BS3- Competition And Market Dominance

Question 1

State two barrier to exit.

Answer 1

Redundancy costs

Exit fees and rental agreements

Question 2

Outline why contracts with suppliers may act as a barrier to exit

Answer 2

They may be locked into a contract with a supplier with means if they broke the contact by exiting the market they would be breaking laws or contacts.

Question 3

Identify two impact to a business of competing in a market with many sellers.

Answer 3

If there is a lot of competition profit margins can be a lot less due to competitive pricing being popular
Can be easier to negotiate with suppliers and there are lots of other options

Question 4

Identify two impacts to a business of competing in a market with sew sellers

Answer 4

Can become the monopoly of the market a lot easier

May get more business and sales

Question 5

Explain what is meant by market dominance.

Answer 5

It is the measure of the strength of a business and its products relative to the competition. The more obvious way to calculate it is to look at the size of the share of the market the business has.

Question 6

State two ways of growing a business externally.

Answer 6

Merger

Takeover

Question 7

Distinguish between external and organic growth.

Answer 7

External growth usually involves a merger or takeover where as organic growth is the growth achieved by increasing the firms sales.

Question 8

State two ways of growing a business organically

Answer 8

Selling more to existing customers

Reinvest profits to expand

Question 9

Explain how growth (external and organic) can lead to the creation of a dominant business. (Use the concept of market share in your answer)

Answer 9

Both external and organic growth both lead to being able to make more sales and therefore gain a better marker share. The bigger the market share then the more dominant the business is.

Question 10

Outline two ways that the CMA regulates markets in the uk.

Answer 10

They will stop company’s driving others out the market

They can stop business deals which will put business over having 25% market share

Question 11

State three impacts of regulation of uk markets by the CMA.

Answer 11

Stops business becoming too powerful
Will stop tactical takeovers for power
Will reduce the chances of business being pushed out the market