2.6 Competitive environment

• The competitive environment refers to other businesses offering similar products or services to the same customers
• Three competitive strategies include cost leadership, differentiation, and focus
• Match the factor of the competitive environment with its impact:

  Number of competitors ↔️ Determines degree of market saturation

  Market share ↔️ Indicates dominance or influence
• Barriers to entry protect existing businesses from new competitors.


  True
• The degree of control over pricing varies across different market structures
• Porter's Five Forces is a framework for analyzing the competitive environment of a business
• The 'Intensity of Rivalry' in Porter's Five Forces measures how fiercely existing competitors compete with each other
• What is the primary aim of cost leadership as a competitive strategy?

  Larger market share
• What defines the competitive environment for a business?

  Similar products or services
• What do high barriers to entry protect existing businesses from?

  New competitors
• What type of firm is a price taker in a perfect competition market?

  Small firms
• In Porter's Five Forces, what does the 'Threat of New Entrants' measure?

  Ease of market entry
• Businesses can pursue three main competitive strategies to gain an advantage in the market
• Technological change can significantly impact the competitive environment
• Businesses must adapt their competitive strategies to stay ahead of technological changes.

  True
• Steps in the process of innovation for maintaining a competitive advantage:

  1️⃣ Differentiate offerings

  2️⃣ Improve operational efficiency

  3️⃣ Target niche markets
• What is the purpose of Porter's Five Forces framework?

  Analyze competitive environment
• What role does innovation play in maintaining a competitive advantage?

  Attracts and retains customers
• What does price competitiveness in the competitive environment drive?

  Pricing strategies
• How does the number of competitors affect market saturation?

  Determines the degree
• What type of interdependence characterizes decision-making in an oligopoly?

  Interdependent
• Match the force in Porter's Five Forces with its description:

  Threat of New Entrants ↔️ How easy it is for new competitors to enter

  Bargaining Power of Suppliers ↔️ Control suppliers have over prices

  Bargaining Power of Buyers ↔️ Control customers have over prices

  Threat of Substitute Products ↔️ Ease customers can switch to alternatives

  Intensity of Rivalry ↔️ How fiercely existing competitors compete
• Higher bargaining power of buyers reduces a business's profitability.

  True
• Match the competitive strategy with its description:

  Cost Leadership ↔️ Lowest prices in the market

  Differentiation ↔️ Unique products or services

  Focus ↔️ Targeting a specific niche
• The choice of competitive strategy depends on the business's resources and market characteristics.


  True
• Market share indicates a company's dominance or influence
• Match the market structure with its key characteristics:

  Perfect Competition ↔️ Many small firms, homogeneous products

  Monopolistic Competition ↔️ Many firms, differentiated products

  Oligopoly ↔️ Few large firms, interdependent decision making

  Monopoly ↔️ Single firm, unique product
• Different market structures vary in the number of firms and barriers to entry.


  True
• Match the competitive strategy with its description:

  Cost Leadership ↔️ Lowest prices in the market

  Differentiation ↔️ Unique products or services

  Focus ↔️ Targeting a specific niche
• The choice of competitive strategy depends on the business's resources and capabilities.


  True
• The high costs of developing new technologies can create barriers to entry
• Innovation helps businesses maintain a competitive advantage by developing new products, services, or processes
• Businesses that fail to innovate risk losing competitiveness and market share.


  True
• Match the market structure with its key characteristic:

  Perfect Competition ↔️ Many small firms, homogeneous products

  Monopolistic Competition ↔️ Many firms, differentiated products

  Oligopoly ↔️ Few large firms, interdependent decisions

  Monopoly ↔️ Single firm, unique product
• Technological change can significantly impact a business's competitiveness.

  True
• Differentiation in the competitive environment helps attract customers who value specific features or benefits
• Understanding the competitive environment is crucial for businesses to develop effective strategies
• In perfect competition, firms are price takers because they have no control over pricing.

  True
• Order the five forces of Porter's Five Forces framework:

  1️⃣ Threat of New Entrants

  2️⃣ Bargaining Power of Suppliers

  3️⃣ Bargaining Power of Buyers

  4️⃣ Threat of Substitute Products

  5️⃣ Intensity of Rivalry
• What does the 'Threat of New Entrants' measure in Porter's Five Forces?

  Ease of market entry