gcse economics - firms - competition

Most businesses operate in a competitive situation. This means that they have to consider the activities of other businesses when they make decisions.

COMPETITION means

• a large number of producers
• new firms can set up in the industry
• firms are knowledgeable about the activities of their competitors.

How do firms compete?

1. PRICE - not too high or too low
2. QUALITY
3. INNOVATIONS e.g. new ideas
4. PROMOTIONS e.g. special offers
5. ADVERTISING
6. BRANDING e.g. creating an image / identity (Nike, Burberry)

Successful competition means that the business may

• Survive in the market
• increase profits
• increase market share
• make more dividends for shareholders

Unsuccessful competition may mean the opposite

ACTION

a. Who are the main competitors in the fast food market in your locality?

b. Consider the fast food outlets near you. How do they compete for customers?

c. Why do you think that competition is good for the consumer? Try to think of 3 reasons.

d. What do you understand by branding (clue Virgin, Nike)? What are the benefits of branding to a business?

 SMART THINKING

e. Why does competition force a business to become more efficient?