Archive for the 'Economics' Category

16
Nov
07

Tesco: Everyday Low-Price Guarantee Strategy

Abstract

The UK retail grocery market is widely recognized as being oligopolistic. The retailers often advertise that they will not be undersold. Some firms promise to match any lower price offered by a competitor on the same item (price-matching guarantee), while others promise to beat any competitor’s lower price on the same item by some percentage of the difference (price-beating guarantee). One of the most interesting examples about using low-price guarantee strategy in oligopoly is Tesco, the supermarket with the largest market share in UK. In this paper, we will try to answer several questions, namely: Does Tesco use this pricing strategy to meet or beat a competitor’s price? Why does Tesco success by using low-price guarantee? And can Tesco avoid cutting price war? Also, another interesting point is that while Tesco’s performance in UK is excellent, its new business strategy is to enter US retailing market and to challenge Wal-mart, the top1 US retailer. Wal-Mart can even undercut supermarket prices by as much as 20 percent but is still able to generate considerable profit because of its enormous volume and huge buying power. It is very interesting to research why Tesco decided to compete in such a high competitive market.

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