How do Firms Compete (CH13) Flashcards
What is Market Positioning?
Creating a unique image/identity for a product/brand in mind of consumers
What is Market Mapping?
All of the positions a product can take based upon two dimensions which are significant for consumers
Examples of Market Mapping
- High Quality vs basic quality
- Old vs Young
- High income vs Low income
- Male vs Female
What does a Market Map identify?
It identifies which existing products meet which customers needs. Gaps can then be identified and firms can enter the market to fills the gaps
What is a Competitive Advantage?
When products are regarded to be better over competitors by customers
How can a firm gain a competitive advantage?
- Price
- Quality
- Cost
- Niche market (specialised market for product/service)
How does a firm gain a competitive advantage?
When its average cost lowers and this creates maximum value for consumers
What is Product Differentiation?
The act of distinguishing a product from another. Firms do this to make the product seem more favourable than those form competititors
How can a firm use product differentition?
By pointing out unique features of a product to give it some value
Types of Product Differentiation
- Difference in quality; difference in price
- Difference in functional features/design
- Marketing by sellers (advertising)
- Difference in availability (time/location)
What is the Adding Value to a product/service?
The additional value a firm creates during the production process. Difference between the price of finished product and cost of inputs used to make it
Methods of implementing value?
- Brand
- Quality
- Good service
- Unique features
Higher added value, leads to a more profitable firm
Define a Stable Market
Where trade can be conducted in large volumes without causing the price to change significantly.
(Slow and predictable change)
Define a Dynamic Market
A market changing constantly and rapidly.
(Technology Markets)
Pricing Decisions
Firms aim to maximise their profits and minimise their losses
