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Tesco Analysis

1. MARKET STRUCTURE
The market in which Tesco operates is supermarkets. Although this is a highly competitive one Tesco holds a disproportionate amount of power. The figures below indicate that Tesco holds over a third of the market share, and even double the amount of Asda's market share, the second leading supermarket. Market share is ‘the percentage or proportion of the total available market or market segment that is being serviced by a company' (Wikipedia 2006).
SUPERMARKET SHARE
Tesco: 30.6%
Asda: 16.6%
Sainsbury's: 16.3%
Morrison's: 11.1%
Somerfield: 5.4
Waitrose: 3.7%
Iceland: 1.8%

(Source TNS cited by BBC 2006)

Therefore it may give a more accurate picture in saying that the market structure in Tesco's case is oligopoly meaning there is a ‘small number of large producers' (Britton et al 2005, p221) whereas a perfect competitive market would mean that it would be characterised as being price takers dependant upon supply and demand. Tesco is the market leader in the UK and 5 international countries (Tesco 2006).

Due to the fact that they are in an oligopoly market, Tesco's decisions would be mainly influenced by the decisions that their other few competitors, such as Sainsbury, are making too as well as how they are likely to respond to Tesco's actions, which include their expansion into other product ranges, integration, and price strategies.
2. BARRIERS TO ENTRY AND PRICE STRATEGIES
Barriers to entry within this market have proven to be very difficult to overcome. Examples can be seen in the past such as when Morrison bought Safeway out. However the outcome has proven not to be as successful as hoped as currently Morrison's market share is actually falling from 11.3% to 11.1% over the period (BBC 2006)

However, Tesco attempted to buy Safeway but their bid was rejected as it was feared that they would become a monopoly as they already hold a large percentage of the market. This would mean that Tesco would gain so much power...