2.5.3 The competitive envirnoment

Question 1

what is the competitive environment

Answer 1

the external factors and conditions that influence how businesses operate and compete in a market

Question 2

what are factors affecting competitiveness in a market

brainstorm

Answer 2

location
usp
quality of products
economic environment- boom and recession
elastic or inelastic product
interest rates
inflation
niche/mass market
demand for product
trends (seasonal)
exchange rates for importing raw materials
bargaining power of suppliers and customers
differentiation
level of regulation

Question 3

how can competition and market size effect businesses

Answer 3

lots of competition leads to unloyal

customers

increased pressure
decreases prices to attract- then leads to lower profit margins

increase cost of promotion

may need wider product ranges

increased innovation

Question 4

what are the pros and cons of being in a large market

Answer 4

pros=
- more growth potential
- increased customers
- larger pool of market share
- more investors/share holders
- larger target market
- economics of scale
- less volatility than small markets

cons=
- higher regulations which are costly
- higher scrutiny
- potential for international competition
- overall more competition so harder to have customer loyalty

Question 5

what are the pros and cons of being in a small market

Answer 5

pros=
- easier to have USP
- less competition
- customer loyalty
- save costs on marketing
- can focus on design mix

cons=
- cant globalise
- smaller target market
- limited growth