The Competitive Environment
Business: Edexcel GCSE, topic 1.2.4
Market
The term 'market' can be used in 3 different ways.
Place to trade products
- A place where buyers and sellers meet to trade products. This can be a website like eBay or a stock market.
Industry
- An industry for a specific good or service. Businesses often analyse the market for bottled water or the market for games consoles.
Specific group of customers
- We often talk about the market for 16 year olds or the market for retired people (retirees).
- This is often used when talking about a company’s “target market”, which is the group of people that a company aims their product or service at.
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:
Location
Product range
- Product range is the different goods or services that one firm offers to customers.
Customer service
Price
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:
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.
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.
Test yourself on The Competitive Environment
Which of the following can NOT be described as a market?
What do we call the group of people a company aims their product or service at?
Ryanair sells flights from £17. What do you think it competes on?
Colgate sell lots of different types of toothpaste. What do you think one variable that they compete on is?
Does Apple compete more on price or quality?