BUSINESS A Level – Sainsbury’s and ASDA
Three exam boards’ Business A level specs tell us to study:
• Reasons for mergers and takeovers
• Financial risks and rewards
• Problems of rapid growth
• What is meant by market dominance, mergers, acquisitions and organic growth
• How mergers, acquisitions and organic growth could lead to the creation of dominant firms
• The impact on a business of a dominant firm operating in its market
• How market dominance is restricted and regulated in the UK
• Methods of growth to include mergers, takeovers, ventures, franchising.
Sainsburys and Asda, currently the second and third biggest UK retailers respectively, confirmed in October that the two supermarkets are set to merge in a £15bn deal to take on the market giant Tesco. The chains will continue to trade under their separate brands and stores will keep the same names.
The new supermarket group will have around 31 per cent of the grocery market, surpassing Tesco’s 27 per cent, and would be the biggest petrol retailer in the country with an 18 per cent market share – bigger than Tesco, BP or Shell. Their combined revenues of £51 billion and will aim to generate £500 million in cost savings.
What did the bosses say? Lower prices and even greater choice in ASDA stores, Sainsbury’s till prices cut by 10%.
What do others say? The deal will be bad for shoppers as there will be less competition, potentially hitting prices and the range and the quality of products available. 2,500 jobs could be lost.
Most important, what does the Competition and Market Authority say? Its provisional verdict “extensive competition concerns…substantial lessening of competition at both a national and local level”
HOW DOES THIS HELP YOU?
A relevant example shows the examiner you haven’t just learnt this stuff form a book, but you really get it. So watch what happens. By May/June there will be more news. Quote this merger briefly in your answer.
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