1.3.6 the competition

Question 1

What does a market map illustrate?

Answer 1

All the positions a product can take based upon two dimensions which are significant for consumers.

Question 2

What are some possible dimensions for a market map? [6]

Answer 2

• High vs low price
• Large vs small volume
• Light vs heavy
• Good vs lesser quality
• Young vs old
• Necessity vs luxury

Question 3

How can a firm gain a competitive advantage? [4]

Answer 3

By using price, quality, cost or through a niche market.

Question 4

When does a firm gain a cost competitive advantage?

Answer 4

When it can lower its average costs and create maximum value to consumers.

However it is hard to maintain a cost competitive advantage, so firms have to offer consumers other benefits, in addition to a low price.

Question 5

What is product differentiation?

Answer 5

The act of distinguishing a product from another, to make a product seem more favourable than those from a competitor.

Question 6

What is added value?

Answer 6

The additional value a firm creates during the production process, and is the difference between the price of the finished product and the cost of the inputs used to make it.

Question 7

How can value be added to a product? [5]

Answer 7

• Brand
• Quality
• Good service
• Unique features
• Convenience for the consumer

Question 8

What is a stable market?

Answer 8

One where trade can be conducted in large volumes without causing the price to change significantly. Any changes that occur are slow and predictable.

Question 9

What is a dynamic market?

Answer 9

One which changes constantly and rapidly, such as the market or mobile phones.