external influences - competition Flashcards
1
Q
explain what is meant by competition?
A
rivalry amongst sellers
2
Q
what is a barrier to entry?
A
the factors that could prevent a firm from entering and competing in a market
3
Q
what are the barriers to entry?
A
- large start up costs
- having the marketing budget to break customer loyalties
- the inability to gain from economies of scale
- possibility that existing businesses will start a price war
- legal restrictions such as patents
4
Q
define barriers to exit?
A
the factors that could prevent a firm from leaving a market, even if it wanted to
5
Q
when a business leaves a market do they not exist anymore?
A
no, they still exist. they may just enter a new market.
6
Q
what are the barriers to exiting a market?
A
- difficulty selling off capital (liquidation)
- high redundancy costs (employees who worked for a long time are owed more)
- contracts with suppliers (firm will face legal challenge is not honoured)
- leases with landlord
