external influences - competition Flashcards

1
Q

explain what is meant by competition?

A

rivalry amongst sellers

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2
Q

what is a barrier to entry?

A

the factors that could prevent a firm from entering and competing in a market

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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
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4
Q

define barriers to exit?

A

the factors that could prevent a firm from leaving a market, even if it wanted to

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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.

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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
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