1.2.4 Business Competition Flashcards
SF: Flexibility
Small firms can adapt quickly
Owners are more active and can react to change
SF Personal Service
Bigger firms have it had to personalize order
Some may prefer to pay higher price in small firms in manager involved
SF Lower wage costs
Many workers do not have trade union
power is weak
owners are able to pay minimum wage
SF: Better communication
Fewer employees means more rapid communication
Owner is closer to staff so they may become more motivated
SF Innovation
They are forced to innovate tp create their new ideas
they will lose their market if they don’t
Oligopoly
a market that is dominated by a few large producers
Og Few firms
only a few firms
Og Large firms dominate
The large firm will dominate and set prices consumers will pay
Og Different products
Each large firm sells close substitutes to eachother
Usually a bit different because each firm has different aims
Og Barriers to entry
The firm that dominates likely to benefit from barriers to entry
Due to brand names etc. as a result the higher firms will enjoy the barrier to entry bc they make more profit
Og Collusion (informal agreements between firms)
Dominant firms set up agreements to restrict competition eg prices output and location
Restrict output therefore exploit customers by high prices
This reduces supply so there is less choices
Og price competition
If one cuts prices, the other does too
however overall revenue falls and profit decrease
Non price competition Og
Compete using advertising, branding
However if market do not come up with new ways to innovate or attract customers they will lose dominance
Og Choice
Advantage
new brands- different products- more choices for customers
og Quality
Some markets may be superior
but depends on opinion
