Effectiveness of Customer Reward Program as Loyalty Marketing Tool: The Case of Tesco - Dissertation Example

As the biggest and fastest growing grocery and general merchandising retailer in the United Kingdom, Tesco Plc is selling a wide-range of grocery products and wine; entertainment products such as books, CDs, DVDs; PC, photo and gaming items; landline and mobile phones; home electrical appliances; ready-made and made-to-order furniture items; car and garden supplies; sports and leisure products; and a wide-range of toys and clothing for babies and toddlers throughout its store outlets in 14 countries around Asia, Europe, and North America (Tesco 2012a; Wilson 2005; Humby and Hunt, 2004, p. 1).  In general, an oligopolistic market is commonly characterized by a few similar companies that aim to sell homogenous products and services to a large group of buyers (Arnold, 2008, p. 512). In most cases, one of the very few factors that can trigger the development of an oligopolistic market is the continuous process of merger and acquisitions.

With the UK retail grocery industry, the market share of Tesco as of April 2012 was reported to have reached 30.7% followed by Asda (17.6%), Sainsbury (16.6%), Morrisons (11.9%), and Waitrose (4.5%) (The Guardian, 2012). Since the UK retail grocery is dominated by four major companies, its market structure is said to be oligopoly.             Homogenous products are products with perfect substitute (OECD, 2012). It means that the buyers an easily purchase the same item from one store to another.

When selling homogenous products, one of the market consequences of having a few-firm concentration ratio is that companies like Tesco (including its competitors) do not have the power to dictate the selling price of its products and services. Since grocery and merchandise retailers are selling homogenous products, its target customers will always have the opportunity to decide on which grocery retailers they will regularly purchase their weekly consumption of grocery items.