UKCBC Unit 3 Business Environment-2
P3.1 Explain how market structures determine the pricing and output decisions of Tesco plc the UK.
Deciding the price and output of any organization is the most critical decision to be made. This decision impacts the success of any business and should be taken after considering a number of factors. These decisions are highly influenced by the market structure. A market is defined as a place where buyers and sellers interact with each other to exchange goods and services. Market structure is basically the way in which these interactions between the seller and the buyer happen. The seller themselves does not the liberty to decide the output and final price on their own rather they have to consider the market structure before doing the business research. Market structure is basically characterized by the number of producers in the market and the type of products sold in the market. If the numbers of sellers are more and they produce similar kind of products, then, in that case, the price and output of the products and services are decided by the supply and demand mechanism. But in the market structure where the goods and services offered are distinct from each other, the decision making lies with the producers. They can decide whether to substitute a product with other and how much to produce (Spar, 2006). Same is the case with Tesco plc. The market structure where the Tesco is operating, for example in the UK, there are many other players in the market which are offering the same products as the UK, hence the price and output of the products offered by Tesco is being decided by the supply and demand mechanism. The decisions are made by Tesco after taking into considerations the strategies and practices followed by the competition. On the other hand in a perfect competition market structure, the number of buyers and sellers are too high so any individual cannot fix the price and output and the decision is made according to the market sentiments. The buyers and sellers can easily enter and exit the market. They have to follow the market pricing in order to be alive in the competition. In other market structures, the producers have the total control over the price and output of the products and services offered by them.
P3.2 Illustrate the way in which market forces shape Tesco plc responses using a range of examples
The market forces are very much responsible in the way a particular organization behaves in a market. Market forces are responsible for deciding the pricing of the products as we have seen in the above segment. Similarly, these market forces are also involved in another business-related decision-making process. The market forces communicate with each other in order to have better profits and this depends on the market structure. For Tesco plc, the decision making is done depending upon the market preferences i.e. the customer preferences, the competitor analysis, price elasticity, supplier relations, etc. All these forces drive the way Tesco behave in the market. In a perfect competition, the number of buyers and sellers high and they play a crucial role in deciding the prices of the commodities traded on the market. This is often termed by the economists as the price taking property rather than a price making the property as the sellers get to know that at what price they should sell their products instead of deciding it themselves. Are the products being sold in the market are similar then the producers cannot bargain over their product as they are similar to other available in the market. Due to this, the sellers are forced to accept the price prevailing in the market and decide the same price for their products. The market forces decide the trend of the market and interact with each other. The sellers then have to act according to of the conditions set by these market forces. Another form of market structure is a monopoly, where the seller has the complete control over the market and have the liberty to decide the output and price of the commodities offered by them. The pricing of the products is non-elastic and producer has the complete control over it.
P3.3 Judge how the business and cultural environments shape the behavior of Tesco plc the UK.
The business management and cultural environments are very much responsible for shaping the behavior of much organization. Same is the case with Tesco a well. The businesses in the current times are not autonomous and operate under different cultural environment. The behavior of the organization in different markets heavily depends on the culture of that market which may include the society ideologies. This differs from one location to another and while doing business companies like Tesco which is present all over the world have to incorporate in their business practices. The culture of the UK where the Tesco is based is inherited from ancestors and the customer preferences define the behavior of any organization. Different regions of the UK market differ in their business and cultural environment. The retailers in the UK have to deal with different cultures and the beliefs and encapsulate that in the business. The UK has a diverse culture and the businesses like Tesco behave accordingly. In Tesco, the competitor strategies are formulated very carefully taking account the different market environment and different culture in different regions of UK. The regulation and competitive laws of the UK are responsible for making the firms compete with the competitors fairly.
LO4: Be able to assess the significance of the global factors that shape national business activities
P4.1: Discuss the significance of international trade to Tesco plc UK
In the recent times globalization has become very popular and the companies have realized the importance of going global. They have realized the benefits from expanding the business to different geographies. There are a lot of forces which motivate the companies to go global. These are the cheap labor present in certain parts of the world. There are also many geographical locations which are technologically very advanced so opening business in those geographies will help the business to take the advantage of those advanced technologies and use it all over. There are places where the cost of production is very low; the cost of raw materials is very low, so opening business in those locations will be very profitable for the businesses. Same is the case of Tesco plc. This company has also realized that doing business in more than 1 nation makes the organization use its resources optimally that are present in different locations. It makes the utilization of resource management with the company in a more optimal way. On the other hand expanding the business to foreign locations can also take the advantage of international trade policies. These days for being successful and make huge profits it has become a necessity for many organizations to expand globally. It gives the organizations like Tesco plc the opportunity to make use of the diverse workforce. These will bring better profits to Tesco plc.
P4.2 Analyse the impact of global factors on Tesco plc
There various global factors which are present in the market which has a huge impact on the organizations which are operating in the global space. Tesco plc is one such organization which had to face many such global issues. One of the most common is the political system and its regulations imposed on Tesco in expanding its business in different geographies. The UK-based businesses which are operating at global scale face two major challenges in coping with the dissimilar business environment. Any sort of hostile transformation in government policies or structure in any of the major economy will have a far-reaching impact on the UK business. Political factors including the policy changes by the European Union plays a major role in reshaping the UK business. The political changes affect fundamental economic drivers of the countries, and hence, the tax rates, interest rates, etc. get affected. Tesco has to deal with all these factors while doing business and expanding worldwide. The political factors in the EU have a huge impact on the working of the company Tesco plc.
P4.3 Evaluate the impact of policies of the European Union on Tesco plc
The policies of the European Union have a great impact on the Tesco plc. As discussed in the above segment, changes by the European Union plays a major role in reshaping the UK business. The European Union had a great impact in influencing the political regulations and policies. UK is one of the most important members of the European Union and the policies set by the European Union have to be obeyed by the UK industry also. So Tesco has to follow the policies set by the European Union. There are many factors and policies set by the European Union which affect the Tesco plc. Some of these are the taxation policy, interest rate policy, process of business operation, etc. Higher the tax rate, higher is the amount paid by Tesco plc which in turn decreased the profit margin and demotivates the company to expand its business in new geographical areas. The treaties being signed by the European Union is not factorable for the Tesco plc to expand its business in Europe. The most common example is the Common Fisheries policy. This is one of the most controversial policies till date set by the European Union. This policy had a great impact on the fishing industry and prevented the fishing companies from expanding.
Here we can conclude this paper by stating that the market structure, policies set by the government, market forces, etc. play a very key role in shaping up a business and in deciding its future. In the current scenario, it has become very necessary for companies to go global and expand enormously but the global factors sometimes act as roadblocks to them. Hence, the government should keep this in mind and should formulate such policies which should prove to be a win- win situation for both the government organization and behaviour like Tesco plc. These policies can have the form of monetary and fiscal policies and should favor the businesses and motivate them to expand in new geographical regions. These policies should not affect the profit margins of companies and should prove to be beneficial for the companies to expand.
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