Competitive environment

• Factors that impact on competition

  • Business ownership
  • Nature of products or services provided
  • Nature of the product range
  • Pricing strategies
  • Marketing methods
• Business ownership

  Competition from other businesses will have an impact on the decision to become a Ltd or a PLC. A business may wish to grow and to expand and to do this it will need a significant injection of finance and may need to become a Ltd or PLC to sell shares to raise to fund the expansion cash.
• Nature of products or services provided 


  Competition from other businesses may change the nature of the product or the services provided. Competition from Starbucks and Costa has meant that many smaller cafes and coffee shops now serve lattes and cappuccinos rather than just basic tea and coffee.
• Nature of the product range

  Competition from other businesses means that in some industries

  the whole nature of the product range has had to change. In response to consumer demand and competition from independent bakeries, the larger bread manufacturers have had to produce a whole "free from" range of new types of bread e.g., sourdough.
• Pricing strategies used


  Competition from other businesses means that different pricing strategies have to be used to attract customers and remain competitive. Instead of skimming, a business in a very competitive market would use competitive pricing to make sure that customers have to differentiate on non-price factors.
• Marketing method

  Competition from other businesses means that marketing campaigns need to be exciting, up to date and eye catching. This is going to have a cost implication, but important where there are many sellers with the same product.

  Competition forces prices down resulting in falling profit margins. In a highly competitive market businesses may need to design new products to match what rivals are doing. The business may need to increase spending on advertising and branding to retain their competitive advantage.