3.1.4 The Stucture Of Markets 🏪

Question 1

Define competition

Answer 1

The rivalry between firms that into increase market share

Question 2

What is a competitive market?

Answer 2

Where there are Numerous business that compete with each other

Question 3

What are uncompetitive markets?

Answer 3

Markets with little to no Businesses competing with each other

Question 4

What is a monopoly?

Answer 4

a single business with 25% of market share dominating a market

Question 5

what is a Oligopoly?

Answer 5

When a market is a few large businesses (Had 25% market share)

Question 6

What are the three impacts on the business of changing competitive environment?

What is consolidation? how may they be a threat ?

What happens if we fail to respond?

Answer 6

New entrants - competition get stronger - business has to consider position -different services ? have to offer services otherwise fail to survive

New product -Business forced to change their own
Have to adapt and products lower price to survive

consolidation - the number of business fall but they get bigger - may be a threat because they are lower cost -If you fail to respond you become obsolete

Question 7

Give a few examples of changing competitive environmenta

Answer 7

Supermarkets
retailers

Question 8

What are Porters five forces?

Answer 8

identifies key pressures of an industry That affects the businesses ability to compete with rivals

Question 9

Discuss the porters five forces diagram?

Answer 9

Threat of new entry
Bargaining power of Buyer

Industry rivalry

Bargaining power of Supplier 
Threat of Substitution

Question 10

What are low industry profits associated press on the porters five forces?

Answer 10

strong suppliers
strong customers
Low entry barriers
Many opportunities
intense rivalry

Question 11

What are high industry profits associated with?

Answer 11

Weak suppliers
weak customers
High entry barriers
Little rivalry 

Question 12

What happens if a new entrant were to enter a new industry ?

Answer 12

Gain market share
rivalry will intensify

Question 13

What is the position of existing firms there are barriers?

Answer 13

Will be stronger

Question 14

What are the six barriers to entry under porters five forces?

Answer 14

Investment cost - Cost will be higher to deter entry
High capital requirements required so only big businesses can compete

Economies of scale available to existing firms - Lower unit cost makes it difficult for small comers to break into market

Regulatory and legal restrictions -Each restriction can act as a barrier

Product differentiation- Existing products with a strong US please make it difficult with newcomers to gain market share

Access to suppliers- Lack of access will make it difficult for newcomers into into markets

Retaliation from established products - Price war discourages new entrance

Question 15

what makes an industry easy to enter under porters five forces?

Answer 15

Common tech
access to distribution channels
low capital requirements
No need for high-capacity if output
Absence of strong brands 

Question 16

What makes an industry difficult to enter under porters porters five forces threat to new entrance?

Answer 16

well established brands
High capital requirements
Restricted distribution channels
If you need to achieve economies of scale

Question 17

What will firms exercise if they havebargaining power under the porters five forces? 

Answer 17

Exercise power
sell products at higher price
squeeze industry profits

Question 18

when was suppliers find themselves in powerful positions?

Answer 18

When there are a few suppliers

Switching into an altentative is high

Little resources

Customers are small or unimportant

Question 19

What are the factors that determine how much power as a supplier has? 4

Answer 19

uniqueness of inputs applied - resource is essential nuclear substitutes are available

Number of size supplying resources - large suppliers can exert more power than small ones

What is it a competition of the input from other industries - If the greater supplied will be stronger

Cost of switching to alternative resources - Businesses may be locked in - Business is used to the production process and timings of raw materials

Question 20

what are powerful customers able to do under porters five forces?

Answer 20

Exert pressure to drive prices down and

increase of quality requires for same price

reduced profits in the industry

Question 21

What are the five factors that affect the bargaining power of customers on the porters five forces?

Answer 21

Number of customers- The smaller number of customers the greater the power

Size of their orders - Larger volume the greater the power

Number of firms supplying the product- The smaller alternative is less opportunity for customers

Threat of integrating backwards - Increased power

Cost of switching- Customers tied supplier because of the cost of searching

Question 22

When do customers enjoy bargaining powers? (porters five forces)

Answer 22

When there’s a few of them - suppliers

When they can choose from a wide range of firms 

When customers purchase a large proportion

Question 23

What is a substitute product?

Answer 23

Something that meets the same need

Question 24

What does the threat of substitute products on the porters five forces depend on?

Answer 24

The extent to which the products can match the performance of the real product

willingness for customers switch

Consumer loyalty

Question 25

how will rival products compete ? ( Substitute products - Porters five forces)

Answer 25

Lower price and differentiation

Question 26

What are the three ways competitive rivalry is encouraged?

What will this do?

Answer 26

price wars

Investment and innovation for new products

Intensive promotion

Increase costs lower profits

Question 27

What are the 7 factors at the time of the degree of competitive rivalry?

Answer 27

Number of competitors in the market - The more the more competitive

Market growth size - the bigger the more competitive

product differentiation and brand loyalty- if there is more loyalty less competition
Less differentiation more war on price

Power of the supplies and ability for
substitutes - If there are more substitutes more intense

Capacity utilisation - Spare capacity more competitive

Cost of structure of the industry - Dependent on volume
more competition in the market shares

exit barriers -Difficult to exit more expensive as intensity to competition to stay