2.6 Competitive environment

2.6 Competitive environment

1. Key terms

   • Markets share
     • The percentage of sales in a particular market recorded by a business
   • Recession
     • When the value of an economy's output of goods and services falls for six months or longer
   • Monopoly
     • When a business does not face any competition in a particular market
   • Diversification
     • When a business starts selling in new markets
   • Market
     • Exists where buyers and sellers exchange goods and services for a price

2. How to compete in different ways

   • Price
     • Business avoid competing strongly on price with larger rivals as it will cause lower profits
   • New products
     • Attract customers from competetors
   • Advertising
     • Where consumers in the market switch brands regularly so may be attracted by a large amount of advertising

3. Uncertainty and Risk

   • Internal risks
     • They come from in the business like: employees refusing to work-Fire or theft-bad publicity-loss of employees to competitors
   • External risks
     • New competitors-natural disasters-new laws
   • Economic Uncertainty
     • All businesses are affected by changes in economy like the UK leaving the EU
   • Competitor uncertainty
     • When you dont know what your competitors will do (e.g. a new product
   • social uncertainty
     • When a business cant predict social trends in the public and how it will effect sales
   • How to reduce risk
     • Business plan
     • Invest in training for employees for hazards or customers
     • Use experts and consultants
       • Reduce decision making errors or effects of bad publicity
     • Selling in different markets
       • If sales fall in one market due to issues other markets are profitable (diversification)