impact on firms

Question 1

What are some conflicts from competition and market dynamics? [2]

Answer 1

• Price Wars
• Barriers to entry: established firms may conflict with new entrants threatening their market position, leading to strategic behaviours such as aggressive advertising or patent protection

Question 2

What are some trade offs due to competition and market dynamics? [2]

Answer 2

• Market share vs profitability: firms may lower prices or offer discounts to gain market share, reducing short-term profits. E.g. e-commerce firms such as Amazon often priorities market dominance over immediate profitability
• Innovation vs Cost Management: to stay competitive, firms may invest heavily in innovation, increasing costs in the short term

Question 3

What are some trade offs from labour market conflicts?

Answer 3

• Cost control vs employee satisfaction: firms must balance keeping labour costs low while offering competitive salaries to attract and retain talent
• Automation vs Job Preservation: introducing automation to improve efficiency can lead to job losses, creating conflicts with workers and unions