Competitive Environment Flashcards
All 15 cards in this deck
What is a market in business?
A place or situation where buyers and sellers exchange goods and services for money — it can be local, national, international or online.
What is competition in a business context?
A situation where more than one business tries to compete for the same customers in a market.
What is a monopoly?
A market situation where one firm holds 25% or more of the market share, effectively controlling an industry.
Name three risks a business faces when it launches a new product or expands.
Business failure, financial loss and loss of customers.
Why do all businesses face uncertainty?
Because factors outside their control change — technology, the economy and consumer tastes.
Give two reasons why an entrepreneur is willing to accept risk and run a business.
The chance to earn profit, and independence — being their own boss (also personal satisfaction from a successful idea).
How does market research help a business minimise risk?
It finds out what customers want before money is spent, so the product is less likely to fail.
How does business planning help a business minimise risk?
It sets out objectives, costs and forecast revenue in advance, so problems are spotted early and finance is easier to obtain.
How does insurance help a business minimise risk?
The business pays a premium so that an insurer covers the cost of losses such as fire, theft or accidents.
How does diversification help a business minimise risk?
Selling a range of products or selling in different markets means poor sales of one product do not cause the whole business to fail.
True or false? Complaints about a new product can only damage sales of that new product.
False. Poor reviews damage the reputation of the whole business, so sales of its existing products can fall too.
In a market with many small or medium-sized competitors, what do businesses typically compete on?
Low prices, advertising, service quality and convenient locations.
True or false? Competition in a market can reduce a business's profit margins.
True. To attract customers a business may have to lower prices or spend more on quality, service and innovation, squeezing the margin on each sale.
Name one way a manufacturer can reduce its production costs so it can lower its selling price and compete internationally.
Change to flow production. The cost saving can be passed on to customers, making the business more price competitive and boosting sales.
True or false? Launching a cheaper online version of a service guarantees a business will stay ahead of its rivals.
False. In a competitive market there is nothing to stop other businesses offering the same service.