2.6 The Competitive Environment Flashcards
When do markets exist?
Where there are buyers and sellers
When does competition exist in a market?
Competition exists when more than one business is attempting to attract the same customers
When does a monopoly exists?
When a business does not face any competition in a particular market
What is a USP?
(Unique Selling Point) - The essence of what makes your product or service better than compettors. The 4 USP categories is product characteristics, price Structure, placement strategy (location and distribution) or promotional strategy
State the different types of market
- Monopoly
- Oligopoly
- Monopolistic Competition
- Perfect competition
What is a market like with lots of small or medium-sized businesses?
In a markets with lots of small or medium -sized businesses selling to large numbers of consumers, prices will generally be low to attract customers, especially if each firm is selling a similar product!Often these firms will have to compete through advertising, high-quality service and convenient locations.Examples of this type of market include hairdressers and fish and chips shops.
What is a market like with a small number of large businesses?
In a market with a small number of large businesses, such as supermarkets or cinemas, they will often advertise there products are different. Prices may be high and firms will compete through advertising, a USP or launching new products. This type of market can exist if the costs of entering the market are very high, such as airlines.
What is a market with one business like?
A market with one business is called a monopoly.Prices may be high due to a lack of choice and little or no direct competition.The monopolies are hard to find in market-based economies. Royal Mail has a monopoly when posting a letter in the UK
When will a business face uncertainty?
When a lack of information makes an outcome difficult to predict
(E.g Covid)
What is risk?
Risk is the possibility of something going wrong, for businesses this will usually lead to lower sales and reduced profits
What types of risks can businesses face?
Internal ( inside the business) or external ( outside the business)
State examples of internal risks a business can face
- Industrial action from employees (e.g going on strike)
- Fire or theft, including data through hacking
- Bad publicity from poor treatment of employees
- Losing good employees to competitors
State examples of external risks a business can face
- New competitors
- Natural disasters
- New laws
How can businesses minimise risks?
- Write a business plan
- Invest in training for employees
- Use experts and consultants
- Sell in different markets
What do businesses face uncertainty around?
- Entering new markets such as online or international markets
- Economic uncertainty such as recession
- Competitor actions such as price cuts, new products, takeovers and mergers
- Changes in relationships with trade blocs such as the European Union and the impact on international trade
- Developments in technology
- Social changes such as tastes and fashions
