2.6 The competitive environment

2.6 The competitive environment

1. Keywords

   • Markets
     • Where there are buyers and sellers.
   • Market Share
     • The percentage of sales in a particular market recorded by a business.
   • Uncertainty
     • When there is a lack of information about a situation meaning the outcome or consequences are difficult to predict. 
   • Recession
     • When the value of the economy's output of goods and services falls for six months or longer.
   • Competition
     • When more than one business is trying to attract the same customers.
   • Business plan
     • A document setting out what a business does and what it helps to achieve in the future.
   • Entrepreneur
     • Someone who is willing to take risks involved in starting a new business.
   • Monopoly
     • When a business doesn't face any competition in a particular market.
   • Diversification
     • When a business starts selling products in new markets.
   • Contract of employment
     • A legal document stating the hours, rates of pay, duties and the other conditions under which a person is employed.

2. What is a market?

   • A market exists where there are buyers and sellers who come together to exchange goods and services for a price.
   • A market can be geographical, such as a high street, or online, e.g. websites for music and film downloads.
   • Markets can be local, such as convenience shops, or global, such as selling cars around the world.

3. What is competition?

   • Competition can be local or national.
   • Competition exists when more than one business is attempting to attract the same customers.
   • The more businesses provide the same goods or services the more competitive the markets.

4. Levels of competition

   • For some businesses there are very few rivals, but for others there is strong competition.
   • A monopoly exists when a business does not face any competition in a particular market.
   • Water companies in the UK currently have no other companies to compete against.

5. Competition in market with few businessses

   • Market share is the percentage of sales in a particular market that a business controls.
   • Globalisation has meant that many UK markets are dominated by a small number of businesses who have a large market share.

6. Different ways of competing.

   • Price competition means businesses avoid competing strongly on price with larger rivals as this will cause lower profits.
   • Competing by developing new products aims to attract customers from competitors, e.g. the games console, Nintendo Switch, can be used on the go or at home.
   • Competing through advertising happens when consumers in the market switch brands regularly, so they may be attracted by a large amount of advertising, e.g. the car insurance market is very competitive, so companies like Direct line advertise to sttract new customers.