2.6 The Competitive Environment

Question 1

What is a market?

Answer 1

A Market is a voluntary meeting of buyers and sellers who trade or exchange goods or services

Question 2

What is a dynamic market?

Answer 2

A dynamic market is a market where supply amd/or demand factors are constantly changing

Question 3

What are the types of markets?

Answer 3

• Goods markets (or product markets) – For final goods and services ready to sell
• Factor markets – For factors of production like inputs in manufacturing. Raw materials
• Labour markets – People and jobs

Question 4

What is competition?

Answer 4

This is the rivalry between businesses to gain sales from customers

Question 5

What is a competitive market?

Answer 5

A competitive market is where a large number of sellers are selling to large number of customers

Question 6

What are some negative impacts of competition on businesses?

Answer 6

– Have lower sales as there are lots of alternatives
– Have less profits unless the business reduces costs and possibly quality
– Find it harder to get customers, they may need to heavily promote and advertise

Question 7

How can a business become more competitive?

Answer 7

• Provide better quality goods or services than the competition
• Offer a unique product
• Offer better value for money

Question 8

What is the definition of a business risk?

Answer 8

Business risk is the possibility a company will have lower than anticipated profits or experience a loss rather than making a profit.

Question 9

How can a business minimise risks?

Answer 9

• Focus on the 4Ps (product, price, place, promotion)
• Get the price right for customers
• Get the promotion right
• Sell in the right location e.g. high street
• Continue to innovate or improve the product or service

Question 10

What is uncertainty?

Answer 10

Uncertainty is when businesses are unable to predict external shocks or future events