Analysis of Tinned Tuna Market in the UK

This is a report about the tinned tuna market in the united kingdom. In this report I will concentrate on how the tuna market is rolling out in the past, as well as how it might evolve in the future. The objective with this statement is to conclude whether or not entering the forex market would be profitable for a business. First you will see a short summary of the product itself. Then a description of the existing market situation as well as the marketplace actors (future opponents) will observe. Furthermore this report will examine the purchase price setting conditions and effects on variety demanded and offer available by analyzing substitutes and possible suits and talking about the demand driving factors. At last this report will look at possible improvements and innovative solutions for a potential future dealer.

Tinned Tuna - The Product

Tuna is one of the most commercially valuable seafood on the planet, and in the united kingdom tinned tuna is the most important fish purchased at retail level by size, exceeding another seafood whether tinned, fresh or iced. Since the 1970's the amount of the most common type of tuna, the Atlantic Bluefin tuna, has dropped by almost 90 per cent. While being almost extinct, the overfishing of tuna still carries on. While being extremely popular in Japan due to demand for sushi and sashimi, it includes increased in attractiveness in the western world over the last decades, partly because to be a relatively low-cost commodity. In european countries the most common kind of tuna sold is tinned tuna. In the united kingdom alone, the 2006 utilization of tinned tuna was 700 million tins making the UK the second most significant tinned tuna consuming country on earth. Tinned tuna can presently be bought in the three most normal forms - in sunflower essential oil, brine, or planting season water. The product is a tin with a net weight of approximately 150-200g and has a price of 60 pence and above depending on supplier. In UK supermarkets the purchase price is about one pound per tin (as at 25/11/09). One might say that tuna is a homogenous principal product since it practically is the same no matter what brand you get (given you buy e. g. tuna in spring and coil drinking water from different suppliers). However I realize that, while being rather similar no matter which provider chosen, tuna is a differentiated product since it does not necessarily have to be of the same quality and type. With this report I'll thin my market down to tinned tuna sold in the UK, and will include tuna in sunflower essential oil, brine and springtime water.

Market situation & supplie

The UK market for tinned tuna happens to be dominated with a few large suppliers - Princes (27. 1 per cent of total market value) and John Western world (31. 3 % of total market value). Furthermore, the major supermarkets in the UK (Tesco, Sainsbury's, ASDA, Morrisons and Marks & Spencer) all have their own make of tinned tuna. Since you can find more than one supplier, and the product is relatively similar whichever supplier chosen, it can be ruled out that there is a monopoly or monopolistic competition on the market. What can be concluded from these facts is that there is currently an oligopoly in the tinned tuna market in the UK, with a few major players. That the supermarkets have their own brands is only evidence of a strong position on the meals retail market is required for introducing a new brand for an already existing market. In other words, the barriers to entry the tinned tuna market are high and the endogenous obstacles including the advertising barrier are a major concern for new market entrants. The "economies of size" barrier is just one more concern for new entrants. Worthy of over 2. 7 billion USD (1. 65 billion) worldwide, the tinned tuna market would be very difficult to attempt to enter for a corporation without a large economic strength. Even with a financial strength, entering the market would require huge amounts of primary capital outlay, only for covering the obstacles to entry. These sunk costs might be a deterrent factor even for a corporation with financial strength.

Product Price Environment & Impact in Volume Demanded

If overlooking the supermarket's brands and focusing on the two major suppliers Princes and John Western, we can conclude that the marketplace suppliers' price environment is significantly influenced by the competitors on the marketplace. If then considering the many various supermarkets' own brands that often aim to beat the major suppliers' prices, we can sketch the conclusion that it is a firmly competitive market where suppliers have to keep up low prices to be able to appeal to customers. If also taking into consideration that the tinned tuna market is with respect to the supply of fresh tuna, which is determined by the suppliers of any prior link in the resource string, we can bring the conclusion that even though the supply is bound, it is currently a competitive market for fresh tuna. This facilitates the businesses for suppliers of tinned tuna by maintaining low source costs.

In my research I found that tuna, as a low price product, usually is consumed as a minimal budget choice instead of other protein enhanced grocery products. Whilst having many substitutes and not so many complementary products, we can expect that the demand for tinned tuna would be severely affected by increasing prices (as shown in physique 1). Under this assumption, a little relative change in cost would generate a greater relative change in amount demanded. Therefore that the purchase price elasticity of demand is flexible for tinned tuna.

