2.5.3 the competitive environment

Question 1

what factors affect competitiveness in a market?

Answer 1

• the number and size of competitors in the market
• the growth rate of the market
• the pace of innovation and new product development
• the level of differentiation between competitors
• the bargaining power of suppliers and customers

Question 2

what affect does competition have on businesses?

Answer 2

• fall in prices
• increased costs of production
• improved efficiency
• increased innovation
• wider product ranges

Question 3

what are the pros and cons of larger markets?

Answer 3

+ wider customer base
+ less volatility
- more regulation
- more competition (global)

Question 4

what are the pros and cons of smaller markets?

Answer 4

+ less competition
+ more opportunities for expansion
+ easier to build loyal customer relationships
- threat of new businesses entering the market
- less economies of scale