Competition

• Monopoly


  A market with one business having complete control over the market, no competition
• A monopoly can usually increase prices without much concern of demand decreasing, and can keep marketing costs low
• A monopoly risks being fined if they act against the consumers' interests
• In 2017, Google was fined £2.1 billion by the EU for abusing its monopoly on internet search by promoting its own online shopping comparison service rather than other similar services
• Perfect competition

  • Lots of firms in a market, they all compete on an equal basis, their products are pretty much identical, and they all charge a similar price
  • Businesses need to keep costs low to keep prices low, otherwise demand would be taken by the competition
  • Businesses also need to keep a high quality of product to keep a good level of demand
• Oligopoly


  • A small number of large firms dominate the market and charge similar prices
  • Firms focus on marketing and brand image to increase demand, so marketing costs will be high
  • Firms tend to behave in a competitive environment by improving customer service or product quality
  • It's extremely difficult for new businesses to enter this market as Apple and Google have established brands, marketing, and loyal customer bases
• In a competitive market, an increase in competition can cause businesses to lose customers, so they might increase marketing costs or spend more on improving or diversifying their products, or cut costs to keep prices lower than competitors to increase demand
• Competition can benefit consumers by bringing new and innovative products to the market and reducing prices of existing products
• Heavy competition can have negative effects on consumers, such as businesses making large losses and going out of business, leading to cancelled flights for customers
• Firms in competitive markets need to monitor their rivals and their costs such as marketing costs or production costs to prevent themselves losing money
• Large Market


  • Usually has a High Number of Competing Businesses
• Market size


  The number of buyers and the number of sellers within a market
• Larger markets have more potential customers


  More businesses are attracted to these markets
• Before entering a market

  1. Business will need to conduct market research

  2. To determine the size of the market

  3. Estimate how many customers would actually be willing to buy its product
• Carrying out market research

  A business is better able to make decisions on how to market its product successfully
• Market research

  Will also tell a business the level of competition within a market
• Number of competitors in a market


  Will affect the business's marketing strategy
• If there are lots of competing firms in a market


  A business might invest heavily in promotion and sell at low prices
• Level of competition in a market


  Will also affect a business's strategy for launching a new product
• If there's a lot of competition in a market

  A business would need to make sure it has enough stock of the new product so that it can meet initial customer demand, otherwise it may lose customers to those competitors who were able to copy the product quickly following the launch
• Businesses will often try to leave small or shrinking markets


  And move into growing or large, mature markets
• Larger market size


  Allows for more potential for growth, which could lead to increased profits for the business