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Economic

 

From my group’s visit to Tesco Puchong, we have observed Tesco’s business in many aspects and how we can relate whatever required for Integrated Project in each of the modules. For Principles of Economic, all necessary observation and analysis was done during the visit and the full report was done by Gautam Rajendran.

The business that is conducted by Tesco Supermarkets Malaysia can be related to many factors of demand such as level of income, prices of goods, taste and preferences, expectations of the future prices and health awareness. The factors stated above can be closely related to Tesco’s business in many aspects. Firstly, based on the level of income earned by all Malaysians, Tesco offers affordable prices to suit the consumer’s budget which is why most Malaysians love to shop at Tesco (Graph 1.1). Besides that, the prices of the goods sold by Tesco are cheaper and affordable compared to any other hypermarkets as the qualities of the products are nearly similar (Graph 1.2). Another factor is the taste and preferences of the consumers are often fulfilled by Tesco as they offer variety of products that are often consumed by consumers in Malaysia (Graph 1.3). In addition to that, Tesco uses the factor festival to pull customers by giving promotions and price cuts during festivals like Deepavali, Hari Raya and Chinese New year (Graph 1.4). Last but not least, Tesco Hypermarkets use population as their strategy to increase their demand by building their hypermarkets nearer to residential areas where the population is high, thus the buying power in higher (Graph 1.5).

Level of Income

 

Price of Goods

 

Taste and Preferences

 

Festival

 

Populations

 

Question 2 

Tesco hypermarkets encourage customers to reduce the use of plastic bags. In order to reduce the usage of plastic bags, Tesco sells an alternative bag known as eco bags. Tesco utilizes the factor of demand, price of the Tesco goods to sustain the green environment by selling each plastic bag for RM0.20 every Saturday. Customers who purchase goods in a large volume find it expensive to pay for each plastic bag. As an effect customers tend to bring their own bags which can be used every time they purchase something from not only Tesco but also in other supermarkets. Other than that, Tesco also uses the price factor through selling eco bags for an economical price which is affordable for the people from every level of income from Malaysia. According to a survey, plastic bags utilize nonrenewable resources such as petroleum and natural gas which eventually leads to increase the price of fuels. Therefore the best alternative way to reduce this massive amount of loss is by replacing the use of non – biodegradable plastic bags to reusable bags. In addition, reusable bags are multifunctional as people can use it anywhere, anytime and is durable. Reusable bags are made from 100 % of environmentally friendly materials.  

 

Taste and preference is the major factor which affect the demand of goods in Tesco Hypermarket. Customers always prefer to buy goods which last longer especially when comes to food goods. Tesco actively acting in improving packing in collaboration with their packaging and product suppliers. Tesco come up with new innovation by creating new pack format for chickens. Through this innovation Tesco has achieved to reduce 68% of packaging weight and extend the shelf life to 2 extra days. This made the customers to choose Tesco Hypermarket to buy chicken because it last longer than other chickens sell in other hypermarkets and the weight of the packaging is lighter so it is easy  for customer to do shopping at Tesco. Furthermore, apart from the packaging saving, this new pack format for chickens also contributed to supply chain efficiency through increased crate fill, saving 900,00 crates per annum , 14,000 fewer pallets and 540 less vehicle movements.

 

             In this era globalization, the number of population increases. As the population increases, the number of vehicle used by people also increases rapidly. As an effect the amount of carbon monoxide and dioxide emitted by vehicles increases which leads to the cause of air pollution. Therefore as mandatory precautions, Tesco has taken actions which overcome this problem which through building their hypermarkets nearer to residential areas where the population rate is higher and through this customer can obtain all necessary grocery which eases their burden. Thus, customer no need to use their vehicles to travel all the way to buy their grocery at different places because provides all in 1. Therefore, a few percentage of carbon emission into the air by vehicles is reduced. In addition, based on an article on 8 November 2013 Tesco Malaysia has launched its new “Less CO2” distribution fleet that aims to cut carbon emissions by 4,500 tons each year. These new trucks have range of environmentally friendly features to reduce road miles and improve air quality. This acts shows that Tesco perform actively in sustaining green environment. 

Question 1 

Question 3 

Based on the a survey we conducted at Tesco Hypermarket, the changes in price of goods, level of income, and prices of other Goods will influence the demand elasticity of Tesco Hypermarkets goods.

Based on the survey, when the prices of Tesco hypermarket goods increases 20% of customers tend to still buy at Tesco and 60% says will not continue buying at Tesco Hypermarket and another 20% says maybe they will buy according to their situations. This shows that when Tesco Hypermarkets goods prices changes Tesco Hypermarkets will have fairly elastic demand.

According to the survey, when the level of income of customers change there will be changes in the demand elasticity of Tesco Hypermarkets goods. If the level of income of customer’s increase 50% of Tesco customers says that they will consume more goods meanwhile another 50% says they will not increase the amount of goods they consume no matter how much their income increase. Based on this, we can conclude that the demand for Tesco Hypermarkets goods is unit elasticity when the level of income of customers changes. 

 

The changes in price of other related good or substitute will influence the demand elasticity of Tesco Hypermarkets goods. Based on the survey 50% of customers stated that they will go for other related goods when the price of the other goods decreases. As a conclusion, the demand for Tesco Hypermarkets goods is fairly elastic.

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