2.6 - The Competitive Environment

Question 1

Markets

Answer 1

Exist where there are buyers and sellers

Question 2

Competition

Answer 2

Exists when more than one business is attempting to attract the same customers

Question 3

Monopoly

Answer 3

Exists when a business does not face any competiton in a particular market

Question 4

Market Share

Answer 4

The percentage of sales in a particular market recorded by a business

Question 5

An uncertainty in business

Answer 5

Occurs where there is a lack of information about a situation. This means the outcome or consequences are very difficult to predict.

Question 6

A Business Plan

Answer 6

Is a document setting out what a business does and what it hopes to achieve in the future

Question 7

Diversification

Answer 7

Occurs when a business starts selling new products in new markets

Question 8

A recession

Answer 8

Occurs when the value of an economy’s output of goods and services falls for six months or longer

Question 9

An entrepreneur

Answer 9

Is someone who is willing to take the risks involved in starting a new business

Question 10

What is Price Competition?

Answer 10

Business may wish to avoid competing too strongly on price (lowering prices on one product in order for customers to prefer it over others) as they may wish to avoid a price war (businesses aggressively lower prices) as this would lead to less profit for all players involved

Question 11

Competing by developing new products

Answer 11

In many markets, businesses will compete by introducing new products regularly to win customers. This is very common in technology or fashion markets.

Question 12

Competing through advertising

Answer 12

Common in markets where consumers can switch between competitors easily, such as gas suppliers.