2.5.3. The Competive Environmemt

Question 1

Competitive environment

Answer 1

Not just about how many customers they face but how directly other firms’ products are in competition and how fierce rivalries are.

Question 2

One dominant business

Answer 2

Market dominated by single business is bad for consumers as:
-Little choice
-High prices
-Little incentive for dominant firm to innovate or provide great customer service

However customers strive to become an effective monopoly(single business dominating supply in given market.) Key focus is trying to build barriers to entry to prevent new firms entering market by:
-Patents and tech breakthroughs
-Strong brand and high advertising budgets
-heavy spending on infrastructure

Question 3

Competition between few giants

Answer 3

-In an oligopoly market (market dominated by just a few major suppliers), rivalries are intense as only one firm can gain market share by directly taking it from one of just a handful of rivals.

Aspects of non price competition:
-Branding
-Product features and design
-Advertising
-Tech innovations

Question 4

Market size

Answer 4

Big markets- larger markets offer scope for new competition by carving out a niche. Causes dominant producers from becoming complacent as they need to offer good services to prevent opening opportunities to rivals.

Small markets- fewer customers and lower sales, may be easier to built up barriers to entry, carving up market between few businesses.

Growing markets…attract new entrants…seeking higher profits on offer
Shrinking markets…see established firms existing…as profitability tends to be low,they’re unattractive

Question 5

Collusion

Answer 5

When two or moire businesses agree to fix supply or prices within their market which is illegal.
A way companies try to survive in a really competitive environment.