Buisness (UNIT 3)

• Businesses in mature industries: Produce products and services that are close substitutes, want to have a competitive edge over each other and compete to gain attention of customers
• Businesses experience agressive competition which creates a hostile business environment.
• Effects of a hostile competitive environment: Competitive Rivalry, Strategic Analysis required to remain competitive, Barriers are created to deter other competitors from entry.
• Current Business Climate: Prone to rapid change, Global Operations, Operations and communications is subject to technological advancement and online competitors can disrupt dominant businesses
• Trends influence consumer behaviour
• Market Power: consists of Perfect competition, Monopolistic Competition, Oligopolies and Pure monopolies.
• Perfect Competition: Large number of buyers and sellers, no barriers to entry or exit, homogenous product, price taker, perfect information.
• Monopolistic Competition: Many firms selling differentiated products, high degree of competition, low barriers to entry/exit, imperfect information.
• Oligopoly: Few large firms dominate the market, high barriers to entry/exit, interdependence between firms, imperfect information.
• Pure Monopoly: Single firm dominates entire industry, high barriers to entry/exit, no substitutes, imperfect information.
• True Oligopoly: Businesses must account for 60 to 80 percent of the total market, eg banking industry
• Barriers to Entry: High start-up costs, economies of scale, patents, government regulation, brand loyalty, access to distribution channels, network effects
• Economics of Scale = lowest possible unit costs
• Duopoly: When two businesses dominate the entire industry, this is due to their ability to control the market and pre-existing barriers to entry
• Characteristics of Hostile Environment: Cost-competitive environment, Declining Profit margins and Low profit margins (selling price - cost price)
• Survival of Hostile Competitive Environment: Knowing their USP and exploiting it to gain consumer attention, and to gain a competitive edge without direct competition, Product Variations and Increased product line to keep consumer interest
• Competitive Analysis (Benefits): understanding of what drives the competitor, competitor's marketing strategies, existing competitor strategies and competitor's strengths and weaknesses.
• SWOT analysis: Strengths, Weaknesses, Opportunities, Threats
• Research and Development (R and D): strategic tool to remain competitive in the market
• benefits to R and D: Competitive Advantage, Customer Loyalty, Reputation - strong brand, Additional Publicity, Intellectual Property, Potential to enter new (niche) markets and lower costs - efficient processes.
• challenges to R and D: Very Expensive, Not guaranteed to lead to a breakthrough in the market or gain market acceptance and leading competitors also invest into R and D.
• Project Management: unique one-time operations designed to achieve a specific set of objectives.
• Types of Projects (examples): Relocating office spaces, Introduction of new products and setting up a new IT space
• Benefits of project management: Improved efficiency, Cost savings, Better quality outcomes, Increased productivity, Reduced risk.
• Outsourcing: transfer certain aspects of business operations to external sources to reduce costs and improve efficiency
• Offshoring: Transferring business operations to overseas locations.
• Challenges to Offshoring: Quality of Product/Service will be negatively affected
• Strategic Direction: Specifying the vision and strategy of the business
• Strategic Planning: a long-term outline of a businesses goals and objectives and the plan to get there
• USP: the aspect of a business which differentiates itself from its competitors.