Understand the Behaviour of Organisations in their Market Environment Essay

Understand the Behaviour of Organisations in their Market Environment - Essay Example Understand the Behaviour of Organisations in their Market Environment This has enhances shopping for consumers making it even more convenient by providing all products under the same roof. Tesco’s has been working towards building of a sustainable business model throughout the years. This has been done through diversification into new geographical areas as well as value added retailing (Datamonitor, 2011, 7). This has enabled Tesco to reduce its business risk as well as work toward increased sales through trade in growth markets. Similarly, value added retailing encourages consumers loyalty and assist to sustain revenue growth even in times of economic difficulties. However, with increased competition in the UK market, retaining customers would be a crucial concern for Tesco. This has a risk of causing loss of the market share (Finne & Sivonen, 2009, 298). Perfect Competition This is the existence of different buyers and sellers, which implies that prices vary in response to supply as well as demand (Wood, 2008, 187). The market is characterized with substitutes where increase in price of one commodity means a change to consumption of the existing substitute. Both the buyer and the seller are seen to have equal chances of influencing the price. There are two extremes in perfect competition, which include monopoly, as well as oligopoly market. Price and output in a perfect market is determined as shown below. The profit in the firm indicates the level of price and output in three different ways. For a firm to make profits, it will produce at a level where P> ATC, while experiencing losses P< ATC and for it to break even P= ATC. Monopoly In a monopolistic market, there is only a single seller with a number of sellers. The firm is the price maker and therefore, determines the level of output as well as price (Finne & Sivonen, 2009, 298). The firms aim is to maximize profit. Oligopoly Classical theory in economics has the assumption that a producer with some market power whose aim is to maximize profit will set Marginal Cost ( MC) equals to Marginal Revenue (MR) (Finne & Sivonen, 2009, 298). This indicates that the larger the quantity sold the lower is the price. Any change in MC or MR will be indicated by the price. This, however, does not occur where a kink exists. As a result, MC in this case would change without a change in price or quantity. The advantage of this to consumers is that companies will not raise their prices in fear of losing customers (Seth & Randall, 2011, 234). However, even a fall in price will only gain a few customers. This indicates that the curve is price elastic in case of price increase and less for price decrease. In the end, competitive firms will enter the industry. Pestle Analysis Political factors Tesco is an international company with carrying out operations in 14 countries. This makes the organization susceptible to the various legislative and political environments in these countries. This necessitates the compliant to comply with these laws to avoid conflicts with the authorities. In most countries, governments encourage foreign companies to consider local candidates for various posts in the organizations, to ensure locals benefit from their investments. This, therefore, means that Tesco employs a wide pool of individuals to satisfy their labor requirements. Tesco will be compelled to follow the legislation on employment adopted in the country where its stores are located. Economic Factors Economic factors are crucial in the operation of an