The paper "The Emergence of the Discounters and Their Impact on Tesco’ s Survival" is a great example of coursework on business. Tesco is one of the largest retailing grocery and supermarket in the UK as well as in the whole world in terms of revenue and market share (Lewis and Dart, 2014). However, it has recently announced the closure of 45 of its UK stores and this move will alter the market share and power of the supermarket. In this essay, an analysis will be conducted on the emergence of discounters in the UK supermarket industry and their impact on the survival of a market leader such as Tesco Plc.
For the purpose of this analysis, the Structure-Conduct-Performance model will be used to explain the characteristics and changes in that industry, and to understand the future prospects of the company, a PEST analysis will ensue. Structure-Conduct-Performance Model The Structure-Conduct-Performance (thereafter abridged, SCP) defines the rationale behind a firm’ s performance through economic conduct in the market segment. The SCP model indicates that the external environment keeps a dominant influence on a firm’ s performance in which it operates.
In this model, structural characteristics of the industry are regarded as the determining factors of conduct or strategies that influence the business performance of the industry players. Market structure The supermarket industry is oligopolistic because it is dominated by few but powerful key players. W. G. Shepherd and J. M. Shepherd (2003) defined oligopoly as a market condition in which the industry is dominated by a small number of large producers and sellers In the supermarket industry of the UK, four large firms such as Tesco Plc, Sainsbury’ s, ASDA and Morrisons account for more than 75% of the revenue and market share (Metzger, 2014).
However the small discounters such as Lidl, Aldi, 99p stores and Poundland have decreased the market shares of some of the leading supermarkets (The Telegraph, 2014a). Significant characteristics of an oligopoly market can be presented in the following way. There exist a small number of firms in the market segment which are large enough as compared to the size of the whole industry. Therefore, all such firms tend to dominate the industry segment.
Producers are engaged in producing almost identical or slightly differentiated products. Therefore, the producers drive for strong promotional activities and take advertisement initiatives for highlighting their products and services and making these more attractive to the target consumers.
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The Telegraph, 2014a. Cuts threaten survival of supermarket suppliers. [Online] Retrieved from: < http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11314806/Cuts-threaten-survival-of-supermarket-suppliers.html
The Telegraph, 2014b. Five predictions for Britain's battered supermarket industry in 2015. [Online] Retrieved from: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11302478/Five-predictions-for-Britains-battered-supermarket-industry-in-2015.html