Jason Gander Case

Introduction

Tetley Tea's products are drunk by millions around the world, with 165 million cups of tea being drunk every day in the UK alone. It is the 2nd largest beverage currently being drunk behind carbonated soft drinks. Despite very humble beginnings and being rationed during World War 2, Tetley tea has survived and gone on to sustain itself firmly at the top end of its current business environment (www.tetleyteaacademy.co.uk).

History

The history of Tetley Tea dates back to 1822. Brothers Edward and Joseph Tetley after peddling salt for many years then decided to expand in to selling tea which eventually became Joseph Tetley & Co in 1837. Due to expansion in 1856 the brothers relocated to London from Yorkshire. A little after 1953 Tetley introduced the tea bag to the UK, it was an instant hit and changed the way people drink tea. From then on the teapot was used very little as people chose to make tea in a cup using a tea bag (www.tataglobalbeverages.com).

In 1974 Tetley was bought by J Lyons and merged to form Lyons-Tetley. The company was sold again in 1978 to Allied Breweries. The Tetley Group was created when the beverage arm of Allied Domecq was sold to a group of investors in 1995. The current owners of Tetley Tea are Tata Tea Limited, they acquired Tetley Tea Group on 10th March 2000 in a deal worth £271 million making the Tata Tetley Group the 2nd largest tea brand in the world (www.tata.com).

Products and Markets

Now consisting of about 30 different products. They range from your average black tea to a new diverse range of flavored teas. Also cold teas, which are now available in 70 different markets worldwide from the UK to Poland and also moving in to several other countries with the eventual idea of becoming a globally available product.

Market Structure

Market structure is defined as the environment in which a business manufactures and sells its merchandise.

Market structure can be thought of as lying along a spectrum with perfect competition at one end and monopoly at the other.

PERFECT > IMPERFECT > OLIGOPOLY > MONOPOLY

COMPETITION COMPETITION

(Worthington & Britton 2000).

These are the 4 classifications of market structure;

Perfect competition

In this structure five criteria must be met

1) "All firms sell an identical product"

2) "All firms are price - takers they cannot control the price of their product"

3) "All firms have a relatively small market share"

4) "Buyers have complete information about the product being sold and the prices charged by each firm"

5) "The industry is characterized by freedom of entry and exit"

(www.investopedia.com).

Imperfect competition

1) "Differentiated products: A collection of products alike enough to be called the same item, but dissimilar enough to charge different prices".

2) Businesses set their own price:

"Tradeoff between price and quantity"

"Variables in quantities demanded are signs to businesses that market circumstances have changed - maybe alter the price".

3) Non-price competition:

"Advertising to move the demand curve for production to attract people away from other companies, guarantees of superior quality" (www.spot.colorado.edu).

Oligopoly

Oligopoly is a market structure in which the number of sellers is small.

The UK petrol market would be a good example of an oligopoly as there are only a few sellers of petrol in the UK, when an oligopolistic business alters its price or output, it will have consequences on the sales and profits of its rivals in the trade. This is why an oligopolistic business always considers the reactions of its rivals in formulating its pricing or output decisions. (www.referenceforbusiness.com)

Monopoly

A monopoly is a market environment where there is only one provider of a certain economic good or service (www.investinganswers.com).

There are very few examples of a pure monopoly and in the UK the government do not allow monopolies to exist although we do have legal monopolies. These are companies that own more than 25% of the market share. For example Tesco currently have a 29.9 percent share of the grocery market (www.grocerynews.org).

LAW OF DIMINISHING MARGINS

"The law of Diminishing Marginal Utility is based around 3 facts man's wants are unlimited but each single want can be satisfied the more we have of a particular good, the more the desire to have that good falls to a point where we no longer want it"

"Different goods are not perfect substitutes for each other in the satisfaction of particular wants."

"The marginal utility of money is constant given the consumers wealth" (www.slideshare.net).

Profit maximization is the ability for a business to maximize profits with the lowest running costs.

Factors of Production

The 4 main factors of production for any business are LAND, LABOUR, CAPITAL and ENTERPRISE these are the essential resources needed to produce goods and services.

Land is the natural resource of the planet. Also the space on the ground, timbers fisheries etc. are all part of the lands resources. When the land is used for production such as in Tetley's case, they have 100's of tea plantations they have access to as part of their merger with Tata Tea. This makes good use of natural resources.

Labour is the human element like workers, managers etc. Tetley have 634 staff in the UK but due to the merger with Tata Tea now have access to 59,000 workers worldwide. "Labour can be improved through training