Competitive Environment Practice Questions

Item A: Bowden Bikes Ltd

Bowden Bikes Ltd is a private limited company based in the town of Alderwick. The owner, Lucy Bowden, employs six staff who sell and repair electric bikes. The business has a reputation for careful servicing and friendly advice.

The local market has become far more competitive. Two more bike shops have opened in Alderwick, and a national online retailer now delivers electric bikes to the area with free servicing for the first year. Lucy has reduced her prices in response.

Lucy is now considering a new service: hiring out electric bikes to tourists who visit the riverside trail in the summer. Twenty hire bikes would cost £24 000, which Lucy would pay for with a bank loan. None of her staff have worked in bike hire before, and Lucy does not know how many visitors use the trail.

Table 1 – Information on Bowden Bikes Ltd

	2025	2024	2023
Average selling price of an electric bike	£1 150	£1 300	£1 400
Bowden Bikes Ltd's share of the local electric bike market	18%	24%	31%
Number of businesses selling electric bikes in Alderwick	7	5	3

Item A: Paddle Pod

Paddle Pod is a paddleboard hire and lesson business on Hollowmere Lake in Cumbria. It was started three years ago by Ryan Doherty, aged 31, who gave up a permanent job as a secondary school PE teacher. Ryan used £9 000 of his own savings to buy 20 boards, wetsuits and a lockable storage container beside the lake.

Paddle Pod charges £15 an hour to hire a board and £28 for a one-hour beginners' lesson taught by Ryan himself. Most customers are families on holiday and about 80% of bookings are taken between May and September. Bookings are cancelled when the weather is poor, and in winter the business earns very little; last January Paddle Pod made a loss of £1 400.

Ryan now employs two part-time instructors during the summer. He says that he enjoys deciding which days he opens and that he no longer has a manager telling him what to do. The business is now his only source of income.

To reduce the risk of making losses in winter, Ryan is considering going back to teaching part-time, three days a week, from October to April. Paddle Pod would then open only at weekends during these months.

Item A: The Bothy

The Bothy is an independent bookshop in Kendal owned by Leah Raman. She opened the shop in 2021 after working for a publisher for ten years. The Bothy sells new books at the publisher's recommended price, usually between £9 and £20, and holds author events on Thursday evenings. Leah employs one full-time and two part-time members of staff.

Three months ago a national bookshop chain opened a branch 400 metres away. The chain advertises 20% off all best-selling titles and has a coffee shop inside the store. Before the chain opened, The Bothy's sales revenue was £12 000 a month. Since it opened, monthly sales revenue has fallen by 15%.

Leah has visited the new store and has looked at the prices and the ranges of books offered by the other bookshops in the area. She has also spoken to customers at her author events.

Leah is considering reducing the price of best-selling titles by 20% to match the chain. Another possibility would be to use market research with local parents to develop a specialist children's section with a weekly story-time session.

Item A: The Lunch Box

The Lunch Box is a sandwich shop on a business park in Swindon, owned by Luke Harding, a sole trader. Luke opened the shop in 2016 and employs four staff. All sandwiches and salad boxes are made fresh each morning and the staff are known for remembering regular customers' usual orders. Around 700 people work on the business park, and until this year The Lunch Box was the only place inside it to buy food; the nearest alternatives are a ten-minute drive away.

In September a national chain, Fuel Street, opened a unit at the entrance to the business park, five minutes' walk from The Lunch Box. Fuel Street buys its food ready-made from a central factory, has an app for pre-ordering, and charges lower prices. It does not sell any hot food.

In the eight weeks since Fuel Street opened, The Lunch Box's weekly revenue has fallen from £4 200 to £3 400.

Luke is considering introducing a hot menu of soups and toasted paninis, which Fuel Street does not sell. He would need to buy new equipment and train his four staff. Luke has also thought about reducing the price of every item to match Fuel Street's prices.

Table 1 shows the prices charged by the two businesses.

Item	The Lunch Box (£)	Fuel Street (£)
Sandwich	4.20	3.50
Coffee	2.80	2.20
Salad box	5.00	4.75
Cake	2.40	1.95