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1.2.4 The Competitive Environment

The document discusses the competitive environment of businesses, focusing on the strengths and weaknesses of competitors in terms of price, quality, location, product range, and customer service. It outlines how competition impacts business decision-making, emphasizing the need for differentiation, customer orientation, and value addition. The document also provides examples and objectives for understanding the competitive landscape.

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2 views34 pages

1.2.4 The Competitive Environment

The document discusses the competitive environment of businesses, focusing on the strengths and weaknesses of competitors in terms of price, quality, location, product range, and customer service. It outlines how competition impacts business decision-making, emphasizing the need for differentiation, customer orientation, and value addition. The document also provides examples and objectives for understanding the competitive landscape.

Uploaded by

areeb.aasim108
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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1.2.4.

The competitive environment


Worksheet
From Edexcel
Understanding the competitive environment:

• Strengths and weaknesses of competitors


based on: price, quality, location, product
range and customer service

• The impact of competition on business


decision making
Objectives and Outcomes
Start of the lesson End of the lesson
Objective: To understand the Objective: To understand the
competitive environment of a competitive environment of a
business business
I do not understand the competitive I do not understand the competitive
environment of a business environment of a business
I am able to identify strengths and I am able to identify strengths and
weaknesses of competitors weaknesses of competitors
I am able to discuss strengths and I am able to discuss strengths and
weaknesses of competitors weaknesses of competitors
I am able to explain the impact of I am able to explain the impact of
competition on a business decision competition on a business decision
making making
Starter
• What impact do you think that being in a
competitive market has on business?
Definition
• A competitive environment is the
dynamic external system in which a
business competes and functions.
• The more sellers of a similar product or
service – the more competitive the
environment in which the business
competes
• Example: fast food restaurants - there are
so many to choose from - the level of
competition is high
Strengths and weaknesses of competitors
Price - competition
If the market is very competitive with lots of
businesses trying to sell the same thing – then
they may decide to compete on price:

1) Lower prices may mean lower profits


2) This will mean the business will have to lower
costs e.g. by making staff redundant
3) This may also mean that it starts a price war
with other competitors
Price competition
Price competition

UK car market – lots of competitors selling


similar - what would happen if car
manufacturers started to compete on price?
Quality
• If a business is in a very competitive market
then it may decide to compete on quality:

1. If the business decides to improve the quality


of its products this will cost more
2. If costs increase then this will mean that
profits will be lower
3. This is risky as customers may care more about
price than quality
Quality competition

Watch market – which brands compete on


price and which compete on quality?
Quality competition

Console games market – does Sony


(playstation) compete on price or quality?
Location
• In a very competitive market a business may
decide to compete on location, for example:
1. Having the most convenient location for
customers e.g. close to a housing estate
2. Being able to offer free customer parking
3. Locating out of town so that the business can
have a large store and offer a larger product
range than the competition
Location competition
• Businesses may decide to locate close to the
competition to catch customers who may
move from store to store
Location competition
• Locating a café close to shops, so when
shoppers want a break they don’t have to walk
far with the heavy bags that they have
(customer convenience), this is Muffin Break

Can you
think of
other
examples?
Location competition
• Out of town stores can offer lots of free
parking and larger stores.

Can you
think of
other
examples?

What other
benefits
might there
be for the
businesses
to locate
here?
Product range
• In order to attract and satisfy customers,
companies need to produce products that are
superior to their competitors, for example IKEA
Customer service
• Retailers that provide customers with a helpful
and friendly service will win their loyalty. For
example Marks and Spencer have a “goodwill”
returns policy:
• "Goodwill" means we’re happy to refund you
for items you don’t want. Our "goodwill"
policy is in addition to your legal rights as
we’re not legally required to refund you for
items you don’t want.
Customer service example video
The impact of competition on business decision
making
Business decision making in a competitive
market
• Businesses will need to change the way they
compete in a competitive market:
A. Make their brand stand out
B. Be customer orientated
C. Build customer loyalty
D. Differentiate the product or service
E. Add value to the product or service
Business decisions – build customer loyalty
Business decisions – add value
• Where the customer receives something they
see as adding to the value of the product or
service e.g. the offer of a two year free
product guarantee
Plenary

1) In a competitive market a business may lower its prices

2) In a competitive market a business may need find ways to add value to


their product or service
3) In a competitive market a business may need to differentiate their product

4) In a competitive market a business will need to be more product orientated


Sample question 1
Answer question 1
Sample question 2
Answer question 2
Objectives and Outcomes
Start of the lesson End of the lesson
Objective: To understand the Objective: To understand the
competitive environment of a competitive environment of a
business business
I do not understand the competitive I do not understand the competitive
environment of a business environment of a business
I am able to identify strengths and I am able to identify strengths and
weaknesses of competitors weaknesses of competitors
I am able to discuss strengths and I am able to discuss strengths and
weaknesses of competitors weaknesses of competitors
I am able to explain the impact of I am able to explain the impact of
competition on a business decision competition on a business decision
making making
Written by Sarah Hilton ©

Revisionstation

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