The competitive environment

The competitive environment This section covers the following: What is meant by the competitive environment Price Quality Location Product range Customer service The impact of competition the business

Key words Competitive environment The strength of competition between companies in the same market Innovative A new, perhaps original, product or process Unethical An action or decision that is wrong from a moral standpoint

What is the competitive environment? The competitive environment is the market in which a business and other businesses operate. The more businesses there are in a market, the more challenging it will be for a business to be successful. Example: The Trunki suitcase was designed by Rob Law and has created £90m of sales. Rob has had to spend £1m trying to stop (unsuccessfully) Kiddee cases making similar products. Rob’s environment has now become more competitive. Rob Trunki Trunki article

Price A business should look carefully at the price of the product sold. What does the competition charge? Is price something that customers rank highly or is it something else? Being the cheapest does not guarantee a competitive product. Example: Many products are sold at pound shops, but customers still shop at other stores.

Quality Quality comprises the features and characteristics of the product and its ability to satisfy customer wants and needs. Quality is critical to remaining competitive. Example: Domino’s pizza advertises that pizzas will be delivered piping hot, a quality that sets them apart from their competition.

Location Where a business is situated can be an advantage over competition. Customers may prefer a certain location. Staff may only be available with certain skills in certain locations. Costs may be much more affordable in certain locations. Organisations such as Amazon have gained a competitive edge from having no location. Instead they have concentrated on fast and reliable delivery, e.g. 30-minute time slots in some cities.

Product range Offering a list of products with slightly different features ensures competitors have difficulty gaining sales This is time consuming and expensive particularly if the market develops very quickly, e.g. technology Go Pro spotted a market for sports cameras and developed a limited number of products. Their range was small so competitors like Sony have gained market share, with Go Pro having to create new products to remain competitive. Go Pro article

Customer service Customer service is a highly important feature of a business in order to remain competitive A business may sell products of exactly the same quality at the same or lower price. Customer service acts as the competitive edge to entice customers to purchase and stay loyal. Amazon has topped the customer service rankings in 2016 beating rivals such as Ocado. Amazon are seen as trustworthy and reliable so customers generally stick with what they know, e.g. no quibble replacement policy on tvs compared to Curry’s. Customer service rankings

Impact of competition The impact of competition on a business forces the business to do the following: Offer good prices and products Keep prices low Bring in new and innovative products

Impact of fierce competition The impact of fierce competition on a business forces the business to do the following: Cut costs such as staff Take short-term risks, such as not paying suppliers to cut costs Act unethically, such as paying staff below the minimum wage or dumping waste Competition needs to be healthy rather than fierce to reduce risks for the business, customer and society.

Summary questions Write down or discuss the answers to these questions. Give one reason why businesses selling petrol rarely compete on price. Why is quality such an important selling point for a luxury brand such as Michael Kors? Why do supermarkets carry such a large range of the same type of product? Why is customer service so highly valued by restaurants? Give one reason fierce competition may not benefit a customer of a business.