Impact of competition on business decision making - Competitive environment - Edexcel - GCSE Business Revision - Edexcel - BBC Bitesize (2024)

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What are the effects of competition on business decision making GCSE? ›

Impacts of Competition on Business

A highly competitive market can lead to price competition, causing businesses to reduce prices to attract customers, which may affect profit margins. Competition encourages businesses to improve their products and services to differentiate themselves and keep their existing customers.

Competitors will try to win market share by cutting costs, improving efficiency, lowering price and innovating by either creating new products and services or improving upon old ones. In other words, competition tends to give consumers better goods and services at lower prices.

All businesses are affected in some way by their competitors, and this may have an impact on the decisions businesses make. For example, if two businesses offer the same product and one of the businesses offers a discount for a limited time, the other business may need to do the same.

Market impact: The relationships that competitors have with suppliers can influence overall market dynamics, including pricing and availability of materials. Shared suppliers: When competitors share the same suppliers, it can lead to competitive tensions and pressure to negotiate better terms.

A competitive advantage can be gained through: offering products at lower prices than competitors. ensuring that the product has added value close added valueThe difference between the cost price and selling price. to distinguish it from those of the business' competitors.

From local communities to global patterns

A certain amount of competition is fundamental for healthy ecosystems. Competition not only influences which species survive, but also what traits they have and how functionally unique they are.

examples of the effects of competition in a business context is bank lowers its credit card fees to match those of other banks in the area, is law firm offers a company car to new hires who graduated from law school with top grades, is chain store has so many applicants that it offers minimum wage and can still fill ...

Competition makes the market more efficient, and will translate into competitive prices for goods and services. Competition spurs businesses to be more productive, innovative and responsive in order to compete for consumers.

Competition can affect business by causing inconsistent performances, loss of market share, and compromising on fundamentals, leading to a betrayal of customers' trust.

Is competition good or bad for business? ›

Greater competitiveness creates more productivity and better quality of products and services. Companies can satisfy consumer preferences and, consequently, attain a better position in the market. The market grows steadily, and consumers benefit from lower prices and a more comprehensive range of goods and services.

Basic economics implies that businesses with market power withhold at least some production in order to keep prices high. Thus, if firms produce less due to a lack of competition, they also may hire fewer workers, which could raise unemployment or, in the long run, reduce workforce participation.

Competition can affect business in several ways: It drives businesses to improve their products, increasing innovation and development. It leads to changes in prices (price wars) It can raise customers' expectations about the product quality.

It benefits consumers by keeping prices low and the quality and choice of goods and services high. Competition also encourages businesses to offer new and better products. Competition makes our economy work.

In general competitive risk is when the actions of your competition can negatively impact your business. One source of competitive risk is when similar businesses open in your area or neighborhood. If you're a retailer, the growth of e-commerce means your competition may come from anywhere around the world.

Having a competitive advantage over your competition is essential to business success because: It can contribute to higher profit margins. It may help attract more customers more frequently. It helps maintain brand loyalty.

What is competitive risk? Competitive risk is the potential for a business's competitors to prevent its growth and success. Since many companies compete for the same target customers and distributors, they may take measures that prevent similar enterprises from entering new markets and reaching customers.

Final answer: The three major factors that affect the degree of competition among global businesses are the number of companies, product differences, and market size.