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13 Dec 2019

What challenges and competition TESCO can face when trying to enter the European Union? (Tesco is a British multinational grocery chain) The biggest competitior of TESCO is Carrefour) I need 3 - 4 paragraphs about the challenges when expanding into whole Europe.

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17 Dec 2019
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Related questions

Read the following summary and watch the short video to properly answer the questions:

In the aftermath of the Brexit vote, in which citizens of the United Kingdom decided to leave the European Union, British currency lost nearly 15 percent of its value in the currency exchange market. As a result, products imported into the United Kingdom immediately grew more expensive for distributors and retailers to attain, though in some cases, these price increases have yet to affect local consumers.

The impacts are expanding though. In one notable example, the international consumer goods firm Unilever demanded that retailers pay higher prices with increases of as much as 10 percent to gain access to its brands, from Ben & Jerry's ice cream to Dove soap to Marmite spread. But the U.K. grocery market features razor-thin margins already, leading several large retail chains to protest the demands. Tesco even began the process of removing Unilever products from its shelves before the parties came to an (undisclosed) agreement that averted the crisis. Sainsbury, another large grocer, has indicated that it is in talks with Unilever about the demanded price increases; the outcomes remain to be seen.

However, the request and its aftermath signal a clear consequence of Brexit. Prices on many discretionary imports, such as cars and electronic devices, already are higher. Unilever asserts that it cannot profitably supply its brands to retailers without charging them higher prices. In this sense, Brexit-induced price inflation” appears inevitable. Yet price-sensitive consumers are unlikely to accept such moves quietly, such that the threats to retailers come from both upstream and downstream in the supply chain.

https://www.wsj.com/video/tesco-in-brexit-pricing-spat-with-unilever/17F7D955-BA0C-49E1-8690-0DF1B7A19D83.html

How does the rise in the value of the U.S. dollar relative to the U.K. pound affect prices in the United Kingdom?

How should retailers in the United Kingdom react to this situation?

Russian case study:

Russia has long been a preeminent global producer and supplier of gas, but the recent evolution of global market dynamics has begun to erode this status. Now, it finds itself at a crossroads that could determine its fate in this evolving market. Faced with the US shale gas revolution, competition from global LNG suppliers and new pipeline projects, an uncertain demand outlook in Russia’s once captive European market, and slow penetration of high growth Asian markets, Russia may no longer be able to thrive at status quo and must take decisive steps to devise a strategy that addresses these challenges and ensures its continued role as a leading global gas producer and exporter. Russia undoubtedly has made some early progress on this front by making forays into liberalizing its gas export market, facilitating the rise of a handful of non-Gazprom producers, and pursuing options that begin to shift its strategic focus to Asian consumers. However, given Russia’s heavy budget dependency on oil and gas revenues, coupled with the recent introduction of tax breaks to incentivize new high-cost resource development, the country’s success in expanding gas production and capturing key export market share will depend first and foremost on sustained high oil prices to support government spending. The current system allows Russia to muddle through, but a more drastic price shock could have significant, detrimental knock-on effects for Russia’s gas sector (five years ago the budget could balance at $50-55/bbl oil while breakeven prices were $117/bbl in 2012 and expected to remain at over $100 through the end of the decade).

Over time, Russia will have to introduce still more reforms from additional tax incentives to greater contract pricing flexibility and increased access for foreign investors if it hopes to remain a dominant global gas player. Russia’s market position will become more difficult and uncertain post-2017 as competition rises from global LNG and unconventional producers. Russia’s gas modernization efforts to date do not appear adequate to brace the industry for this uncertainty, and Russia’s position increasingly will come under pressure absent more comprehensive reform of the domestic gas sector, additional tax incentives to expedite the development of key projects, and reconsideration of pricing mechanisms in contracts.

Arguably the greatest challenge to the Russian gas market in the future is the abundance of new gas suppliers and export options coming online over the next decade that will provide significant new volumes of gas at competitive prices, which could undermine Russia’s current supplier relationships. At the center of this gas glut is the US shale revolution and the prospects for USLNG exports, which have had an immediate impact on Russia’s market share and pricing. First, the abundance of new US shale-derived gas supplies has resulted in Russia losing the US market as a potential customer for exports from its Arctic LNG projects. In addition, Russia has been negatively impacted by flows of cheap LNG into the European market since 2008–2009, which has triggered a series of pricing renegotiations between Gazprom and its main European customers.

