Competitive Environment

• Competition is the number and relative power of firms trading in the same or similar markets.
• Competition may attract new suppliers into a market increasing the availability and therefore driving costs down.
• Competition can encourage firms to compete on price therefore lowering prices overall and increasing demand in the market.
• A number of firms competing may see a spread in demand between firms, reducing the market share of each firm if the market size remains unchanged.
• A competitive advantage is a feature of a business that allows it to perform more successfully than others in the market.

  • Same quality of product at a lower price
  • Superior product achieved through differentiation
• Business will employ many tactics and strategies to compete, these include:

  -Differentiation

  -Pricing policies

  -Market Leadership

  -Reputation

  -Market share

  -Cost control

  -Technology

  -Suppliers

  -Employees
• Differentiation- making their product stand out with a unique feature.
• Pricing Policies- charging prices below those of competitors- however have to be careful this doesn't not make the products appear undesirable or lead to a price war.
• Market Leadership- being the dominant business in a market often leads to brand recognition and brand loyalty.
• Reputation- leads to customers trusting a business, receiving positive public relations e.g. media attention and word of mouth promotions.
• Market share- the percentage of the total market held by a specific firm
• Cost Control- allowing the business to compete on price if it wants to.
• Technology relationships with customers- the ability of a business to communicate with customers. This includes databases to directly market to customers and more recently the use of social media and review sites.
• Suppliers- ability to match supply to meet demand is reliant on suppliers as well as maintaining quality.
• Employees- productivity and quality standards are affected by employees as is customer service.
• Benefits and importance of establishing and maintaining a competitive advantage:

  -Maintain market share

  -Achieve an objective of growth

  -Brand loyalty

  -Reputation

  -Barriers to entry

  -Meeting customer needs

  -Innovation