LO: To understand the different markets and the meaning of ethics (E) To analyse the benefits and limitations of different markets (C) To evaluate the role of the Government in competition (A)

 You are the only supplier of chocolate bars in the UK. How much would you charge for a standard bar of chocolate? Explain why you would charge this amount.  You have two major competitors in the chocolate market. Competitor 1 charges 35p per bar, competitor 2 charges 36p per bar. How much would you charge for a standard bar of chocolate and why?  The chocolate market is saturated with hundreds of firms selling similar products. Prices range from 15p to 25p. How much would you charge for a standard bar of chocolate and why?  Write your answers in your exercise books

 Information is collected about the share of a market that businesses have. The formula is: ◦ Sales of the business X100 = market share ◦ Total sales of the market TASK: In 2010, Tesco has a total sales revenue of £56.9billion. The UK supermarket market size is £150.8 billion. What is Tesco’s market share?

 If there is one firm with at least 25% market share then the market is a monopoly by law.  If there are lots of firms with a similar small market share this is what we call perfect competition.  If there are several firms with a large market share (like the UK supermarkets) we call this an oligopoly.

A Perfect Competition Monopoly B Very Competitive Quite Competitive Not Very Competitive Not Competitive

 Lots of businesses  Lots of products, which are all very different  Low prices (normally)  Eg Fast food restaurants  Ways they can compete: ◦ Advertising to attract customers from competition ◦ Branding to build loyalty ◦ Convenient locations

 One main business (Market share over 25%)  One main product available  Higher prices (normally)  Eg BSkyB or BAA  Barriers to stop competition ◦ Advertising to prevent competition ◦ Patents to stop others copying products ◦ Economies of scale leading to lower costs and prices ◦ Collusion with other firms ◦ Government rules ◦ High start up costs prevent new businesses entering

 In groups of 4 people (maximum)  In 2013 the Government wanted to increase competition in the UK postal market, therefore they privatised Royal Mail. What impact has this had on competition and what may be the consequences of this action in the future for the stakeholders of  Royal Mail.

1. New firms entering the market 2. Privatisation (1980’s Britain) 3. Selling new products 4. Cutting prices 5. Increasing advertising

1. Take over or merge with competitors 2. Use marketing mix to increase share of the market 3. Use of patent/copyright to protect ideas 4. Collusion (THIS IS ILLEGAL) 5. Internal growth

 Read the cases provided and match them up with the appropriate type of competition.

 The government encourages competition and this is shown through the privatisation of many national businesses (British Gas, British Telecoms, British Petroleum etc)  They also allow monopolies to take place as they bring economic advantages.  The only thing they really do not like is collusion! This is where more than one firm agrees to a decision normally to increase price and reduce competition. This creates what is called a ‘cartel’. Cartel’s are illegal.

 Complete the paragraph about cartels by filling in the missing gaps.  EXTENSION: From the white OCR textbook complete the exam questions on page 334.

 What does the word ethics mean to you?  What are ethics in business?  What might be the ethical issues for someone such as Holden plc?  Who are the people that are expected to act ethically?  Why is fair trade important? What might the impact of fair trade be on a business?