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Business - Blackwell > EI - Competition And Market Types (External Influences) > Flashcards

EI - Competition And Market Types (External Influences) Flashcards

1
Q

What is Competition?

A

Rivalry amongst sellers

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2
Q

What is a Market?

A

Is a situation where buyers and sellers are in contact in order to establish price

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3
Q

What two types of markers are there?

A
  • Physical

- Non-physical

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4
Q

Why have non-physical markets grown so rapidly?

A
  • Because of the convenience they offer

- Cheaper for businesses as one website is cheaper than multiple stores

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5
Q

Why do Physical Markets continue to exist?

A

Because of the convenience they offer

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6
Q

Why is the Market Price important?

A
  • Means that Firms can’t charge a price that is too far out of line of the market price due to competition
  • Affects Mark-up, if market prices rise so does the mark-up this is a signal to firms in that market to try to supply more because it is now more profitable to do so.
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7
Q

What is Market Price?

A

Although there is no such thing as ‘the market price’ in the sense of a single price for a product, there is a price range in a market at which consumers are prepared to pay.

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8
Q

What is Mark-Up?

A

Is the difference between the cost of producing an item and the price at which it is sold.

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9
Q

What could happen to a firm if it isn’t aware of changes in the market price?

A
  • Lower Profits
  • Affect stakeholder groups negatively
  • Could cause girl to go into liquidation
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10
Q

What are Barriers to entry?

A

The factors that could prevent a business from entering and competing in a market

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11
Q

What are Barriers to Exit?

A

The factors that could prevent a business from leaving a market, even if it would like to.

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12
Q

What is a Competitive Market?

A
  • Is a market structure in which there are a large number of firms producing a similar product who are competing to meet the needs of a large number of consumers
  • Have to accept the price in the market
  • Difficult for firms to raise the price as consumer will switch to another supplier
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13
Q

What is a Monopoly?

A
  • Market controlled by a single business
  • Monopolist can Control the market because it is the only supplier in the market, and therefore can charge whatever price it likes
  • A firm that is dominant in a market may not Act in the interest of consumers
  • Competition Markets Authority (CMA) May be concerned about the behaviour of large businesses
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14
Q

How much market share must a business have to be a monopoly?

A

Over 25%

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15
Q

What is Monopolistic Competition?

A
  • Large Number of Businesses and Consumers
  • Products are very similar and not much scope to raise prices through quality.
  • Lots of non-price Competition (loyalty cards, branding)
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16
Q

What is a Oligopoly?

A
  • Where a market is dominated by a few large firms
  • May be other smaller businesses that follow the oligopolistic in term of price and products
  • Suggested that oligopolistic collude (secretory agree) to keep prices higher than if the market was competitive
  • Price does not really change
17
Q

What is Market Size?

A

Is the number of individuals in certain market who are potential buyers and/or sellers of product or service

18
Q

Why is it important for a business to have an accurate idea of market size?

A
  • If it is launching a new product:
    • Small market size large volume of sales is unlikely
    • Large market more potential sales but but probably has a number of established firms to compete against
19
Q

What is Market Growth?

A

Refers to an increase in the demand for a businesses products over a period of time

20
Q

Why is Competition regarded as beneficial?

A
  • Forces business to be efficient in terms of keeping costs as low as possible, keeps prices down for consumers
  • Encourages innovation and emphasis on meeting consumer needs
21
Q

Disadvantages of Competition of Stakeholders?

A
  • Small Firms can’t gain economies of scale.
  • Consumers have to pay higher prices because of this
  • Employees - competitive pressures to keep costs Down may impact negatively on conditions of work, wages, overtime etc
  • Suppliers - May be little loyalty to the supplier especially if the business is under a lot of competitive pressure
22
Q

What is Market Dominance?

A

Is a measure of the strength of a business and its products relative to the Competition

23
Q

Ways which a business Could increase its market share and dominance.

A
  • Being aware of consumer needs
  • Selling more to existing customers
  • Finding our why old customer no longer use your products
  • Having a clear marketing plan
24
Q

What would merging or taking over another firm do to a business?

A

Increase its market share

25
Q

Examples of Barriers to Entry.

A
  • Large Start Up Costs (Capital Costs such as premise and machinery)
  • Having the marketing budget to break consumer loyalties
  • Inability to gain economies of scale
  • Inability to gain economies of scale
  • Possibility that existing businesses will start a price war
  • Legal restrictions
26
Q

Examples of Barriers to Exit.

A
  • Difficulty of selling capital
  • High Redundancy Costs
  • Contracts with Suppliers (legal challenges if these are not honoured)
27
Q

How do Barriers to Exit make a market less competitive?

A
  • Deters new entrants because it is risky and expensive to leave he market if the venture fails
  • Makes Market less competitive and makes firms in the market more dominant
28
Q

How is Organic Growth achieved?

A

By increasing a firms sales

29
Q

How can a firm achieve Organic Growth (By Increasing it Sales)?

A
  • Selling more to existing customers

- Finding new customers

30
Q

Organic growth could lead to [………………] as long as other business are no growing at the same rate.

A

Market Dominance

31
Q

What is a merger?

A

When two companies join together to form a new larger business

32
Q

What is a Acquisition?

A

Involves acquiring control of another company by buying the majority of its agree.

33
Q

Why might a takeover go smoothly?

A

Because shareholders of both companies see it to be beneficial

34
Q

Why might a Acquisition not go smoothly?

A

It may be resisted and regarded as hostile

35
Q

How might a smaller firm compete against a bigger firm?

A
  • Offer better customer service

- Offer linger opening hours

36
Q

Who is responsible for enforcing competition law in the UK?

A

The Competition and Markets Authority (CMA)

37
Q

What does the CMA investigate?

A
  • Anti-competitive agreements
  • The abuse of dominant market position
  • Prevent actions that would allow the abuse of a dominant market position by a firm to the detriment of consumers in that market
38
Q

What kind of sanction can the CMA apply?

A
  • Business can be fined up to 10% of their global turnover
  • Custer’s and Competitors of the Firm involved can sue for damages
  • Individuals can be disqualified from being a company director
  • CMA can find an individual

Business - Blackwell (5 decks)

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