1.3.6 The Competition

Question 1

market positioning

Answer 1

Show how consumers view individual products or brands, in relation to competing products. This may involve variations in price or quality or other aspects of interest to the consumer

Question 2

market mapping

Answer 2

The use of a grid showing two features of a market, such as a price and quality or consumer page. Individual brands or businesses are added to the grid to show potential niches, or gaps in the market. It helps position products in relation to one another

Question 3

competitive advantage

Answer 3

Feature of a business that enables it to compete effectively with rival products - price, quality, services, reliability, reputation or innovation, location, product differentiation

Question 4

product differentiation

Answer 4

When each business creates a distinctive product. Involves giving it unique features in order to attract customers, changing perceptions on the function of the product (branding)

Question 5

pricing strategy

Answer 5

The way in which a business decides upon the price of its products; output levels will be linked to price: high prices will often be practical only if output is relatively low

Question 6

stable market

Answer 6

One in which the pace of change is slow; market size and market share are fairly constant with little variation in price. Innovation is rare and may consist of variations on existing products.

Question 7

market maps

Answer 7

• Concerns they way businesses place their products, in relation to competing products in the minds of consumers
• businesses decide whether they want to follow competition with a similar product or create a ‘different’ image for their product
• A business that has found a gap in the market differentiates its product so as to to fill the gap

Question 8

positioning the product

Answer 8

• Beneficial it may be best to imitate the market leader
• May be possible to find a gap in the market
• A distinctive product may secure customer loyalty
• Business with long existing products may decide to reposition them in the market

Question 9

market mapping and product design

Answer 9

• Market mapping can help in the design of a product or a product range. The objective is to create a product that will either appeal to customers in a mass market or meet very specific preferences in a niche market
• Product and prices will both be important

Question 10

advantages of market mapping

Answer 10

• Enables a business to spot gaps in the market
• Can help a business to differentiate its product from the competition

Question 11

disadvantages of market mapping

Answer 11

• Can be hard to categorise some products and services
• No guarantee of success
• Identifying a gap does not mean there is a need for a product to fill it: more research must be done

Question 12

firms gaining competitive advantage

Answer 12

• In competitive markets all businesses must strive for competitive advantage in order to avoid falling sales and rising losses. - Cutting costs can allow a business to compete on price and still make a profit. This can be achieved in many ways included:
• Improvements in staff training
• Improving relationships with suppliers
• Striving for greater efficiency in resource use; includes investing new production technologies
• Perceived good value for money may be based on a low price or reputation for quality

Question 13

how do businesses with CA become successful

Answer 13

• Businesses that enhance their competitive advantage by cutting prices or adding value to the product aew likely to be able to sell more:
• Adding more value can allow them to raise prices to, making a product or service distinctive can enhance competitive advantage → positive reputation for eg technical excellence or appealing design features
• Can apply to services as well as manufacturers (hotel service)

Question 14

product differentiation

Answer 14

• Product differentiation means every product is carefully designed to be in some way a little different from competing products
• Some products suit a mass market but many will be designed precisely to match the needs of a particular market segment
• Branding may help to generate customer loyalty

Question 15

USPs and Prod D

Answer 15

• Individual businesses may differentiate within their own product range but they will be especially careful to distinguish their products from others
• Each business aims to cater for as many different market segments as possible
• USPs can be important, these are features that no competing product can match (unique selling points) → makes them better competitors

Question 16

different types of prod d

Answer 16

• Product differentiation can happen in many different ways:
• Design quality, reliability and customer service can all be important
  Businesses may find changing fashions or competitor activity have taken demand from them
• Have distinctive product ranges, with a reputation for giving value for money, can ensure survival if they can adapt swiftly to change

Question 17

adding value

Answer 17

• Adding value: may achieve quality by making the product more useful, reliable or desirable
• Introducing new products or redesigning existing ones
• Target product reliability or customer service with appropriate staff training
• Produce a consistently reliable branded product that will sell for more than an anonymous, basic one would → product differentiation

Question 18

comp ad, adding v and prod D links

Answer 18

• Businesses add value, using their resources (factors of production) to build/distribute a product, so they can recover the costs of adding value and make a profit
• To do this thye must have some kind of competitive advantage that allows them to survive in the marketplace
• For some businesses it is helpful to examine the market segments where their products will sell best: can create added value by differentiating their products to suit as many potential customers as possible

Question 19

different firms deciding level of output

Answer 19

Depends on:
- Competition
- Competitive advantages of the product→ Is it differentiated from competing products
Is the economy growing

With a long established product:
- The decision will be affected by its position in the market
- If a market is a leader, it may be possible to charge a relatively high price and rely on brand loyalty to maintain sales

With unknown business:
- Price has to be reasonable competitive, in order to establish a reputation

Question 20

product diff and charging higher prices

Answer 20

• Looking for ways to add value may help too
• Advertising may create opportunities to expand sales without having to reduce prices
• There is more information on pricing strategies in chapter 2.2

Question 21

dynamic markets and businesses

Answer 21

A business has to be adaptive to the changes in its market
- Otherwise it risks being left behind and ceases being competitive
- Ultimately falling sales will cause it to exit the market
- Markets are shaped by market forces; the more these change the greater the dynamism

Some markets are more dynamic than others:
- Eg high tech products have rapidly changing markets → dynamism has origins in the changes of tech in supply chain
- Includes also change in fashion, advertising, rising incomes, substitutes
- In comparison, some markets are very slow moving: snack confectionary market

Successful businesses must have tactics and strategies to deal with market changes:
- Short term vs long term? (high profits with high prices vs mass market creation or increasing market share with low price for market power

Question 22

market orientation

Answer 22

• Market orientation: producers need to be intouch with their market, and social media has made this increasingly easier
• Market research may provide vital information about a market that the business has previously ignored
• The business may develop competitive advantages through product design or customer service
• Brand loyalty may make it easier for the business to charge a higher price for its products and services

Question 23

the marketing mix

Answer 23

• deals with how a business uses price, product, distribution, and promotion to market and sell its product
• price, product, place, promotion
• an effective marketing mix: meets consumer needs, achieves marketing obs, is balanced and consistent, creates competitive adv

Question 24

price and the marketing mix

Answer 24

• business considers costs when setting prices
• thinks about making profit but also cost effect on demand
• think about elasticity
• small business vs large business –> does not have a well established brand

Question 25

types of pricing

Answer 25

• demand based pricing
• skimming –> set higher price for a product to get a higher profit margin to compensate for low sales
• penetration pricing –> price set lower than comp to convince people to buy your products
• cost based or cost-plus pricing –> costs of production included in price
• price discrimination –> selling a similar product at different prices
• predatory pricing –> pricing to gain market power
• deterrant pricing –> prices low to deter entrants due to unattractive market

Question 26

product and the marketing mix

Answer 26

• factors relating to design, specifications and features of the product
• products have different aspects that help them sell
• a business may alter its products to increase its appeal to different customers

Question 27

promotion and the marketing mix

Answer 27

• this means communicating something about the product
• it exists, a new product/special offer or why should people buy it
• depends on product and target market

Question 28

place and the marketing mix

Answer 28

• distribution
• internet vs shop
• small businesses without much capital so the internet is important for them to get recognised
• websites are relatively low cost and social media can be used as advertisement at a low cost