular goods. This sort of pricing is competitor
based as Tesco are constantly competing against similar food retailers. Morrison's use this strategy as
well to ensure that they get the best possible profit. Tesco also use psychological pricing to make their
products appear cheaper even though today everyone knows this trick but would still rather pay for a
product if it is priced £1.99 rather than £2.00. This type of pricing is customer based as Tesco predicts
what their customers are willing to pay. Sainsbury's use this strategy as well because it makes their
customer think they are saving money by saving a few pennies. Tesco would also use cost based pricing
which is when they buy goods in bulk at a low cost and resell it to their customers at an affordable price
while making high amounts of profit out of it. Asda uses this strategy as well as they also sell their goods
to customers at a low price.
The Sunday trading law limits how many hours a business is allowed to be open for on Sundays. Small
businesses don't have any restrictions but large businesses do as they are only not allowed to be open
on Easter Sunday and on regular Sundays they are only allowed to be open between 10:00 to 18:00. If a
large shop is open when they aren't allowed will be fined. Large retailers such as Tesco and Sainsbury's
work around these restrictions by opening express stores so that they can still make money. This helps
them stay ahead of Asda and Morrison's as they don’t have express stores so wouldn’t make as much
profit for their business on Sundays.
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Competitors in the retail industry
The business I am going to talk about is Tesco and their competitors; Morrison's, Asda, Sainsbury's. In
terms of price and quality, these food retailers are in the middle of the spectrum.
Tesco currently the leading food retailer, owning just under a third of the market shares. Tesco's
currently owns 30% of the market in the UK, where as Asda owns 18 %, Sainsbury's own 17 % and
Morrison's own 4 %.
The barriers to entry are limitations and setback for a business. The biggest barriers for Tesco include;
market structure, threats of substitutes and buyer power
Because Tesco owns a large proportion of the market share they need to ensure that they are constantly
ahead with technology and constantly have new unique selling points in order to stay on top. Tesco also
face threats to substitute products that are sold at a lower price but are a similar quality. Buyer power is
due to consumers having a variety of stores to shop from. The store that usually wins the consumer over
is usually the one closest to their home as it is the most convenient and saves time. As a result Tesco
tries to ensure that they have stores in as many regions as possible so that they can be the closest store
to the consumer.
Tesco use a range of pricing strategies that fall into three categories; competitive based, customer based
and cost based.
Tesco use market pricing which is when retailers price their goods based on supply and demand. This
helps Tesco ensure they never sell out of their most popular goods. This sort of pricing is competitor
based as Tesco are constantly competing against similar food retailers. Morrison's use this strategy as
well to ensure that they get the best possible profit. Tesco also use psychological pricing to make their
products appear cheaper even though today everyone knows this trick but would still rather pay for a
product if it is priced £1.99 rather than £2.00. This type of pricing is customer based as Tesco predicts
what their customers are willing to pay. Sainsbury's use this strategy as well because it makes their
customer think they are saving money by saving a few pennies. Tesco would also use cost based pricing
which is when they buy goods in bulk at a low cost and resell it to their customers at an affordable price
while making high amounts of profit out of it. Asda uses this strategy as well as they also sell their goods
to customers at a low price.
The Sunday trading law limits how many hours a business is allowed to be open for on Sundays. Small
businesses don't have any restrictions but large businesses do as they are only not allowed to be open
on Easter Sunday and on regular Sundays they are only allowed to be open between 10:00 to 18:00. If a
large shop is open when they aren't allowed will be fined. Large retailers such as Tesco and Sainsbury's
work around these restrictions by opening express stores so that they can still make money. This helps
them stay ahead of Asda and Morrison's as they don’t have express stores so wouldn’t make as much
profit for their business on Sundays.
1