Russia has faced myriad challenges in its core European market: the reputational impact of its dispute with Ukraine, the Eurozone crisis causing a decline in gas demand, growing gas competition, and change in the EU regulatory framework. These changing dynamics have triggered an ongoing antitrust investigation on the grounds that Gazprom restricts European buyers’ rights to sell gas to one another and unfairly raises costs by linking prices to oil. The investigations have heightened tensions between Russia and the European Union.

EU policymakers are eager to diversify away from Russia, but the opportunity to do so is limited until Europe experiences far more rapid demand recovery. In the interim, poor economic performance, the availability of cheap coal, environmental regulations, and promotion of renewable technologies have taken their toll on European gas demand. While Gazprom has begun to experience some demand recovery in Europe and ongoing production challenges at Statoil’s Troll field in Norway have leant some near-term support to volumes of Russian gas exports to Europe, overall European demand remains weaker than in pre-crisis years, and the outlook is still uncertain.

In September 2012, the European Union launched an investigation into anti-competitive Gazprom practices. Russia, which feeds 26 percent of European gas consumption, did what it said it never would and, motivated by a combination of weaker demand and arbitration, rewrote long-term contracts to include a new price formula for certain European buyers. This move came at the expense of several billion dollars in budget revenue at a time when Russia’s overall economic growth has slowed and the country has had to introduce considerable tax breaks to incentivize development of more difficult hydrocarbon plays.

Now, as Russia races against the clock to seize additional Asian market share and redirect volumes to these high-growth markets ahead of its competitors (namely LNG from incumbents like Australia and Qatar as well as new participants from North America and East Africa and pipeline gas suppliers like Turkmenistan, Uzbekistan, and Kazakhstan), its strategy is to employ both pipeline and LNG export options to tap into as much additional Asian market capacity as possible. But Russia faces a challenge on the implementation front. LNG projects have faced delays and even indefinite postponement in the case of Shtokman, and Russia has been unable to close on the Power of Siberia pipeline due to its challenges securing a pricing agreement with China. Other options include direct pipeline options to Japan and Korea, but these proposals also face political and security risks that could delay or prevent realization of these plans. Putin gradually has pivoted to Asia, both politically and economically, and Russia hopes to expand energy and trade ties not just with China, but also more broadly with Asia. However, the impact of changes in energy markets could subtly alter the relationship between Russia and China in ways that also could escalate tensions in the bilateral ties. While Russia sees China as a key partner in constraining US prerogatives, China sees Russia mostly as a source of energy and natural resource supply and a great power in decline.

Gas exports remain one of Russia’s most effective political weapons. But the power Russia wields through its gas sector also comes at a tremendous cost. Gazprom’s relative stranglehold over the domestic and export market until relatively recently has hindered entry of foreign investors who could bring capital and technical expertise and limited sources of Russian budget revenue. On the export side, Russia’s disregard for disruptions and the impact on customers further down the line in Western Europe has driven a wedge in the Russian-European gas relationship and compelled Europe to look into alternative supply sources from abroad as well as to its own un-conventionals potential to displace Russian supply over the next decade. Despite widespread bans on fracking in Europe, even the partial development of European shale resources or a growth in LNG imports could force further contract pricing revisions on Gazprom, underscoring the increasingly brittle state of Russia’s traditional gas sector development model.

The Russian budget is nearly 50 percent dependent on oil and gas revenues, and while the dependence is far greater on the oil sector, the recent push by oil companies into more challenging plays, including tight oil and the Arctic, has required significant tax concessions from the government. By default, heavier burden has been transferred to the gas industry and expressed in the form of MET hikes to prevent a significant blow to budget revenues.

Case Study 1

What is the Russian political climate? How it is going to impact its LNG exports?(50 words)

How the government policies are hindering development of the LNG industries? ?(50 words)

If you were an investor would you invest in Russian LNG? ?(100 words)

ONLY ANSWER IF YOU CAN COMPLETE AT LEAST THREE PLEASE! thank you

Explain the following in one or two paragraphs:

1.. why in the long-run perfect competition is the price at the minimum of the average total cost?

2. why is marginal revenue less than the price of monopoly?

3. what is price discrimination and what are the conditions for it to occur and why?

4. why is it that when technology is taken into account, we cannot be sure what market structure (perfect competition or monopoly) will be the lowest cost?

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