Evaluate the factorsthat affect theprofitability of themajor food retailersin the UK
An effective paragraph..Makes 1 relevant point        to an appropriate depth   = 4 to 8 sentences
A2 MicroSuccess in A2 Micro requires you to be a mountain climber and   ascend the Mark Schemes
Focus initially on KAAKnowledge   Application   Analysis
Then evaluate to scale the marks!•   Before you can evaluate you must analyse!•   Evaluate each argument as it is introduc...
Climb Evaluation   Mountain!
Your aim for every question                   Mount EVA   Mount KAA
BackgroundTesco• Leading UK retailer with food market share of 31%• Trading profit for 2012 expected to be around £4bnSain...
Cost factors affecting profit margins                     Labour                      Costs                               ...
Cost factors affecting profit margins                     Labour                    Wages,                      Costs     ...
Cost factors affecting profit margins                     Labour                    Wages,                      Costs     ...
Cost factors affecting profit margins                     Labour                    Wages,                      Costs     ...
Cost factors affecting profit margins                              Labour                    Wages,                       ...
Cost factors affecting profit margins     Supply chain                 Labour                    Wages,    efficiency, tra...
Demand-side factors affecting profits  Competition          Economic         Pricing  • Deep discounters   situation      ...
Market power generates high profitsPrice, Cost                          MC        AC        P1        C1                  ...
Product differentiation boosts        revenues and supermarket profitsPrice                          Price                ...
Product differentiation boosts        revenues and supermarket profitsPrice                          Price                ...
Building the evaluationMarket power / competition• Leading 4 supermarkets > 80% of UK food retail (oligopoly)• Huge buying...
Tutor2u    Keep up-to-date witheconomics, resources, quizzes  and worksheets for your     economics course.
A2 Evaluation Question on Supermarkets
A2 Evaluation Question on Supermarkets
A2 Evaluation Question on Supermarkets
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A2 Evaluation Question on Supermarkets

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A2 Evaluation Question on Supermarkets

  1. 1. Evaluate the factorsthat affect theprofitability of themajor food retailersin the UK
  2. 2. An effective paragraph..Makes 1 relevant point to an appropriate depth = 4 to 8 sentences
  3. 3. A2 MicroSuccess in A2 Micro requires you to be a mountain climber and ascend the Mark Schemes
  4. 4. Focus initially on KAAKnowledge Application Analysis
  5. 5. Then evaluate to scale the marks!• Before you can evaluate you must analyse!• Evaluate each argument as it is introduced• Develop clear chains of reasoning• Make 3 references to data in the question• Outline relevant theory, using a diagram• Develop one point per paragraph (no more)• Remember to come to a ‘final judgement’
  6. 6. Climb Evaluation Mountain!
  7. 7. Your aim for every question Mount EVA Mount KAA
  8. 8. BackgroundTesco• Leading UK retailer with food market share of 31%• Trading profit for 2012 expected to be around £4bnSainsburys• Pre-tax profit of £700m in the last yearAsda / Walmart• UK’s second biggest supermarket group• Acquired Netto for £750m in 2011WM Morrison• Annual sales of £17.7bn• Pre-tax profits of £947m
  9. 9. Cost factors affecting profit margins Labour Costs Store Logistics rents Supplier Economies prices of scale
  10. 10. Cost factors affecting profit margins Labour Wages, Costs Productivity Store Logistics rents Supplier Economies prices of scale
  11. 11. Cost factors affecting profit margins Labour Wages, Costs Productivity Store Logistics rents Town centre, Out of town Supplier Economies prices of scale
  12. 12. Cost factors affecting profit margins Labour Wages, Costs Productivity Store Logistics rents Town centre, Out of town Internal, Supplier Economies External prices of scale
  13. 13. Cost factors affecting profit margins Labour Wages, Costs Productivity Store Logistics rents Town centre, Out of townFood suppliers, Non-food producers Internal, Supplier Economies External prices of scale
  14. 14. Cost factors affecting profit margins Supply chain Labour Wages, efficiency, tran sport costs Costs Productivity Store Logistics rents Town centre, Out of townFood suppliers, Non-food producers Internal, Supplier Economies External prices of scale
  15. 15. Demand-side factors affecting profits Competition Economic Pricing • Deep discounters situation strategies Lidl and Aldi • Consumer • Price • Local monopoly confidence discrimination power increases • Real incomes • Own label products pricing power • Disposable • Premium products • Regulatory incomes intervention
  16. 16. Market power generates high profitsPrice, Cost MC AC P1 C1 AR MR Q1 Output (Q)
  17. 17. Product differentiation boosts revenues and supermarket profitsPrice Price Premium products - P1 low Ped MC AR MR Q1 Output (Q)
  18. 18. Product differentiation boosts revenues and supermarket profitsPrice Price Premium Economy – value products products - P1 (lower marginal cost and a low Ped higher Ped) P2 AR MC MC AR MR MR Q1 Output (Q) Q2 Output (Q)
  19. 19. Building the evaluationMarket power / competition• Leading 4 supermarkets > 80% of UK food retail (oligopoly)• Huge buying power in product & factor marketsEconomies of scale• Scale drives down unit costs and boosts profits• Supermarkets claim this improves consumer welfareOverseas expansion• Increasing flow of revenue and profits from overseas especially Eastern EURecession and recovery• Downturn has hit supermarket profits• Move away from bulk-purchase offers as consumers too poor to afford them
  20. 20. Tutor2u Keep up-to-date witheconomics, resources, quizzes and worksheets for your economics course.

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