The many close substitutes also means that the income impact for tinned tuna would be substantial and generate a poor income elasticity of demand (YED) since there are definitely more luxury types of tuna or other substitutes to the product that might be consumed when having a higher food budget (see amount 2). Hence, the conclusion is the fact that tuna can be an inferior good that will be used less (after having a certain point in time) when the non-public income increases. (NB the generalisation in cases like this ignores some aspects such as personal flavour and behaviors).

The factors that might drive demand up in the foreseeable future will be the price for substitutes such as meat or other fish, as well as the resource conditions for these. In addition, the source conditions for tuna might drive demand up itself - when the products get more scarce, consumers might become more thinking about buying tuna (even though the increase in prices for tinned tuna may possibly eliminate that outturn).

Since the marketplace will involve an oligopoly, it is highly beneficial to understand how the existing suppliers interact. To carry out so, the "prisoners' problem" is applied. If the suppliers on the tinned tuna market would have cooperated and set prices with an agreed level, they might probably increase revenue. However, with the many UK supermarkets supplying their own tinned tuna to the marketplace, often with the objective of being cheaper than other suppliers, it would be highly unlikely that suppliers on the market totally would cooperate and it is subsequently more profitable for the suppliers remain competitive. The game theory indicates that the tension between co-operation and competition in cases like this is too enormous for the suppliers to cooperate.

Market constraints and predicaments

While not being very dependent of the improvement of new systems or developing existing products, the tinned tuna market suppliers have to take into consideration other factors when planning future functions on the market.

The overfishing of tuna has led to declining levels of tuna in the oceans, even though still on-going the way to obtain tuna is highly likely to run out in the future. This will not only pose a direct risk to the tinned tuna suppliers by establishing a time limit on the operations in the forex market, but it addittionally generates a more forseeable future difficulty - Governments and international organisations have increasingly started to present fishing restrictions as an effort to save tuna from becoming completely extinct. Since this consists of constraints of fresh tuna supply - it'll most likely make supply costs to go up a lot more scarce supplies get. When suppliers then raise prices to attain financial goals, the demand will land since the price elasticity of demand is already stretchy. While this is an ongoing development, the demand will likely change as time passes as seen and defined in physique 3.

Possible innovative alternatives and improvements for a new market entrant

In the study for this statement it was discovered that any type of innovative alternatives or new developed methods for producing tinned tuna would be highly unlikely to arise. It would perhaps involve enhancing the producing of the tins and shipping methods, but it's the fish itself that creates the best cost for the suppliers, and the only way of reducing that cost over time would be by an increase in the tuna in our oceans which is not so likely to happen. A fresh entrant could on the other hand put in an attempt to getting the image of being "green" or differentiate itself in ways like this, which most suppliers on the marketplace already do. All in all, the suppliers on the tinned tuna market get excited about a business which does package with the ethical issue of the overfishing of the endangered species, and it is not easy to create creative answers to that problem.

Conclusion

The tinned tuna market in the UK is a highly competitive market with high barriers to entry. Presently there are a few major suppliers on the market, and the one ones which have entered the market in recent years are supermarkets which through their branded products and economies of level have been able to do so. The price elasticity of demand is stretchy and an alteration in price would probably have severe consequences in variety demanded. While the limited way to obtain tuna inside our oceans is constantly on the decline, the prices for fresh tuna will increase in the foreseeable future and generate a rise in selling price for tinned tuna. This will likely have an effect on many consumers to choose substitutes instead of tinned tuna. Over time demand will land heavily, and in the long run the market will most likely end to exist when tuna is extinct. Entering the tinned tuna market would consequently involve an extremely high risk and not just jeopardise a company's financial functions, but could also give a bad company reputation for affiliating in a market that is interacting with the moral dilemma of practically extinct kinds. The high obstacles to accessibility would also imply that it would require the overall economy of a large company to enter in, and then for such a business it would be going for a great risk if getting into the market. It really is why I have come to the reasoned final result of that joining the tinned tuna market in the united kingdom wouldn't normally be wise.

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