The Competitive Environment (2.5.3) Flashcards
Define Market Size
The total volume of sales within a particular market
Define Market Share
The percentage of the total volume of sales within a particular market achieved by one firm
What’s the equation for Market Share?
Total Company Sales / Total Industry Sales
What’s the competitive environment?
The number of firms competing for the same customers
Define Market Structures
The characteristics of a particular market
What is Monopoly?
One dominant firm in a market. In the UK, it is only firms with at least 25% market share. Too much power in the market.
What is Oligopoly?
A few dominant firms in a market. They engage in non-price competition (quantity, branding etc…). Each has high power in the market.
What are competitive markets?
Many small firms in a market. They will engage in price wars as products are all similar. Low power in the market.
What are barriers to entry?
Costs or other obstacles that prevent new competitors from easily entering an industry.
Barriers to entry examples:
- Economies of scale
-Infrastructure
-Patents
-Brand Loyalty
-Switching Costs
-Technology
With competitive markets, Oligopoly and Monopoly what happens to the barriers of entry
As you go from CM – Oligopoly – Monopoly the barriers to entry get stronger
With competitive markets, Oligopoly and Monopoly what happens to the products
As you go from Monopoly – Oligopoly – CM the products get more standardized
What are Price Wars?
Firms undercutting each other to offer the lowest price.
What is Non-Price competition?
Firms completing on factor such as: quality, customer service, differentiation, delivery speed, convenience and branding
What is the impact of new entrants (a company that starts selling a particular product or service)? Disadvantages + Advantages
Disadvantages:
-Lower Price
-Lower Profit
-Increased Marketing Costs
Advantages:
-Pressure to innovate
-Increased differentiation
