Unit 7 - Section 7:The competitive environment

Question 1

Porters force field analysis

Answer 1

A method of analysing the competitive environment the firm is operating in

Question 2

New entrants

Answer 2

New businesses joining a market

Question 3

Substitutes

Answer 3

Alternative products consumers my chose

Question 4

Competitive rivalry

Answer 4

The number and nature of businesses meeting the same consume need

Question 5

Dominant business

Answer 5

One which has substantial influence and prices and large share in comparison to its competitors

Question 6

Porters model power of buyers

Answer 6

This occurs when:
There are lots of substitute products available
Products have high price elasticity of demand
Switching supplier is cheap and straightforward i.e Spotify not easy to swap
Customers buy in large quantities and regularly

Question 7

Porters model power of suppliers

Answer 7

Depends on:
The number of supplies available
The cost involved in changing supplier
Availability of substitutes
Relative size of customer and supplier
Risk of takeover from a supplier

Question 8

Porters model threat of substitutes

Answer 8

This occurs when:
The price of the substitute falls
It is easy for customers to switch
Customers have a little loyalty to suppliers

Question 9

Porters model threat of new entrants

Answer 9

Barriers to entry are factors such as high setup costs that limit the number of firms operating in a market. New firms can be deterred from entering by:
Strong customer loyalty
Huge economies of scale by existing players
Access to suppliers
Impact of government legislation

Question 10

Porters model competitive rivalry

Answer 10

Is strongest when:
Entry into industry is easy
It is easy to access substitutes
Little differentiation between products
Competitors are the same price as each other
The market is not growing so firms have to tempt customers from each other

Question 11

Impacts of strong rivalry

Answer 11

Causes competitive pricing strategies to be utilised
Promotional offers and deals become more commonplace
Innovation occurs

Question 12

Impact of changes in competitive environment

Answer 12

Firms:
May seek new markets
May seek to merger or takeover
May take action in marketing

Question 13

Markets where there are dominant businesses

Answer 13

4 big supermarkets
Games consoles
Sports channels
These firms are in a position where the five forces around them are relatively weak and rivalry is strong