2.5.3 Competitive environment

Question 1

Competitiveness

Answer 1

the ability of a business to deliver better value to customers than competitors

Question 2

Competitive advantage

Answer 2

the ability of a business to add more value for its customers than its rivals and attain a position of relative advantage

Question 3

Market share - increasing marketing competition

Answer 3

perfect competition - monopolistic competition - oligopoly - monopoly

Question 4

key issues of a competitive environment

Answer 4

• extent of current competition
• potential for new firms to enter the market
• the extent to which a business produces a similar product or a differentiated product

Question 5

What is the threat of new market entrants?

Answer 5

• high profits will tempt new comers to enter a market and this will drive down prices and profits
• therefore the maintenance fo market power depends on erecting and maintaining barriers to market entry

Question 6

What are the 4 market structures?

Answer 6

perfect competition
monopolistic competition
oligopoly
monopoly

Question 7

What are the 4 market structures?

-perfect competition

Answer 7

-many firms all producing or selling homogenous goods

Question 8

What are the 4 market structures?

-monopolistic competition

Answer 8

competition between many firms producing differentiated goods
-restaurants, fast food outlets

Question 9

What are the 4 market structures?

-oligopoly

Answer 9

• competition between a small number of suppliers

- chocolate bars

Question 10

What are the 4 market structures?

-monopoly

Answer 10

a single supplier

-water and gas

Question 11

Strategist’s view - Porters Model

Answer 11

intensity of rivalry

• powers of customers
• powers of suppliers
• threats of market entry
• threats from substitutes

Question 12

Market forces - what can be done?

Answer 12

customer reliance

• reduce over reliance on customers
• focus marketing efforts on most profitable customers

Supplier reliance

• build relationships
• have an alternative source of supply

Barriers to entry

• build a brand
• capture a fair share of distribution
• operate efficiency to compete at low cost

Question 13

Barriers to entry - restricting competition

Answer 13

• product differentiation - will increase customer loyalty making it difficult for new comers to gain market share
• access to raw materials and distribution channels - a lack of access will make it difficult for newcomers to enter the market
• retaliation by established products - will act to discourage newcomers

Question 14

Why is USP important when being competitive?

Answer 14

• a way to differentiate
• don’t have to compete on price
• higher profitability

Question 15

USP

Answer 15

something that sets a product apart from its competitors in the eyes of customers, both new and existing

Question 16

What is important when being competitive?

Answer 16

• great product (USP)
• efficient operation (unit costs)
• customer service (customers)