2.5.3 Competitive environment

Question 1

Define the competitive environment

Answer 1

It concerns the degree to which a business is affected by rivals that operate in the same market

Question 2

What did Porter say were the 5 factors that affect competitiveness in a market?

Answer 2

-Threat of substitute products
-Threat of new entrants
-Bargaining power of suppliers
-Bargaining power of buyers
-Intensity of rivalry within the industry

Question 3

Give 3 other factors that may affect competitiveness in a market

Answer 3

-Pace of innovation and development
-Seasonality of the product
-Growth rate of the market

Question 4

How may increased competition benefit a business?

Answer 4

Business may;
Improve efficiency
increase innovation
Expand their product range

Question 5

How may increased competition be a drawback to a business?

Answer 5

Business may;
Increase promotion costs
prices of products may fall

Question 6

What impact does the size of a market have on a business?

Answer 6

-businesses entering niche markets may have less comp as the skills required may limit people from entering the market

-businesses entering a large market may face more competition from established firms

Question 7

Give a benefit and a drawback for operating in a large market

Answer 7

-wider customer base

-potential for international comp

Question 8

Give a benefit and a drawback for operating in a niche market

Answer 8

-more opportunities for expansion

-the threat of new entrants