Competitive Environment

• Competitive environment


  The number and strength of competitors in the same market as your business
• Factors determining competitiveness


  • Number and size of competitors
  • Extent of barriers to entry
  • Bargaining power of suppliers
  • Differentiation
  • Knowledge of sellers and buyers
  • Amount of regulation
• How a business can gain advantage

  • Pricing
  • Quality
  • Loyalty cards
  • Advertising
  • Brands
  • USP
  • Wide product range
  • Profit
  • Customer service
• Benefits


  • Higher quality products = increased costs
  • Charging lower prices = more demand
  • Better location = increased costs
  • Wide product range = decreased economies of scale = higher storage costs
  • Better customer service = high training costs
• Impacts of more competition

  • Reduce prices to stay competitive = lower revenue
  • Increased marketing to retain customers
  • Need to increase quality = increased costs
  • Improve customer service = higher training costs
• Impact of less competition

  • Higher sales because fewer options for customers = raise prices = higher profits = invest more
• Opportunities of higher profits from less competition

  • Increased investment into production = improved production = benefit from technical economies of scale = lower average unit costs
• Dangers of increased profits from less competition

  • Business could get lazy = invest less = reducing barriers to entry = new rivals enter easily = lower market share