Every business experiences external influences which they need to manage properly
hey normally have less control over this. A business has to face external influences from three main areas: ‘Business Competitors’, ‘Economic Conditions’ and ‘Environmental Constraints’. If a business does not respond to these changes efficiently then it is unlikely to be successful because its competitors will steal its customers. “Business Competitors”. A. Nearly all businesses face competition with other firms. The competitors of Tesco are other businesses which provide similar products and services as it does.
Tesco’s local competitors are local newsagents; butchers and local grocery stores etc. Its national competitors include Safeway and Woolworth’s. Tesco also has international competitors which includes Asda. Errol Anderson (Motors) has competitors too. Its local competitors are any business in his local area that provides any similar services or products as him. Its national competitors include ‘AA Brake down services’ and its international competitors include ‘Kwit Fit’ (owned by Ford). One of Tesco’s and Errol’s main targets is to beat their competitors; in the process they may even put a firm out of business.
Tesco and Errol both try hard to retain their existing customers; win new customers and work hard to achieve their objectives. This is also known as increasing their market share. They are competing for customers to achieve high profits. One of the main factors Tesco competes with is ‘Price’. Tesco decides very effectively when pricing its products because it would like to price its products and services lower than its competitors. Tesco does this because it knows that customers like having low prices and value for money. This may enable Tesco to win some new customers as well as retaining its existing customers.
Apart from pricing products low, Tesco has special offers and a loyalty card: ‘Tesco Clubcard’. Many of Tesco’s competitors do not have loyalty cards which is an advantage for Tesco because customers may choose to come to its stores because of the extra rewards they get through the Tesco Clubcard. Tesco charges higher prices for better quality and charges low prices for low quality- its own brand products. Tesco tries to convince its customers that their prices are at a good value and that they are not paying more than they should be.
Customers will go to Tesco’s competitors instead of Tesco if they think that its competitors are offering better prices. Since Errol is a Sole trader with only one garage he isn’t very much concerned about price, as long as he has customers isn’t just sitting their with no work. He is more like a unique business in his local area and so local people are most of his customers and will remain his customers. If Errol is having difficulty for winning new customers or retaining its existing customers he may lower his prices.
He has to make sure that he is making the right amount of profit before he decides to do anything. One of the main factors that Errol Anderson Motors competes with is ‘Quality’. To try and keep existing customers Errol has to try and make them like the quality of products and services provided and sold by his business. Customers will come back to Errol instead of going to his competitors if they like the quality, for example his products/services last long or look better than those sold or provided at his competitors.
Errol also competes with his competitors by trying to provide a good customer service. Even if his competitors prices are low than him, Errol can achieve most of his market share by providing a higher level of service than not charging low prices because customers as well as looking out for low prices, look out for good quality. Quality is also one of the main factors that Tesco competes with. To attract more customers and to try and keep its existing customers Tesco tries to provide good looking and good quality packaging with its own brand products.
It sells products with famous logos and brand names. These may be expensive but they are good quality. Tesco provides a good effective customer service to attract customers. The final main factor that Tesco competes with its competitors is ‘Availability’. Customers must be able to buy the product whenever they want easily without having to travel a hundred miles. Tesco has branches in each local area for the availability of customers. They will go to the store where they think they will get all this. Tesco wants to win customers which is why many of Tesco’s stores are open 24 hours a day.
If there are too many empty shelves in Tesco’s stores than other businesses such as Asda then customers may go to those other businesses instead of coming to Tesco. Tesco has a website from which customers can order there shopping whenever they want; there is a delivery service for the orders. ‘Availability’ is also an important factor that Errol competes with. Errol has to make sure that during his garages opening times all his products and services are available to customers because if they are not then the customer will go to one of his competitors.
This means that he will have to order his spare parts for all cars from all the different countries depending on where the car is from before they run out. Competition is about businesses trying to make the most profit. To make high profits a business needs customers. Different businesses selling similar or the same products/services fight with each other for winning customers. B. Changes introduced by competitors of ‘Tesco’ or ‘Errol Anderson Motors’ can have an impact on their businesses, either by profits increasing or profits decreasing.
If Safeway introduces a new way of selling, such as telephone orders or have appointed workers to give advice on what to buy, then customers may like their customer service better and so would go there instead of Tesco. This would result in Tesco losing its customers as well as the competition. If Tesco appoints workers just like Safeway it will need to recruit more staff and so pay more wages, but it may be the only way to win back its customers.
