Economic Factors Affecting Tesco
Tesco is one of the largest retail businesses across the globe. It has more than 2000 stores and more 325,000 employees. The business operates online and offline under different banners including Express, Metro, Superstore and Extra. Despite its successful operations, the business faces a number of economic challenges including
High unemployment rates
High unemployment rates have been of great concern to Tesco. This is based on the fact that it affects the demand, price profits and the costs of products and services that the company offers. It is an influential factor that decreases the demand for the company’s products.
It is a factor that is beyond the company’s control and its effects can be felt deep within the marketing structure of Tesco. Unemployment has also affected general performance of the company. According to research, Tesco is still penetrating international markets and is expected to gain more income over the coming years. Even so, it is highly dependent on the market. This means that it can be badly affected if any slowdown is exposed in the market and it is attributed to high concentration risk in food market in the UK.
Demand and Supply
Demand and supply are also leading economic factors affecting Tesco. The company has been facing a lot of challenges because of demand and supply for its products. It is facing tight competition from companies such as Asda meaning that, the demand for its products has dropped compared to the past years. Therefore, Tesco has been forced to negotiate for fair and better prices from suppliers that other companies are not able to match.
Tesco is a leading grocery store in the UK and many other parts of the globe. Over the past years, it has faced extremely tight competition from close rivalries. As a result of competitive forces, the company has witnessed low profit margins for supermarket chains and suppliers.
Threat of substitutes
Tesco deals with a wide range of food products. Over the years, it was leading grocery store and its products were second to none. However, companies such as Sainsbury’s Safeway, Asda, Waitrose and Somerfield have been a threat to the company because of their substitutes. Consumers often switch to other brands for their personal reasons including fair prices and convenience.
General substitution of products offered by Tesco has reduced the demand for the products offered by the company. For instance Small Chain of Convenience Stores has emerged over the years posing a serious substitute threat to Tesco.
Due to innovation and advanced technologies, the market share for Tesco has been reduced. It used to be a market leader in a wide range of groceries. However, small retailers have come up and occupied a large marketing platform. Therefore, Tesco has been forced to refocus and adjust the prices of its goods. It has also refocused on the value of its products.
This is to ensure that it maintains a better position in the market and is able to venture into international market without major losses. Tesco through the strategy has been able to reinforce the value of its products and services over the past years.
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