competitive market 3

Question 1

why do businesses cut prices in competitive markets?

Answer 1

• consumers will remain loyal to businesses that cut prices
• businesses who cut prices try to also cut their costs in an attempt to preserve profit margins
• if profit margins are already tight might not be able to cut prices

Question 2

why might some businesses not want to cut prices?

Answer 2

because in the long term it could result in the brand image deteriorating could hinder rather than help sales
- many customers still associate price with quality

Question 3

why do businesses increase product differentiation in competitive markets?

Answer 3

• makes a business stand out from the other

- consumers will be less likely to switch to products supplied by competitors

Question 4

how does the design of a product help a business survive in a competitive market?

Answer 4

• an eye-catching design that is aesthetically pleasing can help a business survive
• by using a design as a USP - making them less vulnerable as they don’t need to change price
• adds value to the product

Question 5

how do unique product features help a business survive in a competitive market?

Answer 5

in highly competitive markets some businesses might redesign their products to ensure they have the latest must-have features

Question 6

how colussion help a business survive in a competitive market?

Answer 6

• try to do deals with their supposed competitors
• agree with a fixed price to boost profitability
• if 2 or more competitors feel threatened by the level of competition they might agree to collusion in the short term