2.1.4
Competition & The Market
How Competition Affects the Market
How Competition Affects the Market
The external environment covers the range of factors which may affect a business, but are outside of the business' control. Competition is a critical part of the external environment.


Impact of competition
Impact of competition
- Competition can affect a business’ costs and demands as the presence of competitors may reduce demand for a business' product or service.
- Competition can force businesses to reduce their prices or increase their sales & marketing spend.


Rising costs
Rising costs
- The presence of a competitor can also increase business costs as a business may increase its spending on promotion and advertising or may invest in research and development to improve the products offered for sale.


Example of competition
Example of competition
- For example, from 2012, Tesco experienced falling demand as competition from Aldi and Lidl rose in the food retail industry.
- This competition increased Tesco’s costs as it increased its promotional activity and increases its investment in developing its new range of food items, known as Stockwell & Co, which replaced its Tesco Value range.
1Exploring Business
1.1Features of Business Organisations
1.2Organisation of Businesses
1.3Business Environment
1.3.1External Influences
1.3.2Political & Legal Change
1.3.3Economic Environment
1.3.4Social & Technological Environment
1.3.5Lifestyle & Technological Environment
1.3.6Corporate Social Responsibility
1.3.7The Competitive Environment
1.3.8Innovation
1.3.9Risk & Uncertainty
1.3.10Porter's Five Forces
1.3.11SWOT Analysis
2Marketing Campaigns
2.1Marketing
3Business Finance
3.1Sources of Finance
3.2Financial Planning
3.3Financial Statements
4International Business
4.1Globalisation
4.2International Business
4.3International Economic Environment
4.4Factors Affecting International Business
5Principles of Management
5.1Management & Leadership
5.2Theories of Motivation
6Business Decision Making
6.1Business Principles & Practices
6.2Quality Management
6.3Human Resources
6.4Documents & Business Decisions
Jump to other topics
1Exploring Business
1.1Features of Business Organisations
1.2Organisation of Businesses
1.3Business Environment
1.3.1External Influences
1.3.2Political & Legal Change
1.3.3Economic Environment
1.3.4Social & Technological Environment
1.3.5Lifestyle & Technological Environment
1.3.6Corporate Social Responsibility
1.3.7The Competitive Environment
1.3.8Innovation
1.3.9Risk & Uncertainty
1.3.10Porter's Five Forces
1.3.11SWOT Analysis
2Marketing Campaigns
2.1Marketing
3Business Finance
3.1Sources of Finance
3.2Financial Planning
3.3Financial Statements
4International Business
4.1Globalisation
4.2International Business
4.3International Economic Environment
4.4Factors Affecting International Business
5Principles of Management
5.1Management & Leadership
5.2Theories of Motivation
6Business Decision Making
6.1Business Principles & Practices
6.2Quality Management
6.3Human Resources
6.4Documents & Business Decisions
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