CHAPTER 5: COMPETITION IN RETAILING Flashcards
What are the five major avenues for differential advantage in retailing?
Price, Service Level, Product Selection, Location or Access, Customer Experience.
What are the four categories of market competitive structures?
Pure Competition, Pure Monopoly, Monopolistic Competition, Oligopolistic Competition.
What assumptions characterize Pure Competition?
Homogeneous products, many buyers and sellers, ease of entry for all, and perfect knowledge of the market.
Why is Pure Competition considered more theoretical than realistic?
Due to stringent assumptions that rarely hold true in real markets, making it difficult to achieve.
What does a horizontal demand curve indicate in a Pure Competition market?
Retailers must sell at the market or equilibrium price; they cannot influence prices.
How does a monopoly differ from Pure Competition in terms of pricing?
A monopoly faces a declining demand curve due to diminishing marginal utility; it cannot set prices arbitrarily high without losing customers.
What is Monopolistic Competition and why is it significant in retailing?
It involves many sellers offering heterogeneous products viewed as substitutes; it’s the most common form of competition in retail.
What characterizes Oligopolistic Competition?
Few sellers dominate the market with homogeneous products; actions by one seller can significantly impact others.
Why is competing solely on price considered ineffective for retailers?
Price competition is easy to replicate and does not create lasting competitive advantages.
What are some non-price competitive advantages retailers can leverage?
Unique private-label merchandise, enhanced convenience (including online options), and high service levels for essential products.
What does marketplace equilibrium refer to?
A state where ROI justifies capital investment without inviting excessive competition; markets can be overstored or understored.
How should retailers view their suppliers?
As both partners and competitors; they must develop loyalty while ensuring profitability for both parties.
What are the four theories of retail competition discussed in the presentation?
The Wheel of Retailing, The Retail Accordion, Retail Life Cycle, Resource-Advantage Theory.
Describe the Retail Accordion concept.
Retailers evolve from offering a wide variety to specialization and then back to offering variety again, repeating this cycle over time.
What does the Resource-Advantage Theory state about competitive advantage?
Firms gain competitive advantage based on resources that are rare, nonimitable, nonsubstitutable, and valuable.