Asda and Sainsbury’s may decide to improve the quality of their own brand products but decide not to increase the price. E. g. hey decide to be creative by using nice plastic re-usable containers as packaging for Pasta etc. Customers are likely to get attracted to their quality and so may decide to shop their instead. This would also result in a decrease in the number of sales of Tesco. If Tesco decide to improve their quality of packaging then they may need to find better suppliers. This means that they will have to pay more than they currently do. One of the local grocery stores right near a Tesco store may lower its prices than Tesco. More people will go there to do their food shopping and so Tesco may lose some of its customers.
Tesco may decide to lower its prices too. As well as making less profit Tesco will have to change its price lists. Safeway decides to concentrate on marketing its products to particular market segments. This can be a treat to Tesco because they may not rely on market segmentation and so Safeway may manage to win customers. If Kwit Fit reduce their prices on certain services then Errol may lose some of his customers. Errol may have to lower his prices to, to get back customers. He can introduce something new to attract customers if he wants. Maybe he can have some special offers and rewards.
All these changes introduced by competitors of Tesco and Errol often get them both worried because they do not want the store/business to shut down. The one thing that they both should bare in mind is that the have to respond to these changes in an effective reasonable manner. C. When competitors make changes; Tesco and Errol Anderson Motors should remain calm and try not to take any serious action without thinking about it carefully. They should respond to these changes but only if they know that it is going to be effective to their business.
They should always try and prevent their competitors from stealing their customers so that their competitors don’t get ahead of them. When these changes take place both Tesco and Errol should try and match their competitors if it really is slowly the business down. This may help Tesco and Errol retain their existing customers. However if they want to win new customers they will have to do some forward thinking about how they can improve the business to beat competitors. This may mean doing some research, things like surveys and questionnaires to find out what customers want.
Once Tesco and Errol Anderson Motors do this, they can then develop their businesses by coming up with new products and inventions to keep ahead of their competitors by winning new customers. If Asda lower their prices it doesn’t mean that Tesco should lower their prices to. Instead they can introduce a new rewards system and something new that will attract customers to Tesco even if their prices are slightly higher then Asda. If they don’t want to do this they can lower their prices to match Asda but it may not help Tesco to go ahead of Asda because more customers may still not go to it as they both have the same prices.
To solve this Tesco can reduce its prices even low then Asda to win new customers but only if it’s worth doing. Tesco don’t have to respond to this change of Asda if it isn’t affecting its business. Tesco may even decide not to respond to Asda’s change even if it is losing its customers because even if it does respond, its profits may not increase because in the process it will spend money. So Tesco can just wait and watch. Asda may increase their prices because even they may be making less profit too. Since Asda is an international competitor this change will affect many stores of Tesco.
Tesco should think about opening more stores internationally in countries where there are no Asda stores. If Safeway improve the quality of their products and customer services and make it really impressive that many of Tesco’s customers decide to go there. Tesco should try and come up with something that will attract customers rather then just matching themselves up with Safeway. A better idea would be to match up with Safeway and also do some forward thinking so that they can also come up with something attractive of their own.
This is the best response because this could also help Tesco prevent itself from losing its customers in the future. Even though this may cost Tesco, it should recover the cost over all the customers that it will get. Tesco should avoid responding in a way that will make the business go into a loss. An example of a new invention/idea is: to concentrate on a particular market segment such as ‘Age’ and do research on it to come up with a suitable attractive item or service. Tesco may choose to design more clothing for Teenagers or even for all ages then it currently is.
Tesco can also come up with a new way of selling, maybe a system like Argos but instead of the customer going there and ordering they can order on the telephone and then go and collect there shopping when it is ready. This can cut down the queuing time on checkouts. Before Tesco does anything it will need to do research maybe questionnaires to find out what the customers want. This change of Safeway will only affect the Tesco stores in the UK because Safeway is a national competitor. If Kwit Fit have special offers on some of there services including ‘Tyre Changing’ and some of Errol’s customers decide to go there instead.
Errol should wait and be patient; he shouldn’t cut down his prices because he will just go into a loss which is the same as just waiting with less business. If this goes on for too long, then Errol should respond in some way. He can diversify his business- sell the products and provide the services that he currently isn’t. This will keep him busy. If the AA improve the quality of their services and Errol’s local customers to there when there’s something wrong with there cars instead, then Errol should try and match up with the AA. He may even consider opening more branches and becoming national.