External Environment

• What is the concept of competition in business?

  Rivalry between sellers in a market
• How do businesses compete in a market?

  By trying to grab their share of demand
• What are the two types of competition mentioned?

  Direct and indirect competition
• Give an example of direct competition.

  Pizza delivery businesses
• What is an example of indirect competition?

  Competing against a curry house
• What is the existential level of competition in a market?

  Battle for market share
• What happens if a business has zero market share?

  It has no business or sales
• What can happen in markets with intense rivalry?

  Price wars may occur
• How can businesses compete through innovation?

  By developing new products and services
• What do market conditions relate to?

  The attractiveness of the overall market
• What is competitive advantage?

  Adding more value to customers than rivals
• How do market conditions affect businesses in an industry?

  They affect all businesses, but responses vary
• What might a business use to gain competitive advantage?

  Distinctive design or strong branding
• What are two key indicators of market conditions?

  Economic Growth (GDP) and Market Demand
• How can discount supermarkets gain competitive advantage?

  By offering phenomenal value for money
• What does economic growth measure?

  The value of output in the economy
• What is one way businesses can achieve efficiency?

  Investing heavily in automation
• How does economic growth influence market demand?

  The level of demand is influenced by growth rate
• What is a key characteristic of businesses that succeed in markets?

  They have competitive advantage in various ways
• What is the long-term growth rate of a mature economy like the UK?

  Around 2-3%
• How does GDP growth vary?

  It varies depending on the economic cycle
• What does market demand measure?

  How much of a good or service consumers want
• How does market demand affect a business's revenues?

  It turns into revenues through sales
• What is a key indicator of market conditions related to market size?

  The size and growth rate of a market
• What are the ways businesses can gain competitive advantage?

  • Efficiency through automation
  • High-quality product delivery
  • Innovation in products or services
  • Exceptional customer service
• What happens in a fast-growing market?

  It encourages new entrants and benefits competitors
• What are the conditions in a slow-growing or declining market?

  Competitors fight for their share of weak demand
• What does income refer to?

  Flow of money received over time
• What are common sources of income?

  Wages, rent, interest, and profits
• How is an interest rate defined?

  Reward for saving and cost of borrowing
• What types of interest rates exist in the economy?

  Savings, borrowing, mortgage, credit card rates
• What is the role of the Bank of England regarding interest rates?

  Regulates the economy using policy interest rates
• What has been the trend of the Bank of England Base Rate?

  Very low and stable for several years
• What might happen if interest rates start to rise?

  Cost of servicing loans may increase
• How does rising interest rates affect consumer confidence?

  Consumer confidence should increase with spending
• What is the impact of rising interest rates on disposable income?

  Effective disposable income rises with lower mortgage costs
• How do rising interest rates affect business investment?

  Business investment should be boosted by rising demand
• What effect do rising interest rates have on the housing market?

  More demand and higher property prices
• How do rising interest rates influence exchange rates and exports?

  Cheaper currency increases exports
• What does demography study?

  Size and composition of a population