1 Flashcards
Define competition
competition is rivalry amongst sellers where each seller tries to increase sales, profits and market share by varying the product mix
Positive influences of competition on a business
Innovation, Efficiency, Quality
Negative influence of competition on a business
Price Wars - Reduce profit margins
Advertising/Promotion - increases business expenses
Define market size
market size is the measurement of all the sales by all the companies within a marketplace in a given time period (usually a year)
How can market size be measured?
Volume: measures the quantity of goods purchased, perhaps in tonnes, packs or units
Value: Amount spent by customers on the volume sold
Factors that affect the growth of a market
- Economic growth (rise in real incomes)
- Social Changes (family meals > fast food)
- Changes in fashion
- Ability of suppliers to identify and meet customer requirements (cinemas)
Advantages of a business being a brand leader (top seller in a market)?
- Higher sales > Higher Revenue > Higher Profits
- Higher distribution level (retailers want to sell your product)
- Easier to receive consumer trials based on established brand name
Above the Line (marketing budget) activity
Media advertising that boosts short term sales but also strengthens brand awareness and image for years to come
Below the line (marketing budget) activity
Strengths short term demand (e.g trade promotions, consumer price promotions, competitions and special offers)
How to calculate market share value?
(Total sales revenue of firm / Total value of sales in the defined market) X 100
Disadvantages of competition
- quality may suffer if competition is based on price
- huge resources are devoted to competing with other firms instead of producing cheaper, better products
- some businesses will be forced out of the market
Advantages of Competition
- Price
- Improved Efficiency
- improved quality of products
- more choice
Describe Perfect competition (key words)
Many small firms, identical products, (e.g fruit + veg), no barriers to entry
Describe monopolistic competition (key words)
Many Small firms, differentiated products, (e.g hairdresser, plumber), no barriers to entry
Describe an oligopoly (key words)
few large firms, differentiated products, (e.g supermarkets, banks), high barrier to entry
Describe a monopoly (key words)
One firm (in theory), unique product, (e.g royal mail for letters), high barrier to entey
What may be some barriers of entry
- Ease of with which firms are set up
- The number and size of firms
- Government restrictions
Why does market size matter?
- Shows potential sales, profits, and growth opportunities.
- Helps assess competition, risk, and long-term planning.
