the competitive environment

Question 1

What is a competitive market?

Answer 1

Measures the directness and toughness of the competition within a market

Question 2

What are the features of a competitive market?

Answer 2

INTENSE RIVALRY - between producers of similar goods or services
- markets composed of just 4 businesses could be quite competitive if they are of similar size

Question 3

Why do consumers benefit from competitive markets?

Answer 3

1. Prices and profit tend to be squeezed
2. Businesses try hard to minimise competition by creating USP or using predatory pricing ( pricing low with the deliberate intention of driving a competitor out of business)

Question 4

What is the Best way a business can ensure it’s survival in a competitive market?

Answer 4

• something it’s good at and stick with it
• needs to get to the stage where customers are subconsciously looking for your brand on and buying it without thinking too much about price and quality

Question 5

What Do big markets do to businesses competitiveness?

Answer 5

Forces market leaders to have to keep innovating in order to stay at number one

Question 6

What do small markets do to businesses competitiveness?

Answer 6

• in such a market it would be hugely difficult for any other brands to break even

Question 7

What is the effect of changes in the competitive environment on businesses?

Answer 7

• number of businesses operating within a market can change over time
• if a new competitors enter and market will become more competitive
• in markets that are suffering from low profitability businesses tend to leave therefore it is less competitive
• new entrants are usually attracted into a new market by the high profits or the rapid growth achieved by the existing business