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Name P6 Unit 1P6 Explore how the market structure and influences on supply and demand affect the pricing and
output decisions for a given business.
1 Introduction
The market structure is an organisation or a competitive market that is defined through the nature
of how the competition and the pricing policy is adopted by an organisation. Perfect competition is
when businesses sell the same product at the same price, they are in perfect competition. An
imperfect competition is that there may be many sellers in an imperfect competition market
structure, but there is less competition. Business can determine their own prices since their product
lines are not identical.
2 Findings
Number of firms
Number of firms is the number of dominant companies is usually three to five, but this number
varies by market. For example, the video console market is dominated by oligopoly members such as
Microsoft, Sony, and Nintendo. Number of firms relates to when it is getting increasingly
competitive. The companies are followed by the minimum market size for each company. Entry
thresholds need to be raised for firms to cover their fixed costs. The number of firms in Tesco’s
market is that in 1957 they bought 70 Williamson’s stores and those were their first acquisitions.
Tesco has now expanded themselves through Asia and Europe and they are now acquiring 30
distinct businesses. This impacts on their pricing and sales decisions because cost of leadership is
Tesco’s pricing strategy. As a result, we keep the prices of our products and services as low as
possible without compromising on quality Benefit from economies of scale and continuously work
with suppliers to streamline your supply chain and drive down prices.
Freedom of entry
Freedom of entry is a circumstance where companies can openly enter the market for an economic
good by setting up production and starting to sell the product. A cornerstone of Tesco's entry
strategy was the use of private label products. These fall into three categories: Product Range,
Objectives of market entry strategy and barriers of strategy. In the objectives of market entry
strategy their goal is to satisfy the needs of a variety of income groups with a wide range of food
products. Being able to control the price by operating at an economy of scale. To be accessible
regardless of geography. To gain significant market share. To be able to compete in the highly
significant technological and infrastructural environment. This impacts on their pricing and sales
decisions because they can low or increase the prices of their products depending on their sales in
those countries without making a loss. This is because they can sale products overseas without any
trading restrictions in place.
Nature of product
Nature of product is the product/ service, pricing, and other factors of a product. Nature of product
relates to how a product is made and how everything is surrounded around the product so that it
can attract to the customer. The nature of product in Tesco’s market is high as Tesco is a ubiquitous
place as they are everywhere in the world, they have products from around the world that they
need to be considered and they must be sold properly. This impacts on their pricing and sales
decisions because as Tesco’s works everything that they do around their customers they try to do
everything to keep their customers/ consumers happy so that they can keep them and that they can
keep gaining more customers and that they keep selling and making profit.
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