1.3.7

The Competitive Environment

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Competition

Competition is defined as other companies who are selling a similar (or the same) product in the same market. Competition is all about meeting the customer’s needs better than competitors. This might be by providing a low price or a high quality product. Businesses can compete on:

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Product range

  • Product range is the different goods or services that one firm offers to customers.

The Impact of High Competition

Competition normally has a negative effect on a business’ profits. This is because in a competitive market, the business has less control over prices. Competition forces businesses to be efficient and to constantly try to improve their product. Firms usually compete on:

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Price

  • Competition often forces businesses to be efficient.
  • Businesses may try to produce their product at the lowest cost possible.
  • Ryanair is an airline that tends to compete with competitors on price. It has a very short period of time between its flights so that it uses its planes as efficiently as possible.
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Quality

  • Competition can lead to better quality products or services if firms compete by creating the highest quality or best product (or service).
  • Companies like Apple compete by making the highest quality product that they can.

Jump to other topics

1Exploring Business

2Marketing Campaigns

3Business Finance

4International Business

5Principles of Management

6Business Decision Making

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