Market Characteristics (Miss Blackwell)

Question 1

Market Size

Answer 1

The collective value of the goods/services that buyers purchase.

Question 2

Market Growth

Answer 2

The percentage change in the size of the market measured over a specific period.

Question 3

Market Share

Answer 3

The percentage of total sales that a business has in a specific market.

Question 4

Barriers To Entry

Answer 4

The factors that could prevent a firm entering and competing in a market.

Question 5

Barriers To Exit

Answer 5

The factors that could prevent a firm from leaving a market, even if they wanted to.

Question 6

Name 3 barriers to entry

Answer 6

• Large start up costs.
• Having the marketing budget to break customer loyalty.
• The inability to gain economies of scale.
• The possibility other businesses will start a price war.
• Legal restrictions such as patents.

Question 7

Name two barriers to exit.

Answer 7

• The difficulty of selling off capital.
• High redundancy.
• Contracts with suppliers
• Leases with landlords.

Question 8

Competition

Answer 8

Rivalry amongst sellers.

Question 9

Market

Answer 9

Any situation where buyers and sellers are in contact in order to establish price.

Question 10

Online Market

Answer 10

Where products are sold online and received as a physical product.

Question 11

Digital Market

Answer 11

Where products are bought for online use only, downloadable.

Question 12

How many firms in competitive markets?

Answer 12

Many

Question 13

How many firms in monopoly’s?

Answer 13

1 (low)

Question 14

What are the prices in competitive markets?

Answer 14

Low.

Question 15

What are prices like in monopoly’s?

Answer 15

High (often)

Question 16

Why are prices not always high for monopoly’s?

Answer 16

Due to price wars and economies of scale.

Question 17

Competitive Market

Answer 17

A market in which there are a large number of sellers. Businesses mainly compete on price.

Question 18

Monopoly

Answer 18

A market dominated by one seller.

Question 19

CMA definition of a monopoly.

Answer 19

Any firm with more than 25% of the industry’s sales.

Question 20

Oligopoly

Answer 20

Where a market is dominated by a few firms.

Question 21

What do businesses in oligopolies compete on?

Answer 21

Non-price differences.

Question 22

Collusion

Answer 22

When rival companies cooperate for their mutual benefit. Prevents fair competition.

Question 23

Monopolistic Competition

Answer 23

A market structure with many competing firms supplying a slightly different product.

Question 24

How many firms with monopolistic competition?

Answer 24

Several.

Question 25

How many firms in oligopolies?

Answer 25

A few.

Question 26

What are the prices like with monopolistic competition?

Answer 26

Relatively low, non-price differences.

Question 27

What are prices like in oligopolies?

Answer 27

Relatively high, similar.

Question 28

Market Power

Answer 28

The ability of a firm to influence / control the terms and conditions on which goods are brought and sold.

Question 29

Market Dominance

Answer 29

A measure of market share compared to competitors.

Question 30

Merger

Answer 30

Where two companies join together to form a new larger business.

Question 31

Acquisition/takeover

Answer 31

Where control of another company is achieved by buying a majority of it’s shares.

Question 32

Name two benefits of external growth to the business.

Answer 32

- May gain new management with different skills/talents. - Will result in an increase in revenue and therefore market share. - May be able to meet customer needs more effectively with combination of resources. - May experience economies of scale.

Question 33

Name two disadvantages of external growth.

Answer 33

- May suffer from diseconomies of scale. (Business/shareholders) - May take on extra debts that the business could struggle to repay if the strategy is unsuccessful. (Business/shareholders) - Could result in redundancies (employees) - Could result in higher prices (customers) - Could result in a dominant business dictating terms and conditions (suppliers)

Question 34

Organic Growth

Answer 34

Involves expansion from within the business.

Question 35

Name 3 examples of organic growth.

Answer 35

Opening new stores, launching new products, employing more workers, increasing production capacity, investing in new technology, launching existing products into new markets.

Question 36

Name an advantage of organic growth.

Answer 36

- Less risk than external growth, less financially damaging. - Able to use retained profit and not a need for a loan. - Sensible and steady growth rate.

Question 37

Name a disadvantage of organic growth.

Answer 37

- Stakeholders might want sales immediately and it is a slower process. - The market size might be small/shrinking meaning a lack of opportunity. - If market leader, already high sales so it might be hard to gain more.

Question 38

What does the CMA stand for?

Answer 38

The competition and markets authority

Question 39

What’s the main aim of the CMA?

Answer 39

To promote competition for the benefit of consumers, both within and outside the UK.

Question 40

Cartel Offense

Answer 40

Where businesses agree not to compete, through market sharing, bid rigging and price fixing.