(PAPER 3) 2.5.3 competitive environment *

Question 1

Competitive environment

Answer 1

how fiercely business compete with the products that another business makes

Question 2

4 market structures

Answer 2

perfect competition
Monopolistic competition
Oligopoly
Monopoly

Question 3

Perfect competition definition

Answer 3

a theoretical type of competition where all firms compete on an equal basis e.g. currency exchange, loo roll, fruit and veg

Question 4

perfect competition

Answer 4

> many firms 
> products are homogenouse- they are the same whichever business produces them
> prices are the same 
> marketing is not important 
> low market share 
> low profits
> high freedom of entry 
> the best strategy is to keep costs as low as possible in the hope of maintaining profit margin.

Question 5

monopolistic competition definition

Answer 5

a market in which many firms offer goods or services that are similar, but not perfect substitutes e.g. estate agent, hair dresser, fast food

Question 6

monopolistic competition

Answer 6

> many firms 
> similar products but slightly different 
> similar prices
> marketing is important 
> low market share
> low profits
> high freedom of entry

Question 7

oligopoly definition

Answer 7

a market dominated by a few large companies e.g. supermarkets, phones, cars

Question 8

oligopoly

Answer 8

> few firms
> differentiated products 
> competitive prices 
> marketing is very important 
> high market share
> more profits
> lower freedom of entry

Question 9

monopoly definition

Answer 9

a single business that dominates supply in a given market e.g. Thames water, utility

Question 10

monopoly

Answer 10

> 1 firm
> very differentiated products 
> high prices
> high marketing 
> high market share 
> high profits 
> freedom of entry is low to impossible

Question 11

larger markets=

Answer 11

more potential customers- more businesses attracted to these markets. This means that larger markets tend to have higher levels of competition than smaller markets because more businesses or suppliers operating in the market. large markets attract other new entrants, resulting in increased competition over time = even dominant producers recognise they need to offer a good service to avoid opening an opportunity to rivals.

Question 12

smaller markets=

Answer 12

fewer customers and lower total sales- may be easier to build up barriers to entry.
businesses often try to leave small/shrinking markets and move into growing/larger ones- larger market size = more potential growth = increase in profits

Question 13

the level of competition in a market and the size of the market determines…

Answer 13

a businesses strategy for launching a new product into the market
e.g. lots of competition = business needs to make sure they have enough stock of the new products so it cam meet initial customer demand OTHERWISE it could loose customers to competitors who were able to copy the product quickly following the launch.

Question 14

the competitive environment evaluation

Answer 14

carrying out MR before entering a market is vital. worst thing that could happen- a business is forced out and might be forced to close cause of competition.
market research helps business determine market size , how many consumers would actually be prepared to buy their product and level of competition in a market.
therefore, a business can comprehend whether entry into certain markets would be advisable or even possible!!

Question 15

6 determinants of

Question 15

6 determinants of

Question 16

6 determinants of

Question 17

6 determinants of competitiveness

Answer 17

1. number and size of businesses in the market
2. extent of barriers to entry
3. extent to which products can be differentiated
4. knowledge that buyers and sellers posses
5. degree of interrelationships
6. legal factors

Question 18

how is price impacted by a competitive environment

Answer 18

prices likely to be forced down, need to find a USP to differentiate from competitors

Question 19

how is profit impacted by a competitive environment

Answer 19

lower profit margins as prices have to be forced down- businesses need to operate more efficiently to cut cost- to improve profit margin

Question 20

how is communication with customers impacted by a competitive environment

Answer 20

businesses under pressure to meet customer needs, so may carry out more market research or use social media

Question 21

how is innovation impacted by a competitive environment

Answer 21

will be encouraged to gain interest from customers and gain competitive advantage

Question 22

how is product range impacted by a competitive environment

Answer 22

need to keep up with what competitors are doing to offer the same choice to customers and meet their needs

Question 23

how is marketing impacted by a competitive environment

Answer 23

quality and amount of money invested in marketing will be important to stand out from competitors

Question 24

4 types of market

Answer 24

1. global markets
2. national markets
3. regional markets
4. local markets

Question 25

reasons why operating in a large market would be chalenging

Answer 25

1. constant need to watch what competitors are doing and better it
2. constant review of strategy/ future direction to survive

Question 26

reasons why operating in a small market is likely to be challenging

Answer 26

1. insufficient volume of sales

2. fear of larger rivals joining the market