Markets Flashcards
What is competition?
Competition is rivalry amongst sellers
What is a market?
A market is a place where buyers and seller come together to agree on a price
What is market price?
It is a price range in a market which consumers are willing and able to pay for a product
What is markup?
It is the difference between the cost of producing a product and the price it is sold for
What is a competitive market?
A market where there is a large volume of sellers
What are the features of a competitive market
There is a large number of sellers with typically low prices
What is a monopoly?
A market dominated by one seller
What are the features of a monopoly?
There are few firms with often high prices
What are economies of scale?
They arise when unit cost falls as output rises
What are the aims of a business?
PIGSS
Profit, Increase market share, Growth, Survival, Services
Why might monopolies have low prices?
This is so they can price competitors out of the market so they can maintain market share
What is the market share required to hold a monopoly
A 25% market share
What is an oligopoly?
A market dominated by a few sellers
What are the features of an oligopoly?
The products and prices are similar (prices often high)
Businesses might compete on non-price differences
What might happen between firms in an oligopoly?
Collusion and anti-competitive behavior
What are the results of anti-competitive behavior?
It prevents fair competition
What is monopolistic competition?
A market with many firms competing not on price but on additional offers, often with low prices
What is market size?
The number of potential buyers in a market and is expressed as the total values of goods sold
What is market growth?
The percentage growth in the size of the market, over a given time period
What is market dominance?
A measure of the market share to its competitors
What is market power?
The ability of a firm to influence or control the terms and conditions on which goods are bought and sold
What is market share?
It is the percent of total sales that a business has in a specified market
What are the 6 strategies to increase market share?
- Be aware of customer needs and meet them
- Sell more to existing customers
- Find out why old customers left
- Have a clear marketing plan
- Use a variety of marketing techniques
- Merge with another company
What is organic (internal) growth?
It is when a business increases in size just by selling more products
How can external growth be achieved?
Through mergers and acquisitions
What are barriers to entry?
A barrier to entry is a factor that could prevent a firm entering and competing in a market
What are some examples of barriers to entry?
Large start-up cost Having the marketing budget to break customer loyalty Inability to gain economies of scale Existing businesses starting a price war Legal restrictions, patents
What is a barrier to exit?
A factor which could prevent a firm from leaving a market even if it wanted to
What are some examples of barriers to exit?
Difficulty selling off capital
High redundancy cost
Contracts with suppliers
What is a merger?
When two companies join together to form a larger firm
What is an acquisition?
This is where the control of another company is achieved by buying a majority of its shares
What are some disadvantages of mergers and acquisitions?
Redundancies due to duplicated roles Lack of company knowledge Break down in communications Diseconomies of scale Can increase risk if entering a new market
What does the CMA investigate?
Dominance and anti-competitive behavior
What are the responsibilities of the CMA?
Investigate dominate positions
Investigate mergers
Completing market studies
Bringing criminal proceedings against individuals
What sanctions can the CMA enforce?
Business fined up to 10% of global turnover
Sue for damages
Individuals disqualified from being a company director
Fine individuals if they fail to comply
