AS1: Business Studies (Spectrum of Competition)

Competition occurs when people can choose from a range of similar goods. It can apply to labour, capital markets and the actual market for the goods and services.

Advantages and Disadvantages associated with competition Forces businesses to be efficient Direct competition forces prices down Businesses look to new ways of implementing technologies Lower prices for consumers Businesses spend more money in research and development

Market Structures Perfect Competition – many firms exist, selling an identical product Monopolistic Competition – Many sellers but each has a different product Oligopoly – A limited number of large firms comprising an industry in which they compete Monopoly – a market in which there is a single buyer

Perfect Competition Many firms exist Sell an identical product Many buyers No entry restrictions to the industry Firms in the industry not perceived as having an advantages over new entrants Firms and buyers well informed regarding competitor’s prices

Competitive market (monopolistic competition) Relatively large number of small firms Free entry Similar but not identical products

Oligopoly Competition between a few Interdependence Branding is very important Prices normally well above average Barriers to entry Initial capital may be prohibitive

Monopoly No substitutes One single seller Prices are set No barriers to entry

Office of Fair Trading Aims: Protects customers and explains their rights. Ensures businesses compete and operate fairly. Gives advice to members of the public on consumer affairs Fights against market abuse Investigate the workings of the various markets Enforces consumer protection laws Takes appropriate against businesses who break the rules

Competition Commission Aims 1. Oversees proposed mergers 2. Checks that where monopolies do exist they are not against public interest 3. To look at existing cases of possible monopoly abuse It cannot take legal action. It can only advise the Office of Fair Trading

Ofcom Regulatory Body Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services

AS1: Business Studies (Spectrum of Competition) Ofwat Regulatory Body body regulating water industry:  a regulatory body set up to supervise water services in the United Kingdom after privatisation and deregulation