The competitive environment

Question 1

Define the term competition.

Answer 1

Competition in business is where more than one seller seeks to sell the same goods or services to a customer

Question 2

List the different impacts competition has on business decisions.

Answer 2

Nature of business ownership
Nature of product or services produced
Nature of the product range 
Pricing strategies used
Marketing methods used

Question 3

Explain the impact of competition on the nature of business ownership.

Answer 3

Competition from other businesses will have an impact on the decision to become a ltd or a plc

A business may wish to grow and to expand and to do this it will need a significant injection of investment and may need to become a ltd or plc to sell shares to raise cash

Question 4

Explain the impact of competition on the nature of product or services provided.

Answer 4

Competition from other businesses may change the nature of the product or the services provided

Competition from Starbucks and Costa has meant that many smaller cafes and coffee shops now serve lattes and cappuccinos rather than just basic tea and coffee

Question 5

Explain the impact of competition on the pricing strategies used.

Answer 5

Competition from other businesses means that in some industries the whole nature of the product range has had to change

In response to consumer demand and competition from independent bakeries, the larger bread manufacturers have had to produce a whole “free from” range of new types of bread e.g. sourdough

Question 6

Explain the impact of competition on marketing methods used.

Answer 6

Competition from other businesses means that marketing campaigns need to be exciting, up to date and eye catching

This is going to have a cost implication, but important in highly competitive markets where there are many sellers with the same product e.g. car insurance

Adverts for these types of products tend to be funny to make them more memorable and stop the customer switch off