The Competitive Environment Flashcards
Market share
Percentage of sales volume (units) or value of a firm in comparison to total sales in the market. Competition and market share can impact a company’s prices, quality, publicity and reputation.
Market
A place where people can trade goods or services
Monopoly
A monopoly is when 1 firm has 100% of the market share. The CMA considers a monopoly as 25% of the market share in large areas like the entire UK.
Patent
If a product took large costs to release, you can have a patent from the government to prevent other companies from copying your product for a set amount of years. This gives them monopoly and they can charge higher prices. This also incentivises them to put more time and money into the product while they still have the chance.
Brand loyalty
During competition customers may choose you over other brands because of sales and quality.
Competition
When more than one business is attempting to attract the same customers.
Uncertainty
When there is a lack of information on a situation. This means the outcome or consequences are hard to predict.
Risk
The possibility of something going wrong.
Diversification
Occurs when a business starts selling new products in new markets
Recession
When the value of an economy’s output of goods and services falls for 6 months or longer.
Price war
Businesses reduce prices while competing against other businesses to try earn more customers. This could get sales dangerously close to the profit margin.
Internal risks
Risks inside the company which can often be controlled. Eg: if a business mistreats its employees, this then increases the risk of strikes and larger profit loss.
External risks
Risks that a business has very little control over. Eg: government could add laws that impact business costs, such ass national living wage. Or a pandemic could sweep through the country, causing lockdowns which would lead to profit loss like COVID-19.
