GCSE / Level 2 Revision Notes

Starting a Business - Beating the competition

With all that competition out there, how does a small business compete effectively?

The starting point has to be – by providing a great product! In most markets, customers are looking for the best value for money.  This means that a product which is better than the competition, and which sells for the same price, will most likely prove to be a winner.

It is often the case that a business needs to have more than one product in order to succeed in a market.   Offering a product range enables a business to provide customers with more choice and potentially attract customers who buy for different reasons.

For example, a product range might include a “budget” or “best value” product, a mid-range product, and a higher-price premium product.  Walk down the aisle of any large supermarket and look at the own-label ranges to see this in action.
Quality is another great way to compete effectively.  A quality product is one that meets customer needs.  Maybe the customer wants something that is 100% reliable, or which uses high quality materials.  A successful business can compete by consistently achieving the required quality level.

By focusing on a high quality product, a successful business is often able to develop its brand reputation.  In many consumer markets, brands are an important source of advantage.  Customers trust good brands, are more loyal to them, and are often prepared to pay a higher price too.

Customer service is an important way of beating the competition. Buying the product is one thing – but what about the level of after-sales service?  Is that an area where a small business can gain an advantage?  The overall selling experience for a customer can be made to be better than the competition – are staff well-informed and friendly?

Price is the other main method of competing.  For many businesses, the price charged is a reflection of two factors:

1. What the other competitors are charging
2. What the product costs to make or buy

If a business operates efficiently, that gives it a better chance of being able to offer a lower price than competitors and still make a reasonable profit.