2.5.3 The Competitive Environment

Question 1

Competition and market size: the degree and nature of competition

Answer 1

• The competitive environment concerns the degree to which a business is affected by rivals to operate in the same market
• The threat competition presented to businesses operating a market will determine how quickly the business respond: the greater threat, the quicker the response required
• Operating in a competitive market can have significant impact on the marketing and operational strategy

Question 2

Competition and market size: the market size

Answer 2

• The market size is essentially the number of customers and sellers in a particular market
• Businesses entering niche markets may struggle to support a high volume of goods due to limited demand as the market size is small
  
  • For these businesses, the specialise knowledge or skills required may well limit the competition and higher the cost of production may well put off new businesses from launching
• Businesses entering large markets may face more competition from established businesses, higher costs of production, and challenges in deciding their pricing strategy